Three Steps to Innovation

In an interview for his The Three Box Solution: A Strategy for Leading Innovation (Harvard Business Review Press), Vijay Govindarajan, Coxe Distinguished Professor at the Dartmouth Tuck School of Business and a Marvin Bower Fellow at Harvard Business School (which means that he’s not your average B. school prof), pointed out, "Marriott did not invent Airbnb. AT&T did not invent Skype. Microsoft did not invent Google. Blockbuster did not invent Netflix.”

The good news for all but the last is that their failures to invent notwithstanding, they’re still in business.

But going forward, companies that don’t invent things that are perhaps adjacent but further on may find themselves like some of the so-called “unicorns” in Silicon Valley. Rich today, selling office furniture tomorrow.

Govindarajan is not one of those people who intone words like “innovation,” “disruption” and “The Future” in a voice that sounds like James Earl Jones. Govindarajan is one of those people who are sufficiently planted to know that businesses are predicated on doing things that make them money in the now—but he also knows that those activities don’t necessarily mean that the businesses will make money in the future. (Or The Future!)

Which brings us to the conceit for his new book, the three boxes. These boxes are simple and sensible, helpful and yet difficult.

The boxes represent where you’ve been, where you are and where you’re going (or should be going).

Or, as he puts it:
  • Box 1—Manage the present core business at peak efficiency and profitability
  • Box 2—Escape the traps of the past by identifying and divesting businesses and abandoning practices, ideas and attributes that have lost relevance in a changed environment.
  • Box 3—Generate breakthrough ideas and convert them into new products and businesses.

Govindarajan provides an assortment of examples from companies ranging from toy company Hasbro to the Willow Creek Community Church, from Green Mountain (the company that developed those coffee pods for Keurigs) to the Mahindra Group (which includes Mahindra & Mahindra, the automotive business).

None of the boxes are bad. All of the boxes must be balanced. Probably the most difficult of the boxes to deal with is #2, as it is closely linked to #1, and there is a natural hesitancy to give up on things that may be living in a sense, albeit somewhat like a zombie. They’re tough to kill.

What’s more, being really good at #1 can be something of a trap because as Govindarajan points out, “The most pernicious effect of the success trap is that it encourages a business to suppose it already knows what it needs to know in order to succeed in the future.” He pointedly adds: “But that’s not true. Organizations that do not continuously learn new things will die.” And one might argue that organizations that do not do new things, but continue to do what they’ve always done, are likely to become sickly at the very least because the external environment (i.e., the market) is changing.

Stay in your box at your own risk.—GSV