Every entrepreneur and business executive knows that continuous innovation is required to survive, but most struggle with this more than any other challenge they face. They know they need to act proactively but still are often blindsided by a new competitor coming out of the blue with a future they never imagined. Innovation driven by the next crisis is not leadership.
I remember the classic book, “The Three-Box Solution: A Strategy for Leading Innovation,” by Vijay Govindarajan, one of the world’s leading experts on strategy and innovation. He succinctly outlines the key behaviors that I believe every business leader must focus on, to drive innovation without waiting for the next competitive crisis:
- Avoid the assumption that current gifts will keep on giving. This is a trap of the past to be avoided at all costs. The best leaders selectively forget the past and are constantly on the lookout for the future’s raw material of new ideas. They overtly set out to create the future as a mission distinctly separate from their performance engine of today.
- Be alert to “weak signals” of non-linear shifts and trends. To do this, leaders must eliminate the noise of obsolete ideas and activities, by creating protective structures, including dedicated teams focused on innovation. They need to regularly listen to a few mavericks and outsiders who routinely generate nonlinear ideas and trends.
- Create the future as a day-to-day business process. The future needs to be treated as today by a team and a process that is insulated from interference but empowered to draw on necessary performance engine resources. The trick is not to sweep everything aside, but to balance relevant aspects of now while making room for what is new.
- Sponsor experiments and measure like new investments. Experiments on today’s revenue engine necessarily focus on short-term financial goals. Experiments on future ideas should be measured like investments and judged on longer-term potential, allowed to iterate, and focused on learning and adapting quickly. Both are always recommended.
- Constantly build new skills to be resilient in the face of change. Ensure your firm’s fitness to act on new opportunities, and develop an evolving sense of where the future lies. A business that relies on static skill replacement is falling behind, and ripe for the next competitive crisis. Build a process also for divesting those who have lost their value.
- Invest more energy in the “horse you can control.” Most executives admit to spending huge amounts of time and energy on issues they can’t control, including the economy, regulatory changes, and competitor moves. The best leaders spend more time on their own processes, skills, and hard decisions on what to keep and what to divest.
Govindarajan recommends a simple and practical “three-box” framework for allocating time, energy, and behaviors in the proper balance to foster continuous innovation. These three boxes include managing the present, escaping the traps of the past, and generating breakthrough ideas. This is the only way to exploit change and let go of old ideas, while still profiting from the present.
He relates actual examples of how major companies, including GE, Hasbro, and IBM, have used this framework and strategy to selectively let go of the past and remake themselves on a regular basis to stay vital and competitive. On the other end of the spectrum, technology startups also really need this mentality, since the rate of change there is rapid, and competition is so intense.
Thus, I believe the approach actually works and applies to leaders at all levels – from a small team startup entrepreneur to a business unit leader in a larger organization, to the chief executive of a multi-national conglomerate. It allows any leader to actively invent the future, rather than consistently be reacting to it. How much of your time is currently spent in crisis reaction mode?