"The real problem for leaders is simultaneously meeting the performance requirements of the current business – one that is still thriving – while dramatically reinventing it."
Vijay Govindarajan has implemented and obtained great feedback from companies like PepsiCo, Caterpillar, General Electric Company, Amgen, and Medtronic who use tools from The Three-Box Solution, a book written to “provide insight and guidance that will help the leadership and organization attend to the long-term future while addressing current priorities.”
Vijay starts with Box 3, which encloses the organization’s ideas and strategies to “generate breakthrough ideas and convert them into new products and businesses” in a nonlinear movement – “creating new business models by dramatically redefining the set of customers, reinventing the value the company offers the customers, and/or redesigning the end-to-end value-chain architecture by which the organization can deliver that value.”
Box 3 leadership must have “a sense of urgency” and generate positive self-talk by constantly saying “there has to be a better way.” This mindset is proposed and driven by a special group called Mavericks who are persuadable but thrive on “great execution, valuable feedback, and their leadership agenda is to continually evaluate the relevance of even core ideas and identities.”
Vijay then looks at Box 2, which is a clash of nonlinear (Box 3) and linear (Box 1) mindsets and teams. When evaluating the organization, this box must be looked at to remove unproductive resources. Think about it as if Box 1 is the productive machine and in order for the organization to move forward, there need to be changes to this linear system with nonlinear Box 3 parts.
Six Behaviors of Innovative Leaders
"Bear in mind that [these leadership behaviors] are not merely for occasional use under unusual circumstances. On the contrary, each one is part of the checklist of daily leadership responsibilities."
Behavior 1: Avoiding the Traps of the Past
Zig Ziglar was good at avoiding traps of the past by documenting everything. First, he started with a goal. Then, he broke down the goal into specific, measurable parts. The projects that are leading innovation normally start out big and putting them into a manageable size with a timeframe will help avoid past mistakes as they will be hard to overlook.
Behavior 2: Being Alert to Weak Signals
Here Vijay says that mavericks do not stop at the problem statement, they actually start by first understanding the problem and then “conceptualize unconventional solutions and a market opportunity that the solution can exploit.”
These individuals are the backbone of Box 3 who “work hard on the fringes of the organization. They are looking ahead and are not interested in the current customers or competitors.”
Behavior 3: Building the Future Every Day
The current organization is already well established, but once the business seems to be running smoothly without hiccups, there needs to be a “sharing of knowledge” across all organizational groups. This is because “leadership is about balance. We as leaders have to learn to operate in all three boxes at once.”
Behavior 4: Experimenting and Learning
This experimentation stage will start with nothing which might be liberating at first, but as leaders learn you must reduce the risks in Box 3 projects and develop a dedicated team to help execute by constant critical feedback through evaluation, coaching, and appreciation for all parties involved.
Behavior 5: Practicing Planned Opportunism
This is a challenge because we have been taught to look at the problem rather than past the problem. It is going to take practice to ask more questions and build an awareness of good things that are happening in the process along the way. As the previous behavior was about experimenting, learning, and applying, remember to stay positive and opportunistic that the project you are working on as a leader will pay off.
Behavior 6: Investing in the “Horse You Can Control”
This behavior is based on the metaphor from Elizabeth Gilbert’s Eat, Pray, Love. “We gallop through our lives like circus performers balancing on two speeding side-by-side horses – one foot is on the horse called ‘fate,’ the other is on the horse called ‘free will.’ And the question you have to ask every day is – which horse is which? Which horse do I need to stop worrying about because it’s not under my control, and which do I need to steer with concentrated effort?”
Where Does Your Organization’s Culture Need Balance?
"Reflect on the mind-sets and behaviors needed for Box 3 to succeed alongside a prosperous Box 1 business. Then take a clear-eyed look at your current company culture."
Vijay gives a plethora of questions that will challenge your organization to think deeper about where it is going. As there is growth, there must be decay to keep the balance. You might have questions already that will help you self-evaluate your personal and professional life, but Vijay asks the reader a lot of questions to help get at the core of innovation.
To keep a balance between the boxes and the departments, ask “what is going well? What’s not? What’s had its day? What can be created or left behind going forward? How can you transform your team by assembling a dedicated team empowered to pursue a ‘clean-slate’ Box 2 approach? How will you mitigate cultural barriers or resistance instigated by the key stakeholders that dedicated team must rely on? What new cultural behaviors might you want to introduce across the organization to create harmony between Box 1 and Box 3 activities?”
There will be a natural pull to keep something that you worked hard on but is not moving the organization forward or generating profit. The business world calls this “sunk cost.” You must ignore all sunk costs and push the organization into a better path.
Assessing your organization’s leaders and yourself
"One of the keys to three-box balance is the availability of leaders who can manage the three boxes well."
Vijay gives tools to act as a self-assessment for your organization by asking questions and then rating your organization. Once you have done the self-assessment it hopefully will help establish priorities for urgent matters that need to be addressed in their divisions of the organization.
“Evaluate a leader on the following dimensions using a 5-point scale, where 1 = totally disagree and 5 = totally agree. A total score of 27 or higher indicates an ambidextrous leader:
- “Create the future while managing the present
- “Operate comfortably in two time horizons – 1-3 years and 5-10 years
- “Evaluate performance in a proven business model and emerging industry
- “Ability to experiment, learn and adapt with driving short-term financial performance
- “Commit to embracing and leading change
- “Leave behind behaviors, mind-sets, and attitudes that nonlinear changes make obsolete
- “Understands importance of placing smaller bets first, before placing bigger bets
- “Detect inflection points and nonlinear shifts (weak signals) in the industry environment and know the appropriate time to experiment with new business models
- “Knows how to manage risk but not avoid it.”
Remember, each box is different in building, tearing down or restructuring. Another challenge for the organization is to “escape the traps of the past by identifying and divesting businesses and abandoning practices, ideas, and attitudes that have lost relevance in a changing environment.”
Box 1 shouldn’t be undervalued or overlooked even though you might want to. As a linear movement to “manage the present core business at peak efficiency and profitability.” This is the “comfort zone” and current “performance engine” for the organization, and these “linear innovations improve the performance of your current business model. By building on the present core by making use of the knowledge, systems, and structures already in place in the organization. It is the straightforward, unambiguous, and unthreatening to the status quo.”
This Box is essential to move toward new advancements and the “Board of Directors must embody the urgency and enthusiasm that the leadership has in order to be resilient in the company’s current market.” Box 1 will help feed the growth of Box 3, but you must leave things behind in the process through Box 2. This is a systematic process, but will serve the organization well as “A Strategy for Learning Innovation.”