10 Rules for Strategic Innovators: From Idea to Execution

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By Vijay Govindarajan and
Chris Trimble
Harvard Business School Press, 2005
252 pages, $29.95

Successful firms have to perform two broad sets of activities that are often antagonistic toward each other. On the one hand, they have to offer reliable products and services at reasonable prices; on the other hand, they have to innovate continually to develop new customer offerings. Management theorists usually call these two dynamics “exploitation” and “exploration,” and the debate about their true nature and the relationship between them is a hot topic in the academic world.

Now Vijay Govindarajan, professor of international business at the Tuck School of Business at Dartmouth College, and Chris Trimble, a consultant and adjunct associate professor at Dartmouth, have written a book that deals with the challenge that strategic innovation (their phrase for “exploration”) poses for mature firms, which are often happier exploiting their existing competencies than developing new ones. Strategic innovations always involve the discovery and development of new, unproven business models, although these new models are not necessarily disruptive to a firm’s existing business. Using research on more than 30 companies and interviews with dozens of executives, the authors frame the dialectic between exploration and exploitation as a tension between “CoreCo,” the established business, and “NewCo,” the strategic experiment. To be successful, NewCo must overcome three challenges: It must forget some elements of CoreCo’s business, it must borrow others, and it must learn from its own experiences. In the process, NewCo must develop a different organizational DNA (staff, structure, system, culture).

The NewCo/CoreCo nomenclature makes for clarity, but it can also make for tedious reading. Fortunately, the authors leaven their writing with stories drawn from their research, and these show how difficult it can be, even for star innovators like Corning Inc. and Hasbro Inc., to find the right dynamic blend of forgetting, borrowing, and learning. There are some excellent chapters on the ways in which corporate behavior that would be perfectly reasonable in the CoreCo environment can actually inhibit learning in the NewCo context. Given the wide range of potential applications, it’s not entirely surprising that the 10 “rules” presented by the authors (produced, no doubt, by a demand for “take-aways”) are a mélange of assertions and injunctions. There are, however, a few useful guidelines: NewCo’s organization and planning process must be built from scratch, not borrowed from CoreCo, and the NewCo management must be held accountable for learning rather than for results. This latter requirement, which will almost certainly be at odds with the performance management culture within CoreCo, is just one of the challenges of strategic innovation for established organizations.

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