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Addressing the future: Vijay Govindarajan

“A lot has been written in management textbooks about learning. We need to write more on forgetting,” says Vijay Govindarajan, Professor of International Business at the Tuck School and founding director of Tuck’s Centre for Global L eadership.

During a recent visit to India, the management guru offered his insights on the key elements needed in the training of India’s management personnel.

“You need to forget all the rules about how we make money today and think about what will be needed in 25 years…Current success can be the biggest obstacle to future greatness,” he warns.

He offers a slew of examples to support his theory. In 1970, there were 3,000 companies in the Swiss watch industry producing mechanical watches. By 1980, only a hundred were left. It was not that the other 2,900 companies did not have access to new digital technology; after all, they had pioneered quartz watches themselves. But they could not see it as a viable business model that would disrupt their then successful, existing model.

Moving to a positive example, Prof. Govindarajan points to U.S. conglomerate General Electric, for whom he now works as professor in residence.

The management realised that the biggest opportunities in the next 25 years lie in the fields of health, infrastructure, water, alternative fuels. So they made the decision to acquire in these areas…But they also made the decision to divest their insurance business and their plastics division, both of which are profitable now, but will have diminishing relevance in the future, he says. Again, the emphasis on forgetting current success.

So what comes next? After forgetting the rules of current success, how are management students to address the future? Prof. Govindarajan replies with that buzzword of the corporate world: innovation.

He is quick to dismiss the current myths about the concept: “Innovation is NOT creativity,” he emphasises. “Creativity is that light-bulb moment, that flash of a brilliant idea,” he says, pointing out that creativity cannot be taught at a management school.

Innovation, however, is a different story. “Innovation is about commercialising creativity. It is that 99 per cent perspiration involved in taking it from the idea to the business,” he says. That is what management training needs to be about.

The process of commercialising creativity needs to be inspired by out-of-the box thinking. Prof. Govindarajan has spent 25 years of research into that process, but he still reaches back to the Tamil cinema of his youth for an analogy. “Think of the scene where the villain ties down MGR, kidnaps the heroine and escapes in a Mercedes. He is chased by a police van, which follows the same rules as the car, but is much slower…By the time MGR gets up, he is 30 minutes late. He knows he can’t play by the same rules, so he jumps on a horse, bypasses the roads and goes after the villain. That’s thinking differently,” he says. Prof. Govindarajan attributes little of India Inc’s current success to innovation.

In the days of the Licence Raj, the key to success lay in exclusivity. It was a system that bred inefficiency. In the post-liberalisation era, that had to change. “For the last 15 years, Indian industry has grown merely by sucking out inefficiency. To me, that game is now over…Looking to the future, our innovation gap is bigger than our efficiency gap,” he says.

He lists e-choupals and the global delivery models of the IT companies as among the few instances of innovation in Indian industry. His best example for the forgetting and innovating process, however, is the Tata Nano.

“Tata had to forget all about how it makes money today. To make a Nano, you can’t just start with another Tata car and downsize it,” he points out. A separate team had to be created for the Nano, which was able to leverage capabilities from the current business, but was also empowered to discard current notions and innovate anew.

From the idea of the one lakh car to the reality of the Nano: that’s the process of innovation. Prof. Govindarajan thinks it can be taken a step further. “The biggest opportunity for Indian companies is that by innovating for India, they can create low-cost models for the mass market here, then invoke the economies of scale even more by taking it to other emerging markets… and then blow the lower end of the market in the U.S. and developed markets.”

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