Monday, 22 October 2007

Looking towards the 4 Horizons

As you are putting the finishing touches onto next year's budget proposal, how do you know you have identified the right projects? One check is to use the 4 horizons model - a sustainable business plan should have a combination of 4 types of projects:
  1. Horizon 1 includes all the projects that you need to do in order to sustain your business - projects required to comply with changes to legislation, to maintain existing systems and to fix problems in your existing business.
  2. Horizon 2 includes all the projects that you need in order to improve your business, and includes internal improvements, such as efficiency and effectiveness improvements, as well as developing new products to meet new and/or changing client needs.
  3. Horizon 3 includes projects that will transform your business. These could take your business into new markets, places in the value chain or new business models.
  4. Horizon 4 includes at least one project that could transform your industry - the so-called category killer.
It does not take much to imagine that it is often Horizon 3 and 4 projects that get left out or cut during the budgeting process, but it is also self-evident that they are absolutely necessary if your business is to survive and thrive.

How much effort should be placed into each of the 4 horizons? That really depends on the nature of your competitive environment. In a very competitive environment, you would need to invest much more in Horizon 3 and 4 projects than you would in a less competitive environment.
Here is an alternative graphic representation of the 4 horizons:

Note: I have adapted the 4 Horizons model from the more widely used 3 Horizons model. However, I believe that in today's hyper-competitive environment, the 4th horizon is now necessary.

You can now do your own 3 Horizons analysis using the innovative StratNavApp.com online strategy collaboration tool. Simple click on StratNavApp.com, register or log in, and select "Planning" from the main navigation.