Business students, from teenagers to executives on an MBA course, are taught many strategy tools: SWOT, PESTLE, Porter’s 5-Forces, Boston Matrix etc. And all have their value in specific situations.

But I choose McKinsey & Co.’s ‘Three Horizons’ model for its tremendous value in continuously analysing, developing, communicating, and testing a firm’s strategy. It provides a canvas for painting a usable picture of all current and potential businesses. This picture can then be used to drive execution, that is fully aligned to the strategy, across the entire firm.

Here is how I use it with my clients. First, portfolio analysis. We use the tool to document and segment the client’s portfolio of live and potential businesses across three horizons:

– Horizon 1: Current core businesses. These deliver the vast majority of current profit.

– Horizon 2: Emerging businesses. Each has delivered a small number of initial sales.

– Horizon 3: New business options. These are more than an idea but not yet a live business.

Technology sector history teaches us that new businesses usually take more time to grow than people realise. So, the lack of items that I often see in horizons 2 and 3 should be addressed urgently. Those core businesses in horizon 1 will eventually start to decline and will need to be backfilled if the firm is to thrive.

Second, strategy development. Using a selection of critical decision-support information, we thoroughly assess each live and potential business and choose the level of future resource investment. We record the choices (I often use a traffic light system) to produce a visual manifesto for future resource allocation. See below.

Third, strategy communication. The choices made should then be relentlessly communicated to all relevant functions. Total alignment to the strategy should be confirmed by functional leads. All product/service development, marketing activities, sales enablement, sales campaigns, internal technical training, and demo development should fully align to the strategy. But the communication should be bi-directional. The functions should be allowed to flag genuine threats to the success of the strategy based on what they are experiencing in the field. Any serious threats should be fed up the chain to be considered carefully.

So, please do see the value in the ‘most useful tool in strategy’: McKinsey’s Three Horizon’s. It will help you highlight long-term risks earlier, make choices about investment in your various businesses, and communicate and test those choices.