If Google was not created by Microsoft or AT&T could not conceive of Skype, it is because established corporations failed to realise that business models are a perishable commodity in a rapidly evolving world, says management expert and innovation consultant Vijay Govindarajan.
The reason many big companies and market leaders struggle to foresee the next big thing is that they “become too focussed on executing today's business model and forget that business models are perishable,” said Mr. Govindarajan, Earl C. Daum 1924 Professor of International Business, Tuck School of Business at Dartmouth, US.
The professor propounds a “three boxes” concept, which is a sort of diagnostic dipstick on a company's vulnerability — Box 1 (Manage the Present), Box 2 (Selectively Forget the Past) and Box 3 (Create the Future).
Companies can sustain only if they strike a balance between the three boxes that stand for maintaining efficiency, shedding underperforming or redundant practices and creation for the future, said Mr. Govindarajan who, along with colleague Chris Trimble, also deals with this concept at length while spelling out the challenge for CEOs in business model re-invention in the latest issue of Harvard Business Review.
Citing Infosys as a good case-study of a forward-looking company that ticked the right boxes, he points out that the IT major had first showcased a global delivery model for offshore custom software development, turning into an end-to-end software solutions provider and then building a totally new portfolio around consulting services.
“One of the toughest challenges for company leadership is to stave off the pressures of the bottomline and quarterly data sheets in taking a long-term decision,” he says. He cites an instance in the early days of Infosys when its founding chairman N. R. Narayana Murthy had taken the bold decision of turning down a demand for deep cost concessions from his biggest client in the larger interests of maintaining a continuum in quality, training, R&D and technology.
“It is vital that Indian CEOs stand up to short-term pressures of performance and focus on Boxes 2 and 3,” he said.
They must also “listen keenly to non-traditional voices” — cross-functional groups of young, maverick employees and even external experts — to harvest innovative ideas. Ideas often do not come from the senior executives but from the lower-rung employees who need to be engaged in an organisation's strategic thinking processes, he said.
As one who is “bullish” on India in terms of its competitive advantage over a rival like China owing to a combination of democracy, demographic dividend and English language proficiency, Mr. Govindarajan believes that India has to facilitate innovation in a big way if the country is to evolve into the global force it aspires to be in 2025.
Of late, Mr. Govindarajan has been advocating the concept of designing a $300 house for the poor and marginalised — something that is aligned to the needs of a country like India — not as charity or Corporate Social Responsibility but as an irresistible business proposition.
A Tuck School team is also due to visit India later this year to rough it out at urban slums, understand the challenges and design a prototype for a 300-dollar house, he said.
