Vijay Govindrajan proposes managing innovation through balancing three boxes: 1) Box 1 focuses on optimizing the core business. 2) Box 2 abandons outdated practices to clear space for new ideas. 3) Box 3 experiments with breakthrough innovations through testing assumptions. Leaders must balance investing in the present business while also creating the future through experiments in Boxes 2 and 3. Govindrajan provides case studies and guidelines for balancing the three boxes approach to innovation.

1. S
The Three Box Solution
Vijay Govindrajan
A strategy for leading Innovation
Harvard Business Review Press

2. About the author
S Serves as a faculty on Dartmouth's Tuck School of Business and a Marvin Bower Fellow
at Harvard.
S Been as Chief Innovation Consultant & Resident Professor – GE
S Keynote speaker in various forums – TED, World Economic Forum, Business CEO
forum,…
S Previously faculty at INSEAD ( Fontainebleau) & at the IIM, Ahmedabad.
S Has s Doctorate & MBA distinction from Harvard Business School.
S Authored many books including New York Times best selling author of “Reverse
Innovation”
S VG and his wife Kirthi divide their time between Hanover, New Hampshire & Boston.
16/04/17 VI Inc.2

3. The Three Box Solution
A simple proven method of allocating the organization's
energy, time, and resources in a balanced measure – i.e.
across three boxes..
The book solves once and for all the practical dilemma of
how to align an organization on critical but competing
demands of innovation.
16/04/17 VI Inc.3

4. The Three Box Solution
S Box 1 – The Present
S Manage the core business at peak profitability.
S Box 2 – The Past
S Abandon ideas, practices and attitudes that could inhibit
innovation.
S Box 3 – The Future
S Convert breakthrough ideas into new products and
businesses.
16/04/17 VI Inc.4

5. Case Studies
S Box 1– URI (United Rentals Inc.) in Crisis.
S Box 2– IBM’s Fall from Grace.
S Box 3 – John Sylvan’s - Keurigs’ Coffee with Green
Mountain Coffee Roasters.
S Balancing the Three Boxes – Willow Creek Community
Church.
S Leading Innovation – Mahindra & Mahindra
16/04/17 VI Inc.5

6. Box 1- Manage the Present
S Strategy
S Run core business at peak efficiency; use linear innovations within
existing business model to extend brands and/or improve product
offerings
S Challenge
S Keep focus on near customer needs, optimize operations for high
efficiency, reduce variance from plan, align rewards & incentives with
strategy.
S Leader Behavior
S Set challenging goals for peak performance, analyze data to quickly
spot and address exceptions, create a culture of doing everything
smarter, faster and cheaper.
16/04/17 VI Inc.6

7. Key Takeaways
S Box 1 excellence begins with strategic clarity, executed with
discipline and supported by system & process that sustain
performance.
S Healthy Box 1 performance is essential for Box 3 creation.
S A fully engaged board of director is invaluable to an organization
resiliency.
S Box 1 is different than Box 3 but needs to be pursued
simultaneously.
S A leaders capacity to understand the human dimension of difficult
business decisions can drive a healthy transparency.
16/04/17 VI Inc.7

8. Box 2- Forget the Past
S Strategy
S Ability to build future day by day begins here; create space and supporting structure
for non linear idea; let go of the past practices, habits, activities & attitudes.
S Challenge
S The past always fights back so be prepared to take tough calls about values Box 3
needs to leave behind( remembering that some are still useful and needed in Box 1 ).
S Leader Behavior
S Establish formal regime of planned opportunism, i.e.( gathering and analyzing weak
signals), champion the idea of maverick thinkers; do not tolerate obstructionism- set
an example for the enterprise by visibly and publicly penalizing foot draggers;
anticipate the needs for orderly process of automation.
16/04/17 VI Inc.8

9. Key Takeaways
S You must fill Box 2 before you can fill Box 3
S It is possible to break even the heaviest of chains.
S Acknowledge the three traps Complacency, Competency &
Cannibalization.
S Abandon the traditional planning process for formulating a new
strategy.
S Use Box 2 as a filtration system to successfully build special
teams in Box 3
16/04/17 VI Inc.9

10. Box 3- Create the Future
S Strategy
S The nonlinear future is built mainly by experimentation that tests assumptions and
resolves uncertainties hedging risk; new learning either strengthens the idea or
reveals its weakness.
S Challenge
S Its not always obvious which ideas to pursue first- you need a method to gauge
relative value and priority; expand the variance, knowing success rate in Box 3
experiments is low, don not trim sails on Box 3 projects in a downturn.
S Leader Behavior
S Measure Box 3 efforts not on revenue but on quality and pace of learning from
experiments; many nonlinear ideas launch into embryonic markets. Its important to
test assumptions not only about the product but also the business model and
developing market.
16/04/17 VI Inc.10

11. Key Takeaways
S Box 3 innovation is painstaking that calls for patient leadership.
S Your best opportunities may include a possible business model of alliance
with others.
S The right combinations of depth & breadth adds creative potential to
anyone's skill set.
S Learning always precedes innovation.
S Place small bets before big bets is the best way of limiting investments.
S It is important to create a box 3 culture in your organization.
16/04/17 VI Inc.11

12. Balancing the Three Boxes
S Do not distract those who work in core Box 1 business.
S Box 2 is the indispensable element of the Three Box.
S Good Box 3 hedging strategies are important.
S Create formal process that both serve the goals of Box 3 and
increase the likelihood of achieving balance among all three
boxes.
S Think of the Three box Solution as endlessly cyclical.
S The Three Box Solution imposes on leaders a requirement for
humility.
16/04/17 VI Inc.12

13. Six Leadership Behaviors
1. Avoid the traps of the past
2. Be alert to “weak signals” that may point to long-term trends and
nonlinear shifts.
3. Create the future as a day to day process and recognize that the future is
now.
4. Experiment & Learn.
5. Practice planned opportunism to be resilient in the face of change.
6. Invest energy in “Horse” you can control in order to influence “Horse” you
can’t control.
16/04/17 VI Inc.13

14. “Simple, powerful & purposeful”
Jeffery. R. Immelt, Chairman & CEO, General Electric Company
THANK YOU
16/04/17 VI Inc.14