Summary of The Three Box Solution by Vijay Govindarajan

Summary

The transcript emphasizes the importance of balancing three types of projects for strategic success: 'Box 1' focuses on improving current operations, 'Box 2' involves selectively abandoning past practices, and 'Box 3' is about creating the future through innovative projects. It stresses that while organizations often prioritize 'Box 1', true strategy lies in effectively managing all three to intersect with the future. The speaker highlights the need for different thinking and execution methodologies for each box, especially the challenges of fostering 'Box 3' breakthrough innovations amidst the demands of 'Box 1' operations. The talk concludes with three key principles for successfully balancing these initiatives.

Takeaways

• 📈 **Three Box Model**: Companies should categorize their projects into three boxes: Box 1 (Manage the Present), Box 2 (Selective Forgetting of the Past), and Box 3 (Create the Future).
• 🔍 **Focus on Strategy**: While Box 1 is crucial, strategy is more about Box 2 and Box 3, which involve innovation and future planning.
• 🚀 **Future is Now**: The future isn't just about what you'll do later; it's about executing projects today that intersect with the future.
• 💡 **Innovation and Improvement**: Box 1 is about incremental improvements and responding to clear signals, while Box 2 and Box 3 are about breakthrough innovation in response to weak signals and nonlinear changes.
• 🌐 **Internet as a Nonlinear Change**: The internet was a nonlinear change that led to new business models like eBay, Amazon, Google, Airbnb, and Uber.
• 🏆 **High Jump Metaphor**: The evolution in high jump techniques (scissors, Western roll, straddle, Fosbury flop) illustrates the necessity of breakthrough innovations to surpass performance limits.
• 💼 **Leadership Challenge**: Leaders must balance resources between improving current operations (Box 1) and investing in future-oriented projects (Box 2 and Box 3).
• 📊 **Resource Allocation**: Companies should allocate and ring-fence resources for Box 2 and Box 3 to ensure they are not redirected during tough times.
• 📝 **Different Evaluation Criteria**: Box 3 projects should be evaluated on learning and assumption testing rather than traditional financial metrics.
• 📚 **The Three Box Solution**: The book 'The Three Box Solution' delves into how companies can create the future while managing the present, emphasizing the importance of balancing the three boxes.

Q & A

What are the three boxes mentioned in the script and what do they represent?

The three boxes represent different strategic focuses for companies: Box 1 is about managing the present and improving the performance of current businesses, Box 2 is about selectively forgetting the past, and Box 3 is about creating the future.

Why is it important for organizations to focus on Box 2 and Box 3 in addition to Box 1?

Organizations need to focus on Box 2 and Box 3 to create the future, as these boxes involve activities that are about selectively abandoning the past and creating new innovations, respectively. This is crucial for long-term success and staying ahead of competition.

What does the speaker mean by 'selectively forgetting the past' in the context of Box 2?

The phrase 'selectively forgetting the past' refers to the strategic decision to abandon certain past practices, technologies, or business models that may no longer be relevant or advantageous in the evolving market.

How does the speaker define 'competition for the present' and 'competition for the future'?

'Competition for the present' refers to Box 1 activities focused on improving current business performance, while 'competition for the future' refers to Box 2 and Box 3 activities aimed at innovation and preparing for future market changes.

What is the central leadership challenge according to the script?

The central leadership challenge is balancing the need to manage the present (Box 1) with the need to create the future (Box 2 and Box 3), despite the inherent conflicts and differences in thinking processes and execution methodologies required for each box.

Why are Box 1 projects considered 'competition for the present'?

Box 1 projects are considered 'competition for the present' because they involve incremental improvements to current business models in response to clear signals and linear changes in the industry.

What is an example of a nonlinear change in an industry that could lead to Box 2 or Box 3 projects?

The Internet is an example of a nonlinear change that has led to the creation of new business models like eBay, Amazon, Google, Airbnb, and Uber, which would not have been possible without this fundamental shift.

How does the speaker use the high jump metaphor to explain the difficulty of Box 2 and Box 3 projects?

The speaker uses the high jump metaphor to illustrate how breakthrough innovations (like the Fosbury Flop) are necessary to surpass the limitations of traditional methods (like the scissors technique). This analogy highlights the challenge of transitioning from known, incremental improvements to radical, industry-changing innovations.

What are the three principles for successfully managing Box 1, Box 2, and Box 3 initiatives as outlined in the script?

The three principles are: (1) Ask for separate plans for Box 1 and Box 2/3 initiatives, (2) Allocate resources separately and protect them for Box 2/3, and (3) Evaluate Box 3 projects on learning and assumption testing rather than just financial metrics.

Why is it suggested to ring-fence resources allocated for Box 3 projects?

Resources for Box 3 projects should be ring-fenced to ensure that they are not redirected to Box 1 during tough times, as Box 3 projects are crucial for the company's future and require dedicated focus and investment.