Takeaways on a speech by Dr Vijay Govindarajan speaker at the World Innovation Forum.
When you visualize your strategic plans visualize your plans in 3 boxes:
Box 1 – Managing the Present
Box 2 – Forgetting the Past
Box 3 – Creating the Future
Most organizations over focus on Box 1! And strategy is really about Box 2 and Box 3.
Strategy is about creating leadership in the year 2030. Right now strategy is about projects going on in 2009 to stay relevant! Strategy by definition has less to do with the present and more to do with the future. In other words – strategy is about creating the future while managing the past.
Competition for the present is about responding to linear changes in your industry – incremental improvements in your processes; call it Six Sigma or whatever you want. Box 1 is about closing the performance gap. But in 2009, 100% of your projects can’t simply be incremental Box 1’s, because the world is changing.
Box 2 and Box 3 are about – Discontinuous changes in your industry – fundamental business model innovation. You can not participate in the growth of emerging market by using Box 1 – because emerging markets represent a huge opportunity since they are fundamentally different.
For example: Ford in early 90s decided to enter India. Ford thought the typical India consumer could not afford the luxury car – so they took a Box 1 approach. They decided to form a design team in Detroit to design the perfect car for India. What the Ford design team decided was to cut the cost of the car for the market, one example of this was to only provide power windows for the front two windows – but what they overlooked was someone in India who can afford to buy a $15,000 car typically has a chauffeur – so the chauffeur got the power window and the owner got nothing! Did the price come down – yes but what they learned was a US Box 1 business model adapted for India won’t work!
Sounds so simple. The lesson is: don’t assume all markets are created the same. Emerging markets are micro markets. There is no mass market business model for U.S. that can be adapted to Indian mass market because of income level differences (mass market per capita is $1k, not like US $50k).
If you want to win in the US in the future, you may have to win in emerging markets first! The real question is not what you can do for India – the real question is what India can do to transform your globalization strategy.
Now think about how many projects does your firm have in Box 1 to restructure, down size, right size? And keep in mind – You can’t restructure your way to transformation!