Ten Rules for Strategic Innovators: From Idea to Execution

In Nature it is rare for one species to successfully rear the young of another species. The difficulties, for example, of a tiger cub being raised by a herd of elephants are easy to imagine. If the tiger isn't accidentally trampled underfoot while it is still too immature to look after itself, it is only a matter of time before some astute members of the elephant herd recognize they are raising a natural enemy, and trample it underfoot on purpose. So it is in Business. We all too often witness the apathy, turf battles, or occasional outright sabotage that cause fledgling products to be trampled underfoot well before they reach fruition. It seems that to survive, new and radical innovations must be nurtured by wholly independent start-ups - away from the threatening feet of the elephant herd at Headquarters, but consequently of little benefit to them either. "Ten Rules for Strategic Innovators" by Vijay Govindarajan and Chris Trimble offers a refreshing and hopeful new viewpoint on this topic. Both authors are recognized consultants to businesses throughout the world, as well as being academics, and their approach is analytical, with a surprising amount of common sense and a good portion of useable "how-to" ideas. A lot of it is theory, of course, backed by the 20/20 vision of hindsight brought to bear on some very interesting case studies. But it is plausible theory, and will give consultants and management several new viewpoints to explore. In the first four chapters the authors describe the inevitable three-way dynamic struggle involved with major innovations. On the one hand, the new venture (NewCo in the vernacular of the book) must Borrow from CoreCo (the established parent company) to have competitive advantage over independent start-ups. CoreCo's intellectual property, production capacity, R & D resources, and so on will be extremely valuable to NewCo during its early days. On the other hand, NewCo must Forget many of CoreCo's ways of doing things. NewCo is just like a start-up in many ways and must have different methods for planning, for rewarding employees, for satisfying customers. They need a different culture. An inability to manage the natural tension involved in trying to balance the Borrowing and the Forgetting is a major reason that many strategic innovations fail. The third dynamic is Learning. The authors characterize successful strategic innovations as being successful learning experiences. They are experiments, and indeed for the rest of the book they are referred to as "Strategic Experiments". Running an experiment is a lot different from running an established business. There has to be planning and accountability, but of a very different kind. Govindarajan and Trimble describe their innovative Theory-Focused Planning (TFP) process for use in an environment where there are several critical unknowns. This is a complex topic worthy of its own book and in the space of one chapter amounts to just a brief introduction -

I read books to be inspired and to change. I was very happy to have this book recommended to me. For every ten business books I read (and I read a lot), I finish one. Mostly because there is little new thought and little on implementation. I had no problem turning every page and learned something new from almost every chapter. A few points that I will put right into my practice (I run a consulting firm): - The role of the strategic experiment. Basically, the corporation must accept an entirely new risk profile with strategic experiments in the new business to mimic the speed of a start-up - New planning process. Planning processes kill innovation. Budgets rule. Put a certain percentage of the budget at risk through new planning process. Fundamentally, this also reflects a new business model. - Learning. The outcome of the new business is the creation of tremendous insights into how to move faster in the marketplace, but not necessarily a great return. This is the role of the CEO to manage. I recommend the book for the pragmatic business leader.

I begin this review with an unorthodox suggestion: Read the last chapter first, Chapter Ten, in which Govindarajan and Trimble explain the "Ten Rules," before reading the Introduction and then the nine chapters which follow. Normally I would not presume to offer this suggestion because, in most business books, the presentation of a given "rule," "lesson," etc. is best understood within a specific context. Indeed, Govindarajan and Trimble provide one for each of their ten "Rules." However, one man's opinion, I think it will be helpful to have at least a sense of the conceptual framework before examining the substance of a cohesive, comprehensive, and cost-effective program within which to formulate appropriate strategies. Govindarajan and Trimble affirm the value of strategic experiments because they can have high revenue growth potential, focus on emerging or poorly defined industries, test an unproven business model, involve radical departure from existing business, require allocation of at least some existing assets and competencies, develop new knowledge and capabilities, create discontinuous rather than incremental value creation, have greater uncertainty across multiple functions, tend to be unprofitable for several quarters (or more), and offer little (if any) indication of performance, at least initially. In other words, strategic experiments can be messy and unpredictable. Why bother? Govindarajan and Trimble suggest that strategic innovation is a process by which to test new, unproven, and significantly different answers to at least one of three fundamental questions: Who is the customer? What is the value offered to that customer? How is that value delivered? Presumably Govindarajan and Trimble agree that it is difficult (if not impossible) to manage what cannot be measured. Therefore, to their three questions I now presume to add two others: How to measure the value of what is offered? and then, How to measure the effectiveness of the delivery system? To obtain appropriate answers to each of these and other questions, experiments of various kinds are necessary. In my opinion, messiness and unpredictability seem a small price to pay, given the value of what can be learned from the experiments and then applied effectively within the given competitive marketplace. Of special interest to me is the material which Govindarajan and Trimble provide with regard to three different challenges: "Forgetting" assumptions, mind-sets, and biases which may no longer be valid or even relevant; "Borrowing" assets and resources with concrete value; and "Learning" how to improve predictions of business performance. I appreciate Govindarajan and Trimble's skillful use of two hypothetical companies, CoreCo and NewCo, which facilitate all manner of comparisons and contrasts which help to illustrate the various strategies and tactics which Govindarajan and Trimble recommend. For example, in Chapter One when explaining why strategic innovators need a differ

Think about it - with the heightened global competition, you feel that you and your firm have to be constantly running fast and hard in order to stay in place! You have tried "kaizen" or continuous process improvement (a la Toyota or GE), and/or implemented process revolution (not unlike Wal-Mart's supply-chain revolution) and/or revolutionized your product line (not unlike Intel or Gillette) - but, you still see only incremental revenue growth and global competitors are knocking on your door. You worry that you have reached a plateau. How do you super-charge your business for breakthrough growth? Strategic Innovation! Professor Govindarajan (VG) and Chris Trimble systematically dissect the anatomy of Strategic Innovation Process by asking three basic questions: Who is the customer that we are serving? What is the value that we bring to the table? How do we deliver this value? VG and Trimble deconstruct the Strategic Innovation Process into a set of ten rules which trace the process from idea to execution - hence, the book is named aptly, "10 Rules of Strategic Innovators - From Idea to Execution". Since the idea or conception phase is new and exciting, most companies place extraordinary focus and attention on this phase. However, the vital execution phase is often shortchanged since it is usually protracted, difficult and painstaking. VG and Trimble place an enormous emphasis on the execution phase as they lay out a lucid road map for the Strategic Innovation Process that is insightfully punctuated by cases from a variety of industries ranging from consumer products to media to genomics. What is compelling about these cases is that they cover success stories as well as failures and the lessons to be learnt from both. This book is a "Must Read" for any executive/manager who is interested not only in staying ahead of the inexorable changes dictated by globalization but also determined to catalyze the change - i.e. any executive who wants to define the rules of the game.