The most important requirement for the three-box solution is that the CEO must allocate resources separately for the core business and the new venture, says Vijay Govindarajan
In his latest book, innovation guru Vijay Govindarajan expands the leader’s innovation tool kit with a simple and proven method for allocating the organization’s energy, time and resources across what he calls “the three boxes". Published by Harvard Business Publishing, The Three-Box Solution: A strategy for Leading Innovation, features examples of companies such as GE, Mahindra and Mahindra, Hasbro, IBM, United Rentals and Tata Consultancy Services as well as testimonies of leaders who have successfully used this framework. In an email interview, Govindarajan talks about the companies’ need to create dedicated teams for the next big thing, and the value of the e-commerce opportunity in India. Edited excerpts:
Many companies find that it is easier to start off by being nimble in strategy and execution. But the moment they hit a certain size, gravity starts holding them back. What is the antidote?
It is not a bad thing that a company grows in size. That indicates that it is able to scale up its initial innovative idea. Big companies are a force for the good because they have resources and capabilities. In order to create the next big idea, what they need is the right mindset. Therefore, big companies must create dedicated teams for the next big thing, thereby providing some distance between their core business and the new venture.
Don’t breakthrough innovation and a formula, even one as dynamic as the three-box solution, run contrary to each other?
Innovation is not chaos. It is structured chaos, disciplined chaos. So it is not contradictory to use discipline to drive breakthrough innovations. However, it is important to recognize that the discipline needed for breakthrough innovation is different from the discipline required to execute efficiency-oriented projects in the core business.
Do you think a company can sometimes end up tripping over its present in its quest to see too far into the future?
Absolutely. The present core business serves today’s customers and wins against today’s competitors. The new venture—necessary to secure the future—requires firms to think of non-consumers, disruptive technologies and non-traditional competitors. That is why a task force with maverick thinkers should be assembled to brainstorm breakthrough ideas for growth in the future.
What is the key to successfully implementing the three-box solution?
The most important requirement for the three-box solution is that the CEO must allocate resources separately for the core business and the new venture. CEOs should evaluate new ventures not based on short-term financial results but on their ability to test assumptions. In short, new ventures must be held accountable for learning.
After championing the $300 House idea successfully, is there any other social issue that you are working on?
I have written a Harvard Business Review (HBR) article with MIT mechanical engineering professor Amos Winter on Engineering Reverse Innovations (July-August 2015) that describes a breakthrough innovation—a $250 wheelchair designed for the disabled in poor countries which has the same features and performance as the $7,500 wheelchair sold in the US. This article won the McKinsey Award for the Best Article published in HBR. The award brings spotlight to an important issue—how can businesses play a role in solving wicked social problems.
Which one of the companies you’ve written about in the new book has best implemented the three-box solution?
My favourite is Mahindra and Mahindra under Anand Mahindra’s leadership. I consider Anand to be the kind of ambidextrous leader India needs more of—leaders who can focus both on the short term and the long term simultaneously, leaders who know how to use a microscope and telescope equally well.
Among start-ups in India, have you spotted any real innovators lately?
The biggest opportunity in India is e-commerce. Why? Three important factors will drive this: 1) mobile phone penetration; 2) a young demographic that is used to ordering things using the mobile platform; 3) growth of consumerism with more Indians with higher disposable income. We will see many new innovative business models in the e-commerce space in the next five years. No doubt we will see new innovative high-growth companies—Indian equivalents of Alibaba.