Spirit of Innovation

Professor of International Business and director of Tuck’s Center for Global Leadership at Dartmouth in the US, Vijay Govindarajan has been cited by BusinessWeek, Forbes and The Times as a top-10 professor in strategy and indeed labelled by BusinessWeek “among the world’s hottest business gurus”. His strategic thinking did not pass General Electric (GE) CEO Jeff Immelt by, and Govindarajan is currently spending a year as chief innovation consultant at the giant corporation.

It was an opportunity that Govindarajan clearly relishes, but when I meet this affable and acutely intelligent academic he explains to me that the role came about through a series of opportune chance encounters – and some planning. It’s all down to a concept he sees as vital to all of our professional and personal lives – he calls it ‘planned opportunism’.

Planned opportunism
“I am a very spiritual person,” he tells me when I ask him to further explain this concept. “I come from India from the Hindu tradition and – while spirituality is not a religion, it is just a concept – I originally got this spirituality from the Hindu religion and that’s where I coined this term ‘planned opportunism’ as the way I think about individuals and the way they lead their lives.

“If you look at your life and big changes in it, they are always the result of chance events – unplanned, random, chance events. That’s the opportunism part, but how you respond to a chance event is anything but chance – that’s the planned part.”

He points out that in Hinduism, self-knowledge is the highest form of knowledge. “So planned really means self-knowledge. Most of us don’t know who we are. If we understand: Who am I? What capabilities do I have? What competencies and what passions do I have? What really drives me? What do I want to be 10 years from now? – that’s self-knowledge. The more you are aware of your capabilities, your competencies, your passion, then you can take the risk on that particular chance event.

“In one way, life cannot be planned, because it depends on those chance events, yet life has to be planned because the planning is what determines which chance event you act upon. It is these intentional choices that comprise the planning part, and the random events that make the opportunism part – that combination is what leads to how individuals conduct their lives.”

He adds that this too is true of corporations. Just because many events in the environment are down to chance does not mean you are helpless, he argues. “Because, as a corporation, if you build the capabilities and build the competencies, then you will grab the right opportunities.”

Govindarajan illustrates the point with the story of how he came to be appointed chief innovation consultant with GE, adding that he has no other connection to the corporation other than this one-year appointment.

“About 10 years ago, I was giving a talk at an event, where the chief learning officer of GE was also giving a talk. Since I was up after her I listened to her speak, and I was fascinated by how she talked about GE’s leadership, so afterwards I went up and introduced myself and told her I enjoyed her talk. She asked me who I was and what I was doing and I told her about my three boxes theory [see overleaf],” he explains.

“Then, about four years ago, Jeff Immelt was speaking at my own college, Dartmouth. He is a Dartmouth alumnus, so was invited to give the lecture for the graduating class.

“Whenever great people like that come to campus I always try to get half an hour with them, just to see what I can learn. His staff gave me the half an hour, so I went with a list of questions and towards the end he asked me what I was working on. I told him about the three boxes and obviously they resonated with him, because that’s what they are trying to achieve at GE – to create organic growth while maintaining efficiencies.”

Continues Govindarajan: “Then about two years ago, I wrote a book, with Chris Trimble, entitled The 10 Rules for Strategic Innovators, which I sent to Immelt asking would he mind giving me an endorsement. I didn’t think he would even give me a response because he must receive millions of requests, and I had just met him for half an hour. But not only did I get a response, I got a handwritten response that said he was going to read the book and, if he liked it, he would give it an endorsement.

“Last year, Immelt told his chief learning officer – the same person I met 10 years ago – that he wanted to get an academic into GE just to push out thinking on innovation, and could she give him a list of 10 people, the top names in innovation. She did some research and came up with a list of names of professors from Harvard and Stanford, etc, and when he came upon my name all the dots connected. It’s a series of random events if you will, but there is a planned part somewhere because I inves-ted in myself, I built some capabilities, some platforms.”

Strategic innovation
Box 1-2-3 framework

1. Manage the present

2. Selectively forget the past

3. Create the future

It was Govindarajan’s theory of strategic innovation and the ‘three boxes’ that caught the eye of the boss of GE. He has published several books on the subject. I ask him to elaborate a little for our readers.

“The best way to talk about strategic innovation is to frame it this way: think about everything an organisation does and try to put it into boxes. Box one is ‘manage the present’, box two is about selectively forgetting the past and box three is about creating the future.

“What I find working with organisations is that they all focus on box one and think they are doing strategy. In fact, while box one is terribly important, strategy is really about box two and three.

