On the Other Side

IdeaConnection Interview with Vijay Govindarajan, Co-author of The Other Side of Innovation, Ten Rules for Strategic Innovators "Instead of asking, 'How do I make this very important initiative a success?' they [businesspeople] ask, 'How do I make innovation happen throughout my organization?' But you have to learn to walk before you learn to run." The Other Side of Innovation, page 16

Vern Burkhardt (VB): What is the "other side of innovation?"

Vijay Govindarajan: There are two sides to innovation. One is to come up with a great idea – the thrilling hunt for the breakthrough idea. Creativity is fun and energizing and the person who comes up with the 'big idea' will be given status and be associated with it.

The other is to execute that idea. Too much attention has been focused on idea generation and not enough on idea execution. Thomas Edison put it well when he said that innovation is 1% inspiration and 99% perspiration. The 1% inspiration is coming up with the idea. The 99% perspiration is about commercializing the idea. Therefore the 'other side of innovation' is the 99% perspiration part, which is the execution of an idea.

There are major challenges and hidden dangers on the other side. The other side of innovation is a challenge that vexes even the best-managed corporations. It's trial and error, and companies get it wrong all of the time. But the other side of innovation is a learnable discipline that any company can master.

VB: In The Other Side of Innovation you say the theory of the execution of innovative initiatives is "only just emerging." Why do you think innovation researchers have placed so much emphasis on ideation and creativity rather than on execution?

Vijay Govindarajan: There are three reasons why people latch onto ideation. One, ideation is easy. You can go into a dark room and all kinds of great ideas will come to you. Two, ideation doesn't cost money. You can just sit in your office and think.

Three, only during execution do you see the conflict between the old and the new. Execution is not only dull and boring, it takes a long time and it takes resources. Execution creates conflict whereas ideation doesn't.

VB: Execution requires discipline and focus.

Vijay Govindarajan: It does and it is a different kind of discipline than day-to-day operation which also requires discipline for sure. Companies often make the mistake of underestimating the degree of difficulty of the other side of innovation. They know how to execute day-to-day operations and presume that innovation execution will be easier than it is.

VB: "The fundamental prescription in this book is that every innovation initiative needs a special kind of team and a plan." Would you talk about this?

Vijay Govindarajan: Innovation cannot happen inside the core business. By the core business we mean the 'Performance Engines' which are designed for ongoing operations. They are not designed for innovation.

Imagine for a moment you are Kodak. You have a Performance Engine which is the analog camera, the 3" film business, and you're making a lot of money. Ask yourself the question, 'Can your business which is doing so well with the analog camera create the digital camera?' The answer is 'no' because the required capabilities are different. The kind of dominant logic it takes to succeed with analog cameras is very different than what it takes to succeed in the digital world. Therefore, you need a special kind of team – the 'Dedicated Team' – to do it.

The special team is a partnership between a Dedicated Team, which is dedicated full time or nearly full time to the innovation project, and the 'Shared Staff', which supports the project while sustaining its Performance Engine responsibilities.

You also need a different kind of planning because in your core business – the Performance Engine – you're dealing with known things whereas innovation is an experiment with a lot of unknowns. The planning has to be done as an experiment, and therefore it is a question of testing functions.

The plan guides a disciplined experiment. Just running an experiment is easy. Doing so in a disciplined fashion ensures that you learn quickly. Quicker learning leads to better decisions, and better decisions lead to better results.

VB: The plan needs to be developed with clear thought.

Vijay Govindarajan: It requires clear thinking and flexibility. In the core business the objective is to meet the plan. In innovation the objective is not to meet the plan; the objective is to continue to refine the plan and change it based on new information.

The core business is focused on efficiency. The Performance Engine is structured for efficiency and accountability, and to deliver consistent and reliable results. In the new business, innovation, the focus is on flexibility.

VB: What are some of the benefits and challenges of running an innovation project as a process for quickly learning from experiments?

Vijay Govindarajan: One of the challenges is to maintain the necessary discipline. Your plan has to identify all assumptions, and these assumptions must be clear to everyone on the team even months later when the results come in. Another is to have the discipline to only alter the plan and assumptions when there are evidence-based lessons that have been learned.

The best way to learn from experiments is to clearly state your hypothesis. The more explicit your assumptions the more likely you will be able to gather the right data, prove or disprove your assumptions, and therefore learn from the experiments. Another benefit of running an innovation project as a process for quickly learning from experiments is your are going to be able to analyze disappointing results with rigor.

