the balancing act

November 28, 2016

Is it possible for businesses to meet the performance requirements of the current business—one that is still thriving—while dramatically reinventing it? The challenge to
do this goes beyond being ambidextrous. Organizations face an intractable problem—letting go of yesterday’s values and beliefs that keep them in the past.

In his book, The Three-Box Solution, Dr Govindarajan offers a simple and practical framework that will help managers to selectively ‘forget the past’, ‘manage the present’ and ‘create the future’. He urges organisations to build the future continuously instead of waiting for the next crisis or for a competitor to come out with a brilliant future idea.

Throughout the book, you talk about the need for companies to build the ability to ‘selectively forgetting the past’. This, you say, is essential for Box 3’s development and success. Could you elaborate on this thought? What should managers do to develop this skill, given that the natural tendency is to follow what has worked previously?

Box 2, selectively forget the past, is the most challenging of the three boxes. Box 3 is about learning and Box 2 is about forgetting. Unless you forget, you cannot learn. Yet, most organizations struggle to forget. Think about how many books we have written on learning organizations. However, we have not written a single book on forgetting organizations.

In order to forget, it is important to create a‘dedicated team’ that is distinct and separate from the Box 1 business. The dedicated team should be constructed in such a way that it can forget the dominant logic of the core business. When Mahindra & Mahindra launched the Scorpio SUV, they formed such a team for this new business venture.

 

Box 1 and Box 3 require different skill sets; managers cannot be expected to work on both. You talk about the creation of separate teams for each of these boxes. Given this context, in an era where performance bonuses are linked to completion of KRAs and targets, how will their contribution be evaluated fairly?

The dedicated team for Box 3 is an attempt to create a business in an unknown and unknowable future. As such, Box 3 is full of assumptions. The leader of the dedicated team should conduct low-cost, low-risk experiments to test assumptions. Therefore, the leader should not be evaluated on short-term financial results. Instead, he or she should be evaluated on her ability to test assumptions.

 

 

The Three-Box Solution is the outcome of 35 years of research, teaching, writing, and consulting. It is well-understood that creating a new business and optimizing an already existing one are two fundamentally different management challenges. The real problem for leaders is doing both, simultaneously. How do you meet the performance requirements of the current business—one that is still thriving—while dramatically reinventing it? How do you foresee a change in your current model before a crisis forces you to abandon it?

 

The book expands the leader’s innovation toolkit with a simple and proven method for allocating the organization’s energy, time, and resources—in balanced measure—across the three boxes:

 

•  Box 1:  The present—strengthen the core

•  Box 2:  The past—let go of the practices that fuel the core business but fail the new one

•  Box 3:  The future—invent a new business model

 

The ‘three box’ framework makes leading innovation easier because it gives leaders a simple vocabulary and set of tools for managing and measuring the different sets of behaviors and activities, across all levels of the organization. Supported with rich company examples—such as GE, Mahindra & Mahindra, Hasbro, IBM, United Rentals, and Tata—and testimonies of leaders who have successfully used this framework to lead innovation, this book solves once and for all the practical dilemma of how to align an organization with the critical but competing demands of innovation.

 

 

You say, “The greater your success in the present, the more difficulty you will have in executing breakthrough strategies for the future.” A problem you call—the success trap. What should companies do to avoid these traps?

The more successful you are in your Box 1 core business, the more you assume that it validates the past. Therefore, you do not want to change. This is what I call the ‘success trap’. The best way to overcome this trap is to create a large ambition similar to John F. Kennedy statement in the early ’60s: “We will land a man on the moon and bring him back safely before the end of this decade.”

 

Can you elaborate on how the ‘three-box solution’ improves communication within the organization?

The strength of the three-box solution is its simplicity. CEOs and senior leaders grasp it within a matter of minutes. Because it is so simple, it facilitates communication. It can build an effective vocabulary inside the organization so that the CEO can cascade strategic priority to each and every employee.

 

Of the many qualities a leader needs to have, humility maybe the least talked about. You, however, opine that humility is essential for successful implementation of three-box solution. Why?

Only humble people accept that they do not know. Only when you realize that you do not know, you are curious and you want to learn. That is why humility is the most critical leadership requirement for the three-box solution. Anand Mahindra, CEO of Mahindra & Mahindra, is a great example of a leader with humility.

 

The concept of ‘planned opportunism’…

Future cannot be predicted. Therefore the question becomes: how can you prepare for a future you cannot predict? The only thing you can control are your actions. These actions include the kind of people you hire, the kind of capabilities you build, and the kind of processes you put in place. This is what I mean of ‘planned opportunism’.

 

Importance of identifying ‘weak signals’ to create the future; what abilities should be ability to ensure that these are not missed?

Weak signals are emergent trends in areas such as technology and customer preferences. Weak signals give clues as to what is likely to happen in the future. Any employee should be able to help the organization identify the weak signals. Therefore, it is important for the CEO to listen to the distributed intelligence inside the organization. Tata Consultancy Services has created a software platform called Ultimatix in order to identify weak signs from every one of their employees.

 

Culture is long said to be the cornerstone of most organizational success. However, the ‘three-box solution’ implores organizations to let go to cultures and values, and seek to build two different sets of cultures—one that pertains to Box 1, and a completely different set for Box 3. How can companies manage these multiple cultures without sending out mixed signals to its internal and external stakeholders?

Box 3 requires risk-taking culture. Box 1 requires rick-adverse culture. Box 3 demands entrepreneurial culture. Box 1 demands performance culture. Box 3 must have a long-term orientation. Box 1 must have a short-term orientation. It is the job of the CEO to maintain these distinctly different cultures to coexist in a healthy fashion.

 

Why is a healthy Box 1 performance critical to Box 3 creation?

Box 1 is the performance engine. It is the foundation. Box 1 generates profits and cash flows that you can invest in Box 3 future businesses. That is why healthy Box 1 performance is critical of Box 3 creation.

 

 

 

What skills/capabilities should organisations build or acquire to ensure that all these three boxes are well balanced?

The most important leadership quality that should be nurtured is ambidexterity. Leaders should be able to operate simultaneously in two time horizons, short term and long term. They should be able to operate microscopes and telescopes equally well. Leaders must be able to use their right hand and their left hand with equal ease. This is what I mean by ambidextrous leaders. Anand Mahindra of Mahindra & Mahindra, N Chandrasekaran of Tata Consultancy Services, and Jeff Immelt of General Electric are ambidextrous leaders.

 

Why is cultivation of mavericks an important aspect of the ‘three-box solution?’

Mavericks have two qualities. First, they think outside the box. Second, they are organizational nightmares. They cannot get along with anybody. It is up to the CEO to identify and empower mavericks. Anand Mahindra is a leader who has leveraged the 3-box ideas of mavericks inside M&M.

 

As told to Poornima Subramanian

 

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