How do you drive innovation and better serve your clients during an economic downturn?
I recommend you apply the simple yet profound “123 Framework” from Vijay Govindarajan, Professor, Dartmouth School of Business.
Start by drawing 3 boxes:
BOX 1 : This is about your managing your present business model and markets. Box 1 represents incremental innovation that strengthens your core business. For example, getting licensed in an existing methodology to provide to your top clients can reap rewards and improve client retention. ProfitCents is a tool that I recently introduced to my existing clients to help them compare their financial strengths to their peers and competitors.
BOX 2 : Box 2 focuses on helping you selectively forget the past. Take your existing solutions to new markets or new clients, OR take NEW technologies to your existing markets or clients. I am finding many custom homebuilders in Central Oregon are suddenly promoting home remodeling services to keep their workers busy.
BOX 3 : In this box, your job is to create the future. Identify new possibilities. Select winning ventures, and launch new, innovative ones. Box 3 exploits discontinuous shifts in technologies or markets by introducing RADICALLY new products or business models; e.g. a virtual certification program for home remodelers. Other examples abound…Twitter introduced micro blogging; customer-obsessed Zappos has changed the way people think about buying shoes; and Amazon changed the publishing world forever when they introduced the online bookstore concept.
The real question is: Where do you spend your time planning for business growth? Professor Vijay contends most companies over invest in box 1 and some spend ALL their time there. This can be very risky and promotes short term thinking.
The solution is to maintain a balance. Look at ways you can maintain your focus across all 3 boxes. The 123 Framework approach forces us to maintain a delicate balance between exploitation and exploration.
GE Power Generation uses this model quite successfully. So does Honda. They did this exercise to see what projects fit in which boxes. They soon found that their core strength in small engine design supported their vision of “six Honda engines in every garage.” Soon they entered the snowmobile and lawnmower markets. Their competitors were completely caught off guard.
As you aspire to grow a Wealthy Business, keep your eyes open for opportunities inside all three boxes. Together, they make great gifts that keep on giving.