VB: Once you obtain the outcome you may need to refine or revise your hypothesis,

Vijay Govindarajan: There are three outcomes that can happen when you conduct an experiment around a hypothesis. One, you accept the hypothesis; therefore, the assumption is valid. Or you reject the hypothesis and conclude the assumption is not valid. Three, you refine the hypothesis because it is more complicated. The moment you have completed one hypothesis you can proceed to the next hypothesis. Any kind of innovation initiative is a series of hypotheses, and you should test the critical hypothesis first. The critical hypothesis is what I call a 'show-stopper'. The show is over if some assumptions you are making are proven to be wrong. You have to test those first. If there are 100 assumptions, first test the ones that are critical.

VB: "We think that the strong inclination to explain shortfalls as bad execution rather than bad predictions is both innovation's most omnipresent enemy and its most dangerous one." Would you explain?

Vijay Govindarajan: This is exactly what I mean by the plans are there to remind the leader and team of the hypotheses and assumptions. You then test the assumptions and when the assumptions prove to be wrong you change the plan.

What is a shortfall? It means there is a difference between the plan and the actual results. The difference doesn't mean you did something wrong. It essentially means you understood something more about the reality. Therefore a shortfall is not a reason to punish people. Actually you may want to reward people when they find a shortfall because it means they have remained disciplined and have focused on testing the hypothesis.

VB: Is the key to understand the shortfall?

Vijay Govindarajan: Exactly. This is the whole idea. The purpose of conducting an experiment and understanding that the shortfall is to be used is to promote conversation and deeper learning.

VB: Why do innovation leaders need to be reminded to "seek the truth?"

Vijay Govindarajan: When there is a shortfall there is a tendency to become defensive. This is a tendency that is deeply embedded in most core businesses because in the core business the objective is efficiency. You've got to meet or beat the sales and profit plan.

In innovation the objective is not to make the plan but to seek information about why the assumption was not proven to be correct and, therefore, to learn from it. This is why seeking the truth is critical. Accepting if your hypothesis is proven wrong takes courage.

VB: "…building a partnership with the Performance Engine, not winning battles with it…[is]…the single most critical trait of successful innovation leaders inside large companies." Did your extensive library of case studies about executing innovation initiatives lead to this conclusion?

Vijay Govindarajan: Yes. While innovation requires a special team this special team has to borrow some capabilities from the core business, from the Performance Engine. Otherwise there's no reason why your company should be doing the innovation.

When the dedicated team is borrowing something from the Performance Engine there will be conflict because they are designed for different purposes. Managing the conflict is how you can turn the relationship into a healthy partnership. This is absolutely critical.

It is hard to manage this partnership. The full-time leader of the innovation execution must have the mindset that the Performance Engine is a friend, not an enemy. It is also important that senior executives get directly involved in making the partnership work. Another important consideration is the Shared Staff – the employees in the Performance Engine who work part of their time for the innovation team – has to have sufficient resources to handle their work for both the day-to-day operations and the innovation implementation initiative.

Even though there are challenges in managing the partnership between the innovation team and the Performance Engine it's worth doing so rather than isolating the innovation team as if it was an independent startup. The Performance Engine has important assets to contribute, such as manufacturing facilities, relationships with customers, areas of technical expertise, and brands.

VB: Would you tell our readers about your library of case studies?

Vijay Govindarajan: We conducted research in about 50 companies that were in a variety of industries and innovation types. This was in-depth research because innovation is a dynamic, multi-year phenomenon. We had to interview multiple people who were involved and therefore we spent a lot of time. We spent a whole decade collecting detailed information, which is not available in newspapers or from sources other than the companies themselves. It was painstaking in terms of the process of collecting the data.

Our book is based on a deep understanding about how companies function and this understanding was derived from these case studies.

With all these case studies we didn't find even one example of a company that did everything right the first time. There are stories of failure, and of initial struggles, corrections, and eventual success.

VB: Are you still mining the information contained in these case studies?

Vijay Govindarajan: Not right now because we are done with writing the two books, and I'm on to my next project. Whatever we had mined we have already published.

VB: When talking about how to assemble the Dedicated Team you advise that it risks being affected by the "organizational memory" which is present in every company. What is this risk?

Vijay Govindarajan: I think the key is when you are forming the innovation team, form it as though it is a Silicon Valley startup.

Remember that your core business has a dominant logic. Don't simply transfer people from the core business to this Dedicated Team which is responsible for execution of the innovation. If you do they will carry the same organizational memory.

Defeating the organizational memory is fundamental in successful innovation because this memory tends to put the brakes on innovation. This is why you should form the team as though it is a Silicon Valley startup, not just an operating arm of the core business?

VB: How can you overcome the organizational memory among those who do come from the core business?

