## Vi­jay Govin­dara­jan

Rotman Management Magazine - - NEWS - by Karen Christensen

De­scribe the uni­ver­sal chal­lenge faced by to­day’s lead­ers.

Mod­ern ex­ec­u­tives face two fun­da­men­tal chal­lenges: op­ti­miz­ing their ex­ist­ing busi­ness while at the same time, in­no­vat­ing to cre­ate new value for the fu­ture. The prob­lem is, th­ese chal­lenges call for a com­pletely dif­fer­ent set of met­rics, mind­sets and lead­er­ship ap­proaches. Man­agers and ex­ec­u­tives, con­sul­tants and aca­demics have long wres­tled with how to achieve this, and in re­sponse, some of them have em­braced a con­cept known as ‘am­bidex­ter­ity’ — the or­ga­ni­za­tional ca­pa­bil­ity to ful­fill both the in­no­va­tion and ex­e­cu­tion im­per­a­tives at once.

How­ever, the chal­lenge goes be­yond man­ag­ing to­day’s busi­ness while cre­at­ing to­mor­row’s. I have found that a crit­i­cal third el­e­ment is re­quired, and that is proac­tively let­ting go of yes­ter­day’s val­ues and be­liefs. The fact is, to get to the fu­ture, you must build it, day by day — and that means set­ting aside cer­tain be­liefs, as­sump­tions and prac­tices that will oth­er­wise be­come ob­sta­cles be­tween your busi­ness of to­day and its fu­ture po­ten­tial.

You de­vel­oped a new model to tackle this uni­ver­sal chal­lenge. Please de­scribe it.

I call it the Three Box So­lu­tion. In Box 1, you take the re­quired steps to man­age your present core busi­ness to its peak ef­fi­ciency. In Box 2, you take steps to es­cape the traps of the past by iden­ti­fy­ing and di­vest­ing busi­nesses, prac­tices and at­ti­tudes that have lost rel­e­vance. And in Box 3, you gen­er­ate break­through ideas and con­vert them into new busi­ness mod­els. Lead­ers at all lev­els — but espe­cially CEOS — must pay close at­ten­tion to each box.

What are some of the best ap­proaches for each box?

The strat­egy in Box 1 is to make lin­ear in­no­va­tions within your ex­ist­ing busi­ness model. The chal­lenge is to fo­cus on your cus­tomer’s near-term needs, op­ti­mize op­er­a­tions for high ef­fi­ciency and align re­wards and in­cen­tives with your strat­egy. Lead­erly be­hav­iour in Box 1 in­cludes set­ting chal­leng­ing goals for peak per­for­mance; an­a­lyz­ing data to quickly spot and ad­dress ex­cep­tions and in­ef­fi­cien­cies; and cre­at­ing a cul­ture of do­ing ev­ery­thing smarter, faster and cheaper.

Box 2 in­volves build­ing a sup­port struc­ture for non-lin­ear ideas by let­ting go of past prac­tices, habits and at­ti­tudes. The past will al­ways ‘fight back’ — so you have to be pre­pared to make tough calls about your core val­ues here. The lead­er­ship skills re­quired in Box 2 in­clude gath­er­ing and an­a­lyz­ing weak sig­nals from the en­vi­ron­ment; cham­pi­oning the ideas of mav­er­ick thinkers; and pub­licly pe­nal­iz­ing ‘foot-drag­gers’.

Box 3 strat­egy in­volves ex­per­i­men­ta­tion that re­solves un­cer­tain­ties and new learn­ing that strength­ens an idea or re­veals its weak­nesses. The chal­lenge here is that it is not al­ways clear which idea to pur­sue first: you will need a method to gauge rel­a­tive value and pri­or­ity. And keep in mind that the suc­cess rate for Box 3 ex­per­i­ments is quite low.