In March I co-ran a course for Fine Company clients with my son Dan and it was, to put it mildly, a moving experience. Not just for me but for the delegates and Dan too. We were collaborating in such a way that it was very powerful. Dan, a consultant at Hive Business, enabled us to do this with an approach that pulled in learning from his MBA. One of the tools Dan used was borrowed from McKinsey, it’s called the concept of three horizons and it could change your life — really!
Dan, what are the three horizons?
The concept was invented in 2000 by three guys from McKinsey & Co, one of the biggest management consultancies in the world, and documented in their book The Alchemy of Growth. It’s a way of viewing your business in the future to achieve perpetual growth. It’s not going to be relevant for every dental practice owner, but it will fascinate the entrepreneurial ones for whom it’s secondary that they’re a clinician.
How does it work?
It’s the philosophy that any business is a collection of projects that you need to be planning all the time. There are active projects, up and coming ones and ones that are far off in the future and don’t exist yet. It divides these up into:
- Horizon 1: Active projects where success means profitability. You maintain and defend these as your core business
- Horizon 2: Projects in the pipeline that aren’t initially profitable, but which you are pulling towards Horizon 1. You want to nurture this emerging business
- Horizon 3: A way of tracking the ideas for growth that you think and talk about but that aren’t yet coherent. This is all about creating genuinely new business
Using this approach forces you to treat these categories differently and assign ownership to them, for instance, at Hive, different individuals have been given the brief for each one, so they are responsible for collating and editing all our thoughts. Adding detail and developing your ideas becomes easier when it’s more systematic, and it’s proving useful for us.
How can it help dental practice owners?
Using three horizons makes it more likely that you’ll follow through on your plans instead of periodically having brainstorms that go nowhere (very easy to do). Most businesses fumble with strategy and if they do make it work, it’s by accident. Instead of doing that, this approach gives you clarity through to the future. Even if it’s a bit outdated (it uses Enron, which is now bust and shamed, as an example of success), The Alchemy of Growth offers useful ways of divvying up complicated ideas. It’s that rare thing, a business book that’s enjoyable to read, and it’s teaching you how to solve a puzzle. Here’s its list of the seven ways to grow your business:
- Selling existing products to existing customers
- Acquiring new customers in existing markets
- Creating new products and services
- Developing new value-delivery approaches
- Moving into new geographies
- Creating a new industry structure
- Opening up new competitive arenas
In your dental business you probably have revenue targets, and you try to grow market share in your catchment. This is where most dental practices stop, but these are only points 1 and 2 on the list. They account for Horizon 1, but what about the rest? If you’re one of the hundreds of new mini-groups in the UK and Ireland with between three and 15 clinics, your success is going to be defined by your ability to also focus on points 3, 4 and 5 (Horizon 2) and points 6 and 7 (Horizon 3) too.
Each horizon has to be treated differently. Success in Horizon 1 might mean making all your activities profitable. Success in Horizon 2 might mean acquiring a feeder practice, acknowledging that initially it’s not going to be profitable. Success in Horizon 3 will be less tangible. Maybe it’s not necessarily about acquisition, more about the ways in which you might be able to collaborate with other businesses and across other industries. You want to pull ideas from Horizon 3 into Horizon 2 as they become more tangible, then make them profitable in Horizon 1.
Stephen Coley, David White and Mehrdad Baghai, the authors of The Alchemy of Growth, suggest that most businesses will require a one to four year period to “get ready for growth” before they can undertake significant growth. This certainly rings true with dental businesses, there is often 12 months of fixes and building work to be done when we start working with a practice and this in itself will often deliver 30% growth. But it is at this point that you can truly leverage your model and work strategically to deliver significant growth.
It’s tempting to equate the three horizons as short, medium and long term plans, but it’s more complex than that, even if the principles are simple. In essence it’s about taking time to get ready for growth. When I read it I thought, “Wow, that’s so true.” You could call it the transformation from a sole trader mentality to a sophisticated business.
If you would like to join Dan and myself for our leadership program in Cornwall we have availability on June 6-9 and October 10-13.