Here is an excerpt from an article written by Vijay Govindarajan for Harvard Business Review and the HBR Blog Network. The material is adapted from The Three-Box Solution: A Strategy for Leading Innovation (Harvard Business Review Press April 2016). To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.
* * *
For a long time, I have been troubled to see how often organizations fail to invest wisely in their futures while instead placing dominant emphasis on the present. To be sure, the present is vitally important. Your current business is the performance engine. It both funds day-to-day operations and generates profits for the future. Where problems arise is when the present crowds out other strategic priorities—for example, when the only skills brought into a business are those that serve today’s core. That is shortsighted in every sense of the word.
What’s missing from the managerial toolkit is a way for managers to allocate their—and their organization’s—time and attention and resources on a day-to-day basis across the competing demands of managing today’s requirements and tomorrow’s possibilities. But as anyone who has ever tried to lead innovation knows, the challenge goes beyond being ambidextrous enough to manage today’s business while creating tomorrow’s. There is a third, and even more intractable, problem: letting go of yesterday’s values and beliefs that keep the company stuck in the past.
To deal with this problem, over the course of thirty-five years of working with and doing research in corporations around the world, I have developed a simple, practical framework that recognizes all three competing challenges managers face when leading innovation. It is based on the simple idea that the future is not located on some far-off horizon, and you cannot postpone the work of building it until tomorrow. To get to the future, you must build it day by day. That means being able to selectively set aside certain beliefs, assumptions, and practices created in and by the past that would otherwise become a rock wall between your business of today and its future potential. This is the basic idea behind what I call the Three-Box Solution (see the figure below).
Success in each box requires a different set of skills, attitudes, practices, and leadership. By balancing the activities and behaviors associated with each box, every day, your organization will be inventing the future as a steady process over time, rather than as a onetime, cataclysmic, do-or-die event. Simply put, the future is shaped by what you do, and don’t do, today.
The three-box framework will help you deliver stronger overall performance and more-innovative futures while also building an organization fit to survive not just from quarter to quarter but for generations. As Karim Tabbouche, the chief strategy officer of VIVA Bahrain, told me: “Our planning process had become myopic and short term in nature, with our objectives becoming tactical and linear in nature. The three-box framework has challenged us to redesign the planning process, which would allow us to brainstorm Box 2 and Box 3 nonlinear initiatives in addition to undertaking Box 1 operational excellence initiatives. It is important to allocate resources to Box 1, Box 2, and Box 3 projects to maintain a healthy balance among the boxes.”
Yet it is not surprising that so many organizations focus mainly—even exclusively—on Box 1. The Box 1 present is their comfort zone, based on activities and ideas that are proven, well understood, and firmly embedded in the business. Most firms’ organizational structures were built on the successes of the past, refined over time to support the priorities of the present core business, and focused on maximizing cash flow and profit generated by the core.
By comparison, the Box 2 work of avoiding the traps of the past is difficult and painful. It may require wrenching management decisions to divest long-standing lines of business or to abandon entrenched practices and attitudes that are unwelcoming or even hostile to ideas that don’t conform to the dominant model of past success. Moreover, the Box 3 methodology for creating the future consists of leaps of faith and experimentation that are fraught with uncertainty and risk. The regime calls for entirely different management strategies and metrics than does the relatively settled and predictable work of executing the present core business at the highest level.
The biggest challenge you have in balancing the three boxes is that the greater your success in Box 1, the more difficulties you are likely to face in conceiving and executing breakthrough Box 3 strategies. This “success trap” typically arises not from willful inattention but from the overwhelming power of success that the past has brought.
* * *
Here is a direct link to the complete article.
Vijay (Vee-jay) Govindarajan (go-vin-da-RAH-jin), known as “VG,” is the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business and a Marvin Bower Fellow at Harvard Business School. VG, a New York Times and Wall Street Journal Best Selling author, is an expert on strategy and innovation. He was the first Professor in Residence and Chief Innovation Consultant at General Electric. In the Thinkers 50 Rankings, VG is rated #1 Indian Management Thinker. To learn more about Vijay (“VG”) Govindarajan and his brilliant work, please click here.