WHEN I ASKED Vijay Govindarajan which of the three boxes from his new book The Three-Box Solution is the most important, he picked the second, “Forget the Past”. This box is about abandoning ideas, practices, and attitudes that inhibit innovation. The other two are “The Present”, and “The Future”, which deal with managing business at peak profitability, and converting ideas into products and businesses, respectively.
The Three-Box Solution (Harvard Business School Publishing, Rs 995) comes at an interesting time. Just when globalisation seemed irreversible, nationalism is challenging it around the world. Closed borders are the theme of the day. The eurozone, which seemed a permanent fixture, is getting wobbly.
Govindarajan, the Coxe Distinguished Professor at Dartmouth’s Tuck School of Business, charts out a strategy for corporations to reinvent themselves for the future while they continue to increase operations and profits in the present. Some organisations try to achieve this through “ambidexterity”. Think of it as Theresa May being a reluctant Remainer in the Brexit poll, but talking tough on immigration. However, ambidexterity alone won’t do. “The challenge goes beyond being ambidextrous in order to simultaneously manage today’s business while creating tomorrow’s. There is a third, and even more intractable, problem: letting go of yesterday’s values and beliefs that keep the company stuck in the past,” he writes. Govindarajan narrates an incident from the early career of Anand Mahindra of Mahindra & Mahindra. In 1991, Mahindra questioned the annual Diwali bonus when the company was in trouble. “A bonus cannot be an entitlement... It is something given in exchange for extra performance,” says Mahindra. Workers were up in arms, but after the dust settled, the company achieved a 120% rise in productivity. “That is how we were first able to make the organisation forget the past,” says Mahindra.
But companies are prone to constructing traps for themselves— they grow smug, lazy, delusional, and apply band-aid solutions where surgery is necessary. The world of business is littered with carcasses of companies stuck in the past. “Nonlinear change” is the solution to avoid such a fate. “The future is not located on some far-off horizon, and you cannot postpone the work of building it until tomorrow,” writes Govindarajan. “To get to the future, you must build it day by day. That means being able to selectively set aside certain beliefs, assumptions, and practices created in and by the past...”
Govindarajan cites examples such as TCS (Why did it abruptly end its offshore call centre business when it was making money?) and IBM (Why did it grow complacent and develop a near-term result bias?). TCS wanted to grow into high-value strategic products, and for the first time, IBM got an outsider (Lou Gerstner from RJR Nabisco) to get the company to “throw off its smug self-certainty”.
The takeaway from Govindarajan’s book: Companies need to get over the past to innovate and succeed.