First and foremost we stood back and used our head as well as our heart to determine Where to go? 1st, 2nd, 3rd, etc. Secondly, we looked at each market on our Market Opportunity Index© and worked through the appropriate market entry model: Export, Contractual or Investment? Last, but not least we need to time phase our market entry over the coming horizons of growth so that we can competently and capably execute on our international business strategy.
One of the most enduring and misunderstood growth strategies used in business today is the McKinsey ‘Three Horizons of Growth’. Having worked in large corporations for well over a decade and consulted to both large and small businesses for several years now I often hear comments from busy executives in corporates and business owners alike “we will do core (Horizon 1) activities this year, then get to international markets (Horizon 2) next year and then start creating new products for those markets (Horizon 3) in 3 years’ time”. The reality is you need to be working on all 3 horizons of your business growth simultaneously to build a sustainable business growth platform for your business. Of course you cannot spend equal $/people/time on all 3 horizons but you need to be clear in your choices, communicate them widely across the business and allocate some of your precious scarce resources to all 3 horizons to realise the growth that comes from effort exerted in the ‘now’ that will payback ‘years’ into the future.
McKinsey Model: Three Horizons of Growth (Coley, 2009)
Creatovate has been privileged to work with clients who clearly get the need to plan the “When to enter?” in their international business strategy and work simultaneously on all 3 Horizons of Growth – defending and extending their current home base(s), building momentum by entering new international markets and allocating some of their scarce resources (the most scarce being their time) to creating options for future new market entry which may also entail new market entry models.
Let me share an example. One of our clients knew they needed to grow fast in their existing ‘hub’ or core home market(s). They did not want to distract unnecessarily their executive team in their home market(s) with international business opportunity in the immediate term. They engaged Creatovate as consulting partners and together we set a clear choice based strategy for international growth that had a clear structure with hub or home markets to focus 100% on their patch whilst simultaneously supporting the international business development unit (a dedicated small team). The leader(s) in the International Business Development unit worked with Creatovate to identify, rank and prioritise new markets for entry and systematically we phased those markets for entry over 3 time horizons, knowing some would be easier to enter than others for example using perfect partners and easier modes of entry like export. However, our client did not stop there allocating some precious resource: $/people/time and strategic foresight to simultaneously explore and create future options for business growth in difficult but very large new markets that would require more complex entry models like contractual and/or investment.
Speed bumps and unexpected surprises hit them hard in one core home or hub market. However, the work for international business growth has been done and they are in the very fortunate position of having a queue of difficult to enter highly attractive growth markets sitting in their new business development pipeline ready to activate. Contrast that story with the vast majority of businesses who are spending almost 100% of their $/people and time defending and extending in their saturated core home market(s) and quite simply can never get out of the daily grind to contemplate growth outside their home base. I know which business I want to be working with and a part of especially at their budgeting and strategic planning cycles when the topic of ‘new horizons of growth’ comes up for discussion.
The need to focus and split your scarce resource allocation wisely over your core Horizon 1 business – say 60%, and emerging new business – say 25% and finally creating options for future new businesses – say 15% is not simply the domain of big business. Creatovate has also been privileged to partner with a family owned client business who has very successfully extended and defended their core home market, entered a new market adjacent to their home country and built significant momentum from a standing start in less than 18 months and created a viable new business venture into another new and highly competitive and complex country all in the space of 2 years and all with a team of less than 10 full time employees. The When to enter? question is vital to your business planning and differentiates the true growth businesses from those that are simply ‘doing the business’.
The lifespan of a company today is getting shorter and we do not have to look far for evidence of this fact. The average life expectancy of a multinational corporation-Fortune 500 or its equivalent-is between 40 and 50 years. A full one-third of the companies listed in the 1970 Fortune 500, for instance, had vanished by 1983-acquired, merged, or broken to pieces (Business Week). To increase your business chance of survival we believe you need to work on more than 1 Horizon of Growth and we believe you need to work on all 3 Horizons of Growth simultaneously. Reach out, give us a call, send us and email, share your thoughts and comments and experience with us.
Dermott Dowling is Managing Director @Creatovate, International Business consultancy. Creatovate help businesses grow outside their home base from market entry strategy to route to market to go to market launch. Contact Dermott if your business needs help expanding your business internationally.
Steve Coley (2009) Enduring Ideas: The three horizons of growth http://www.mckinsey.com/insights/strategy/enduring_ideas_the_three_horizons_of_growth retrieved on 12/02/2015
http://www.businessweek.com/chapter/degeus.htm viewed on 12/02/2015