Out of the box

By: | Published: May 15, 2016 6:10 AM

To strengthen your existing business, you need to innovate for the future. This book tells you how

THE THREE Box Solution comes with the following suffix: ‘A Strategy for Leading Innovation’. Books discussing this topic have become quite common of late, with experts telling corporates how they should strategise and what they should do to move ahead. Thankfully, The Three Box Solution by Vijay Govindarajan has a different approach. In the book, Govindarajan says companies need to absorb three basic tenets called ‘boxes’: strengthen your existing business (box one); forget about the past (box two); and look at cutting-edge innovation for the future (box three). On the face of it, this is logical advice, as companies that continue to believe in successful strategies of the past aren’t able to adapt to changing trends and tend to fail. Also, linear thinking might not be adequate to bring about positive change. What’s needed is to take risks and innovate for the future.

The author quotes an interesting analogy from Hindu mythology involving the trinity of Brahma, Vishnu and Shiva. He says we need Brahma to bring about creation, a proxy for innovation and charting the course of the future. We need Vishnu, the preserver, because one is never sure if Brahma’s new creation will work or not. Last, Shiva is needed to get rid of the past and all the old theories that go with it, so that the company is able to think differently.

As is the case with most such treatises, there are several examples given in the book of companies that followed this path and did well, as well as those that didn’t and hence stumbled. Tata Consultancy Services, for instance, gave up the call service business because it didn’t see a future in it even though it did well in terms of the balance sheet. With changing times, it was required to move on. Similarly, Procter & Gamble went in for divestitures of 43 of its beauty brands in 2015, which was considered quite revolutionary.

The problem with the corporate mindset is the assumption that what worked in the past would work in the future as well. Here, the author explains the three ‘traps’ that companies fall into: complacency, cannibalisation and competency. Being in the comfort zone is one sure way of not making progress, as ‘complacency’ sets in. Further, when companies think of new products or services, there is the fear that they might ‘cannibalise’ a current successful product and this deters them from going in for change. ‘Competence’ is the ability to think and do things differently, which can keep companies happy in their comfort zone, as there is the lurking fear of the unknown. Creating a future is painstaking, as you do not know what will work. Here, one might have to think of forging alliances with partners to succeed. The author’s advice is to first place small bets and experiment before going full on.

There is nothing really new here, as it’s well known what one should do to enhance the existing business. It is more about enhancing every aspect of this approach, starting from the board and management to all the levels of employment down below. This is a pre-requisite for jumping to box three. While there are several successful stories in box one, it is the other two boxes that really test one’s skills. There’s a need to balance the three. The main issue with books on strategy is that they extol the success stories of companies which did well by following these three boxes, but what about those which tried but didn’t succeed? The second issue is that this can’t be done at an advisory level, as no one is willing to believe that they lack these insights. This is one reason for failure. Maybe this is why management consultants provide such advice in general when asked to comment on restructuring business for any company.

Madan Sabnavis is chief economist, CARE Ratings

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition