Leadership Book Review: The Three Box Solution by Vijay Govindarajan

Regardless of whether you’re in the Credit Union Industry or a manufacturer of lawn ornaments, continuous innovation is required if you want to survive. However, innovation is also one of those illusive things that most organizations struggle with. It’s not that we all don’t know it’s important; we just get lost on how to encourage it.

The real challenge with continuous innovation is this: creating a new organization and improving an existing one are two very different challenges. And yet, in order to create continuous innovation, we must be able to simultaneously meet the present day requirements of our existing organization while also reinventing it. So, the real question becomes: How do you envision a change in your current business model before a crisis forces you to abandon it?

That’s the challenge innovation guru Vijay Govindarajan attempts to tackle in his new book, “The Three Box Solution”. In the book, Govindarajan outlines a method for allocating an organization’s energy, time, and resources across “three boxes”:

  • Box 1: The present—Manage the core business at peak profitability
  • Box 2: The past—Abandon ideas, practices, and attitudes that could inhibit innovation
  • Box 3: The future—Convert breakthrough ideas into new products and businesses

This framework makes tackling the challenge of continuous innovation less intimidating because it offers concreate methods for managing and measuring these specific categories of behavior across all levels of the organization.

More specifically, Govindarajan outlines five key behaviors that every leader should focus on if they want to drive innovation before the next competitive crisis arrives on their doorstep:

#1. Don’t assume that current gifts will keep on giving. If you’re concerned about innovation, this is a trap that should be avoided at all costs. Leaders who drive innovation know how to selectively forget the past, and remain on the lookout for the future’s raw material of new ideas. They consciously decide that creating the future is a distinctly separate goal from encouraging top performance today, and should be treated as such.

#2. Be alert to “weak signals” of non-linear shifts and trends. Innovation is often about recognizing things that are not so obvious to everyone else. In order to notice these “weak signals”, leaders must find a way to eliminate the noise of the tried-and-true and create protective structures that include dedicated teams focused on innovation. They need to regularly listen to a few mavericks and outsiders who are drawn to nonlinear ideas and trends.

#3. “Creating the future” is a day-to-day business process. In order to create something that doesn’t yet exist, the “future” must be treated as “today”. This can be tricky… leaders must find a balance preventing them from going too far and sweeping everything aside, while actively choosing to make room for possibilities that don’t yet exist.

#4. Prepare yourself to be resilient in the face of change by constantly building new skills. It’s important for leaders to ensure that their organization is ready to act on new opportunities through developing an evolving sense of what skills the future might require. A business that relies on static skill replacement is falling behind and ripe for the next competitive crisis. In order to avoid this, leaders must build a process for divesting skills that have lost their value while replacing them with skills more meaningful to the current and future marketplace.

#5. 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 internal processes and skills, and on the hard decisions about what to focus on and what to ignore.

Govindarajan’s approach offers valuable insight into the framework required to allocate time, energy, and behavior in the service of continuous innovation. Through real world examples that include GE, Hasbro, and IBM, he illustrates what it takes for an organization to continuously remake themselves in order to remain vital and competitive. The method allows any leader to actively invent the future, rather than consistently be reacting to it. Because of this, the approach is applicable to leaders at all levels in any organization and, in my opinion, well worth the read.

About Dan Finerty

Dan Finerty is the Director of Marketing at the Mountain West Credit Union Association, a Credit Union champion, a Credit Union Development Educator (CUDE), and an award-winning marketer. Dan has over 14 years of marketing experience in communications, retail, packaged goods, and, of course, Credit Unions. He believes that Credit Unions have an incredible story to tell and works with some of the brightest Credit Union professionals to help promote Credit Unions to the public. Dan holds two Bachelor’s of Science in Marketing and in Management. He is also a swell guy.

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