Great Innovators Create the Future, Manage the Present, and Selectively Forget the Past
For a long time, I have been troubled to see how often organizations fail to invest wisely in their futures while instead placing dominant emphasis on the present. To be sure, the present is vitally important. Your current business is the performance engine. It both funds day-to-day operations and generates profits for the future. Where problems arise is when the present crowds out other strategic priorities—for example, when the only skills brought into a business are those that serve today’s core. That is shortsighted in every sense of the word.
What’s missing from the managerial toolkit is a way for managers to allocate their—and their organization’s—time and attention and resources on a day-to-day basis across the competing demands of managing today’s requirements and tomorrow’s possibilities. But as anyone who has ever tried to lead innovation knows, the challenge goes beyond being ambidextrous enough to manage today’s business while creating tomorrow’s. There is a third, and even more intractable, problem: letting go of yesterday’s values and beliefs that keep the company stuck in the past.
To deal with this problem, over the course of thirty-five years of working with and doing research in corporations around the world, I have developed a simple, practical framework that recognizes all three competing challenges managers face when leading innovation. It is based on the simple idea that the future is not located on some far-off horizon, and you cannot postpone the work of building it until tomorrow. To get to the future, you must build it day by day. That means being able to selectively set aside certain beliefs, assumptions, and practices created in and by the past that would otherwise become a rock wall between your business of today and its future potential. This is the basic idea behind what I call the Three-Box Solution (see the figure below).
Success in each box requires a different set of skills, attitudes, practices, and leadership. By balancing the activities and behaviors associated with each box, every day, your organization will be inventing the future as a steady process over time, rather than as a onetime, cataclysmic, do-or-die event. Simply put, the future is shaped by what you do, and don’t do, today.
The three-box framework will help you deliver stronger overall performance and more-innovative futures while also building an organization fit to survive not just from quarter to quarter but for generations. As Karim Tabbouche, the chief strategy officer of VIVA Bahrain, told me: “Our planning process had become myopic and short term in nature, with our objectives becoming tactical and linear in nature. The three-box framework has challenged us to redesign the planning process, which would allow us to brainstorm Box 2 and Box 3 nonlinear initiatives in addition to undertaking Box 1 operational excellence initiatives. It is important to allocate resources to Box 1, Box 2, and Box 3 projects to maintain a healthy balance among the boxes.”
Yet it is not surprising that so many organizations focus mainly—even exclusively—on Box 1. The Box 1 present is their comfort zone, based on activities and ideas that are proven, well understood, and firmly embedded in the business. Most firms’ organizational structures were built on the successes of the past, refined over time to support the priorities of the present core business, and focused on maximizing cash flow and profit generated by the core.
By comparison, the Box 2 work of avoiding the traps of the past is difficult and painful. It may require wrenching management decisions to divest long-standing lines of business or to abandon entrenched practices and attitudes that are unwelcoming or even hostile to ideas that don’t conform to the dominant model of past success. Moreover, the Box 3 methodology for creating the future consists of leaps of faith and experimentation that are fraught with uncertainty and risk. The regime calls for entirely different management strategies and metrics than does the relatively settled and predictable work of executing the present core business at the highest level.
The biggest challenge you have in balancing the three boxes is that the greater your success in Box 1, the more difficulties you are likely to face in conceiving and executing breakthrough Box 3 strategies. This “success trap” typically arises not from willful inattention but from the overwhelming power of success that the past has brought.
For example, like most other forms of popular entertainment, Hasbro competes in a “hits-based” industry, launching many new products in the hope that one or more will become the sort of breakout platform or franchise that vastly overcompensates for the cost of developing products that don’t hit it big. Over the years, Hasbro has had its share of legendary hits (Mr. Potato Head, G.I. Joe, and Transformers), each becoming a growth platform. But until twenty years ago, the company had continued to see itself as a toy and game manufacturer for the retail channel.
The risk for a business of Hasbro’s type is that it could become complacent, resting on its laurels and perhaps failing to notice changes in the environment that could threaten a formerly secure business model. That is why organizations must develop the Box 2 capacity to overcome the influence of the past, to divest one identity in favor of another.
Had Hasbro continued to see itself as a toy and game manufacturer whose customer relationships existed only at the retail point of sale, it would not be the successful company it is today. In the intervening decades, it transformed itself by shedding its old identities. That is among the many reasons why Box 2, whose mechanisms explicitly target success traps, is such an important enabler of Box 3 innovation.
With the three boxes in mind, here are the key takeaways that I find work best with managers trying to balance the competing demands of innovating while running a high-performing business:
• Do not distract those who work in the core Box 1 business from their demanding performance goals. Box 1 cannot execute Box 3 innovations. And that is OK. Remember that Box 3 cannot exist without Box 1. Also, what must be forgotten for the purposes of Box 3 may still be vitally important to Box 1.
• Box 2 is the indispensable element of the Three-Box Solution. Most organizations ignore Box 2 as they try to innovate their way to a new model. Even as old ideas and practices choke off the new future they’re trying to create, organizations find it very difficult to overcome the power of the past. The more attention a company pays to Box 2, the more room there is for the Box 3 to achieve its goals. If Box 3 were an NFL quarterback, Box 2 would be the offensive line, providing time and flexibility in which to read the defense, execute, and, if necessary, improvise. Without a well-functioning Box 2 discipline, your Box 3 offense will be stagnant and predictable.
• Good Box 3 hedging strategies are important. In a regime of experimentation and learning, not every step along the way will be successful. You need to develop a process for hedging risk. That typically means testing assumptions through iterative learning stages that, over time, resolve uncertainty and either produce growing confidence or reveal the need for a reboot or exit. Hasbro’s 1970s venture into Romper Room–branded nursery schools might have benefited from better testing and hedging.
• Create formal processes that both serve the goals of Box 3 and increase the likelihood of achieving balance among all three boxes. Sustainable Box 3 activities require both structure and accountability. Hasbro CEO Brian Goldner inaugurated “martini meetings” and the Future Now team to keep Hasbro moving forward on Box 3 ideas. The martini meetings served the further purpose of identifying situations in which the three boxes might intersect. This became procedural reinforcement of the boxes’ relatedness and ultimately contributed to balance. On a personal time-management level, Goldner audits the amount of attention he devotes to each box every week.
• Think of the Three-Box Solution as endlessly cyclical. You are always preserving the present, destroying the past, and building the future. In other words, the business models, products, and services you create in Box 3 will at some point become your new Box 1.
• The Three-Box Solution imposes on leaders a requirement for humility, because it is essentially a strategy for taking action through continuous learning. Learning is intrinsically a humbling activity; to learn is to admit you don’t know everything. Almost every aspect of the Three-Box Solution framework is intended to increase opportunities to listen and learn. In my experience, the most effective leaders also happen to be good listeners, are never arrogant, and are able to disregard rank and status in the service of finding the best ideas.
The Three-Box Solution requires an ability to think and act simultaneously in multiple time frames. You’re always managing the present, destroying the past, and building the future. At times, you will have to focus on one box more than the others, but if you attend to all three boxes with your teams and others in your organization, you will find that you’re creating the future over time, every single day.
This post is excerpted from the Harvard Business Review Press book The Three-Box Solution: A Strategy for Leading Innovation