“Another name for box one is ‘competition for the present’, another name for box two and three is ‘competition for the future’. Since both are important, strategy is really about how you go about creating your future while managing the present. And what this means is that competition for the future is all about innovation. Competition for the present is all about performance and proficiency. The real strategic tension is about how you engage in strategic innovation while focusing on operational efficiencies. That’s really the core focus of my research.”

So working closely with the likes of GE, how difficult is it for large organisations like that to keep the best of what they have while moving forward, without throwing everything out that was good?

“That’s right, that is a very big challenge and in some sense my box two is the biggest challenge, which is selective forgetting. It is the word ‘selective’ that is important because you don’t want to forget everything. Every organisation has chains and roots. If you cut the roots, the tree dies, so you have got to figure out what the roots are, protect them, nurture them, fertilise them, keep them alive. But you also have to figure out which chains are holding you in the past because you’ve got to break loose of those chains.

“And that is a fundamental challenge for large companies – whether it’s GE, Johnson & Johnson or British Airways – because you are what you are today because of your past, and a lot of the past is relevant for the future. So first you have to understand what is relevant and what is irrelevant for the future, and then have the courage to forget things that are irrelevant. That is very difficult because the people in power today are often the ones that built the past, and they are going to find it very difficult to selectively abandon part of their own heritage, if you will.”

As with much of such academic research, the focus tends to be on such large established organisations. I ask Govindarajan whether the same rules apply to smaller and younger organisations, or do the latter tend to be more agile, nimble and open to innovation?

“Well, it is interesting you should ask. After we wrote The 10 Rules for Strategic Innovators book, which is all about strategic innovation in large companies, somebody in Silicon Valley invited me to give a talk on this. I pointed out that my work has been with large companies, but he still wanted me to come and focus on this tension between the new and the old. I thought: ‘Silicon Valley is only new, so the tension probably doesn’t exist’.

“So I went over there and what I found, surprisingly, was that the tension between new and old starts fairly early on in an enterprise’s life, even a Silicon Valley start-up. Once it tastes some success and tries to build a business model, any new ideas that compete with that, even ones inside that company, can get pushed out. So these kind of inflexibilities start even in very small organisations.

“Organisational inflexibilities are not only for the GEs of this world, they’re universal,” he continues. “They even exist with individuals. You may find it difficult to change because it’s inherent in humans. Forgetting is not easy and therefore it’s a trait that every organisation will have.

“In my work with companies, I have found the ‘three boxes’ not only apply to individuals, but that successful leaders also find it most difficult to ‘selectively forget’ because they assume their actions and behaviours, which led to the success, must be valid. Therefore, they refuse to change, and unless you change you cannot become a great leader.”

Barriers to strategic innovation
So, how does an organisation ensure that creativity and innovation are not stifled by management structures?

“I think the biggest barrier to innovation is the organisation,” replies Govindarajan, “because ironically it is the very structures, systems, processes, metrics and people you need for box one that are going to prevent you doing a good job in box two and three. Yet you need box one, that’s the paradox. We need all three. So the key is to figure out how do you have your cake and eat it too. You have to walk and chew gum, as they say. That is the real challenge.”

I have heard him speak about the typical organisational barriers to innovation, and ask him to detail them for us. He tells me there are five barriers that prevent companies from engaging in breakthrough innovations: “No 1 is too much short-term orientation, managers too concerned with 30-day cycles, that is a big issue. The second is the silo mentality – we have so many walls between businesses, between products, etc.

“The third is the lack of risk-taking culture. We don’t reward failure and if we don’t, people will just keep doing the same things.

“The fourth barrier is that innovation is not embedded in the organisation. Innovation is not the job of the CEO. It is something you have to embed right through the organisation.

“And the fifth and final barrier is the lack of a global mindset. We are too ethnocentric in our mindset. If we really want to do a good job in box two and three, we really have to think about countries such as India and China where there are great opportunities for innovation. If you don’t have that global mindset, you are not going to be thinking about those countries.”

It all comes down to the need for companies to effectively manage the present while creating the future – a challenge for all our organisations today, large or small.

Govindarajan on the ‘dead horses’ in your business
Govindarajan says that part of ‘selective forgetting’ is getting rid of the ‘dead horses’ in your business - lines of business that are declining. Or he helpfully suggests you could:

• Whip the horse a little harder
• Change the rider
• Harness several dead horses together for increased speed
• Emulate the best practices of companies riding dead horses
• Proclaim that it’s cheaper to feed a dead horse
• Affirm that: “This is the way we have always ridden this horse”
• Declare that: “This horse is not dead”
• Have the lawyers bring a lawsuit against the horse manufacturer
• Engage a consultant to study the dead horse
• Promote the dead horse to a senior management position.

This article first appeared in Irish Director magazine