McKinsey's three horizon strategy model highlights the distinct elements of strategy which tackle the challenges across different time horizons.
Horizon 1 is the 'competitive strategy': it addresses how a business plans to win the competitive battles over the next 12-18 months.
Horizon 2 strategy was originally seen as the 'growth' strategy, bringing on stream the next major earnings streams. But it must also deliver organisational renewal to overcome the effects of 'organisational entropy'. It has a 2-5 year time horizon.
Horizon 3 is the 'option' strategy. It is about exploring new possibilities, many of which will not make it past various decision gates, but from a portfolio of options will come the next horizon 2 growth pathways. The time horizon for option plays is often more than 5 years from inception to a major value contribution.
