Reverse Innovation; Let’s Talk Learning From Emerging Markets

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At the most basic, reverse innovation invites business leaders and those looking to change established companies and developed economies by learning lessons from similar solutions crafted in developing markets. For example, potential solutions for irrigation systems that would be usable in the US could come from solutions successfully employed in emerging markets. Professor Vijay Govindarajan (VG) initially coined the phrase in 2009 while working with then General Electric CEO Jeffrey Immelt and his colleague Chris Tremble.

While times have changed, VG continues to think dynamically about how companies can use lateral logic to advance their interests. His new model offers insight into how companies will successfully navigate the pandemic, emerging more resilient on the other side.

*The following is a direct piece obtained from Professor Vijay Govindarajan:

Three Box Solution: Strategy To Adapt to The Post-COVID World

COVID-19 will transform industries — ecommerce, digital health, online courts, higher education, etc. But we do not yet know how industries will be transformed. COVID-19 is what I would call an “unknown unknown”. Companies know how to deal with “known unknowns” and “unknown knowns”. I’ve more calls from CEOs in the past 12 months with this question: “How can I cope with unknown unknowns?”

Companies find Three Box Solution useful to prepare for an uncertain world. The Three-Box Solution describes the framework for managing actions in three-time horizons at once: executing the present core business, the Performance Engine, at peak efficiency (Box 1); taking steps to avoid the inhibiting traps of past success (Box 2); and inventing a future built on breakthrough ideas (Box 3). During COVID-19, I’ve worked with companies on the difficult challenge of executing Box 3 strategies while sustaining excellence in the Box 1 Performance Engine.

Three Box Solution is predicated on three principles that are ideally suited to adapt to an “unknown unknown” future: 1. Develop a point of view about the future. Given the enormous uncertainty, it is not possible to predict the future. But leaders must set aside time to understand what is possible in the future; 2. Conduct one low-cost experiment; and 3. Based on the learnings from the experiment, build the future brick-by-brick. The process involves imagining the future but proceeding from the present.

Every crisis often also creates an opportunity to remake organizations for the better. Corporations must seize this moment to look beyond the impact of the pandemic, and come to grips with the choices that they must make today, so that they are positioned to continue to make the greatest impact tomorrow. Our future starts today. I’ve been advising companies to set up two Task Forces: one to respond to the short-term challenges (Box 1) and the other devoted to preparing for the long-term future (Box2/3). For instance, automobile companies must simultaneously excel in the traditional gasoline-powered, internal combustion driven car (Box 1) as they prepare for a future defined by electrification, ridesharing, and autonomous vehicles (Box 2/3).

Crisis throws up challenges, but it also opens up possibilities. The time to act is now. As Winston Churchill said: “Never waste a good crisis,” and he always added: “Let our advance worrying become advance thinking and planning.”

Three Box Solution is a systematic process not only for recognizing impending changes and ascertaining what opportunities they may offer but for developing experiments to distill and scale up promising breakthrough business ideas. It accomplishes three exceptionally important things for the enterprise: (1) It creates a circulatory system for new ideas; (2) it develops the capacity to prioritize, investigate, and act on those ideas; and (3) it builds an adaptive culture that embraces continual change. It enables organization to be proactive rather than reactive. To be sure, Three Box Solution can accommodate scenario planning and other conventional tools and cultural aspirations, such as a flatter organization and a more empowered workforce. But it is not just an event, an activity, or a tool. It is a discipline encompassing processes and behaviors across many functions that will strengthen resiliency and lead to growth.

About Professor Vijay Govindarajan

VG is the Coxe Distinguished Professor at The Tuck School of Business at Dartmouth College and is a Faculty Partner in the Silicon Valley incubator Mach 49. He is widely regarded as one of the world’s leading experts on strategy and innovation. He is also a two-time winner of the prestigious McKinsey Award for the best article published in The Harvard Business Review, as well as a NYT and WSJ Best Selling Author. His most recent best seller is Three Box Solution.

Further, VG was named by Thinkers 50 as a Top 3 Management Thinker in the world and received the Breakthrough Innovation Award in 2011. He was inducted into Thinkers 50 Management Thinkers Hall of Fame and was given the Distinguished Achievement Award for most contributions to the understanding of innovation in 2019. VG is the only recipient of Distinguished Achievement Awards in two different categories from Thinkers 50. He has worked with CEOs and top management teams at over 40% of Fortune 500 companies to discuss, challenge, and escalate their thinking about strategy. He has been a keynote speaker in the BusinessWeek CEO Forum, HSM World Business Forum, TED, and World Economic Forum at Davos. You can follow him on Twitter and LinkedIn.

Garrett Mitman, Investments Intern

Stay up to date on Professor Vijay Govindarajan’s work by visiting his personal website.

Check out Professor Govindarajan’s Emerging Markets: Engineering Reverse Innovations, which received the McKinsey Award for Best HBR Article in 2016.

Do you see opportunities for developed countries to learn lessons from emerging economies, specifically as they recover from COVID-19?

Check out VG’s The Three Box Solution: A Strategy for Leading Innovation.

This newsletter is intended solely for informational purposes, and should not be construed as investment/trading advice and are not meant to be a solicitation or recommendation to buy, sell, or hold any securities mentioned. Any reproduction or distribution of this document, in whole or in part, or the disclosure of its contents, without the prior written consent of Flat World Partners is prohibited

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