I’m currently attending a six-week course entitled “Strategy is Innovation” designed by Professor Vijay Govindarajan (VG). He is a Wall Street Journal and New York Times bestselling author, widely regarded as one of the world’s leading experts on strategy and innovation. While this course addresses the how an organization as a whole should implement the strategy as a way to innovate for the future, I was wondering if the same principles could be applied to a more specific area – technology transformations.
The main concept behind the Three Box Solution is this: Box 1 represents managing the present. Box 2 represents selectively forgetting the past. And Box 3 represents creating the future. VG’s posits that companies tend to focus on box 1 which is all about managing the present. However, this, in the long run, can be limiting, since all of your efforts and energy is being spent on the present, and not enough emphasis or time spent addressing the future needs of the organization. So, by focusing on box 1 thinking they will never grow. Box 1 thinking is about competition for the present. Box 2 and 3, on the other hand, are about competition for the future. Box 2 is about selectively forgetting the past, and box 3 is about creating the future.
Can this Three Box solution be applied to technology transformations? I believe it does. Many organizations realize that they need to perform some business transformation in order to remain competitive. Or at least they should. Not taking note of the external and internal forces that affect the strategic direction of an organization is corporate suicide. In a prior article, I wrote about what drives a company’s strategic intent and what are the key drivers that influence the direction taken (see What is driving your strategic intent?).
From a technological perspective, many organizations focus on box 1. What is needed to keep the lights on. Box 1 thinking is about how to become more effective and more efficient. So, they focus on business process improvement, Lean techniques to reduce waste, or Six Sigma for example. Don’t get me wrong. Improving processes to become more efficient and effective is important. However, this addresses the technology performance now, not what might be needed for the future. Box 1 thinking will only take you so far. The true innovation happens in box 2 and 3 thinking. Selectively forgetting what you have done in the past and practicing non-linear thinking to create new non-linear innovation.
What this means is that the technology thinking that got you to where you are will not get you to where you need to be in the future to remain competitive. A new business model innovation is needed therefore a new technology model innovation is needed too. This new business model requires a new technology strategy conversation. This new technology strategy conversation includes the following elements:
- Non-linear shifts. what new technology thinking should we perform that are outside of what has been done until now? Linear thinking is following the path current technology path. Non-linear is about understanding non-linear changes in the industry and how to navigate your technology accordingly.
- Strategic intent. This does require an understanding of the corporate strategic intent and how the technology intent needs to align with it.
- Current core competencies. You cannot get to the future by only leveraging your current core competencies. Part of creating the future is about embedding new capabilities as well.
- Annual priorities. This is the activity of articulating all the technology projects you’re executing today. And all the projects you’re executing today cannot be only in box 1. Actually, the projects you’re executing today should have some bearing on the first three bullets, non-linear shifts, strategic intent, and core competencies.
- New core competencies. It is difficult to get to a future technology state by only leveraging your current core competencies. Part of creating the future is about embedding new capabilities as well.
The same team working on box 1 solutions should not also be working on box 3 solutions. To excel at box 3 innovation, you need new organization logic. It requires selectively forgetting what has been done in the past and incorporating new thoughts and new core competencies. Remember, box 1 is the competition for the present concerned with efficiency. We call this the performance gap. Box 3 is the competition for the future and is concerned with innovation. We call this the opportunity gap.
The three-box solution describes the framework for managing a business’s responsibility to create an innovation strategy. This can be extended to also include technology. For an organization to remain competitive and enable technology innovation for the future, an organization has to: (1) execute the present core technology at peak efficiency (by applying concepts like continuous process improvement, Lean methods, Agile methodologies, and so on), (2) take steps to avoid linear thinking and the inhibiting traps of past successes, and (3) invent a future built on strategic innovation.