Where Does Growth Come From? 

As a small or medium-sized enterprise (SME) or start-up, understanding where your growth comes from is crucial for making the right investment decisions and building a robust business portfolio.

Typically, mature businesses have the highest revenues, customers, and profits, but their growth is limited to 2-5% or even stagnates. On the other hand, younger businesses with product-market fit experience double-digit growth and may surpass the mature ones in the future. Understanding this dynamic is key to making the right investment decisions for a robust and growing business portfolio.

To chart your growth successfully, consider the following actionable advice, inspired by the Horizons Model.

The Three Horizons Model also called the innovation horizons model, is a framework that organisations can use to identify areas for innovation and improvement without losing sight of current performance. This model is useful for driving innovation while preventing three type of organisational stagnation. The Innovation Horizons Model operates on the premise that organisations need to innovate and change in order to remain competitive and adapt to the ever-evolving market.

So, let’s dive in. The Three Horizons framework, developed by McKinsey, categorises growth into three horizons based on time and profit/value.

Horizon 1 focuses on optimising core businesses, Horizon 2 on building emerging ones, and Horizon 3 on exploring new and visionary opportunities. Allocate resources strategically across these horizons to achieve balanced and sustainable growth.

Tailor your growth approach to each horizon:

• Horizon 1: Optimise your current businesses through sales programs, product development, marketing, distribution, and cost reduction within a 0-36 month timeframe.
• Horizon 2: Build and grow new businesses by exploring adjacent business models. Develop scalable models that generate new revenue and profit within an 18-36 month timeframe.
• Horizon 3: Explore radical and entirely new business models in a highly uncertain context. Experiment, pivot, and embrace innovation, understanding that returns may take longer (>36 months).

Apple's growth strategy provides a real-life example of the Horizons Model:

• Horizon 1: Apple focuses on enhancing its existing business model through product development, expanding market reach, and improving the supply chain to drive short-term growth.
• Horizon 2: Apple ventures into services like Apple Music, Apple TV+, and Apple Pay, building a new business model with fresh revenue streams and strategic partnerships. These initiatives offer significant growth potential.
• Horizon 3: Apple explores the healthcare sector, leveraging its hardware and services to empower users on their personal health journey. This ambitious initiative aims for long-term success.

As an entrepreneur or business leader, envision your future, identify growth opportunities, and adapt your business model to thrive in a changing landscape. Embrace the Horizons Model to navigate your growth journey successfully.

While crafting your strategic horizons embrace purpose-driven growth. Look beyond financial gains, consider the positive impact your business can make. Purpose-driven ventures, those that reduce negative socio-environmental effects and generate positive ones, are the businesses of tomorrow. Align your growth strategy with a meaningful purpose to attract customers and investors who share your values.

It is also important to collaborate and seek support. Growing a business is challenging, and seeking support can be beneficial. Connect with industry peers, mentors, and experts to gain insights and perspectives. Collaborate with other businesses to explore mutually beneficial opportunities.

In conclusion, growth for SMEs and start-ups comes from strategic planning, purpose-driven initiatives, and continuous innovation. By understanding the Horizons Model and learning from successful examples like Apple, you can chart a path to remarkable success.

Apply this simple yet powerful, future-oriented growth thinking in your upcoming brainstorming meeting, encourage your team to envision the future of the company, identify growth opportunities in each horizon, and brainstorm innovative business model ideas. Use the following template to guide your discussions and planning. You can download the template by clicking on the download button below.

About the author:

Gayane Grigoryan is an Innovation and Strategy Consultant based in Dubai. As a certified consultant and a member of the Chartered Institute of Marketing, UK, Gayane specialises in helping businesses accelerate sustainable purpose-driven growth by leveraging their individual strengths.

With her expertise in business case validation, value innovation, ISO 56002 innovation management, Blue Ocean strategy formulation, and future foresight, Gayane has become a sought-after mentor for entrepreneurs who want to create solutions that make a positive impact on the world.

With Gayane's guidance, aspiring entrepreneurs can achieve their goals and create solutions that make a positive impact on the world. Her unique combination of expertise and passion for innovation makes her an exceptional mentor who delivers creative problem-solving, growth, and performance for her clients. Gayane's perpetual curiosity for "what's next?" drives her to help businesses succeed and make a difference in the world.