Vijay Govindarajan: You have to make some tough decisions regarding who you will recruit. People recruited from outside the organization will challenge the current dominant thinking and therefore, in that way, you can defeat the organizational memory. It also requires sound leadership by the Innovation Leader.

VB: Are "natural innovators" hard to find?

Vijay Govindarajan: A better question is whether an innovation team is hard to find for innovation execution because it's not an individual who can innovate. Therefore it's about assembling a team, which is a skill that can be taught.

Talent is always difficult to find, and it's also going to be difficult to find team members in your core business. Innovators are not born. They can be created, because success is due to a team. If you follow certain principles you can bring about innovation in a systematic way in any company.

VB: Having the right person in the performance engine who is identified to promote innovation is a fundamental decision.

Vijay Govindarajan: It's fundamental because the performance engine is so critical to the success of innovation.

VB: Are many CEOs hearing your challenge to aim high with innovation in order to bring about profound change related to the "realities of a crowded and constrained planet"?

Vijay Govindarajan: Without question.

It's the only way companies can survive and prosper because strategy is about the future. Strategy is not about the past and it's not about the present. It's about the future.

If you want to be relevant in the future, you have to change because the world is changing. Innovation is about change.

VB: The fact of the crowded and constrained planet is highly relevant.

Vijay Govindarajan: A crowded and constrained planet poses many challenges such as environmental sustainability. Innovation is the only way we can prosper as humanity in a crowded and conflicted planet.

VB: There are so many other large social issues to be solved.

Vijay Govindarajan: Without question. Sustainability is only one example.

We have to solve housing for the masses. We have to solve water scarcity. We have to solve energy shortages. We have to solve transportation. There are big issues that have to be solved, and it will require innovation. There is no other way. It's not about charity.

VB: What are some of the questions about the other side of innovation that have yet to be answered?

Vijay Govindarajan: We have learned a lot about execution but not everything. It's an evolving field and almost every insight that we have given can be pushed to the next level.

For instance, what are strategies other than what we have been able to identify for creating a healthy partnership between the Dedicated Team and the Performance Engine. What we have identified will promote a working partnership but it's not going to promote a 100% healthy partnership. We need more understanding about this.

VB: "…strategy is innovation." Do most of the strategies of the companies you have studied reflect a clear innovation agenda or do they usually focus more on maintaining the status quo?

Vijay Govindarajan: Most companies try to maintain the status quo. That's why most companies don't remain strong forever. There's a lot of turnover on the Fortune 500 precisely because they have not been able to innovate. This is a very tough juggling act for most companies.

VB: Congratulations on being selected for the shortlist for two of Thinkers50's awards. Will you be going to the awards ceremony on November 14th in England?

Vijay Govindarajan: Yes indeed. I'm taking my family and going. It's a great honor to be mentioned along with such great people. I am very humbled and would like to go and meet these other great thinkers.

VB: It's going to be a 'Who's Who' of innovation.

Vijay Govindarajan: It's a 'Who's Who', and that's why it feels good to be part of it.

VB: When you and Christian Sarkar wrote your blog with a design for the $300 house, which is the idea that is being recognized as by the Breakthrough Idea Award, did you anticipate it would lead to a campaign to re-invent housing for the world's poorest people?

Vijay Govindarajan: No. It was just part of a thought experiment related to one of the social issues that faces the human race. The issue is how are we going to provide one of the most basic needs – shelter – to the poorest of the poor?

We wrote the blog as a thought experiment. We didn't realize it would create a viral effect. We were quite pleasantly surprised and, certainly, are very encouraged.

VB: Do you foresee that it's going to make a big difference to the world?

Vijay Govindarajan: I certainly think so. I don't know the exact numbers but it is a large number of people who do not have a proper house. We are not just talking about a shelter with the $300 house idea. It's about more than a house. It's about health, education, water, sanitation, jobs, and more.

VB: It's about a basic standard of living.

Vijay Govindarajan: Or economic welfare. For instance, in Haiti there is no electricity which means at 5 p.m. when sun sets the country becomes dark. Imagine if there were to be pitch darkness in the U.S.; most American can't even imagine what that would be like. But if you're a child in Haiti after 5 p.m., or whenever the sun sets, you are not able to do your homework. This is something we simply take for granted in the U.S. and all other developed countries. If we can create a $300 house with solar panels we can help kids in Haiti to do their homework. This would be promoting education.

Something else to think about, there three diseases which kill millions of people everywhere all over the world: tuberculosis, cholera, and malaria. Tuberculosis is an air-borne disease. Imagine a hut in a slum which does not have sunlight or ventilation, and there are ten people sleeping in it. If one has tuberculosis it infects the other nine. If you can create a $300 house with proper sunlight and ventilation, you can decrease the incidence of TB. Cholera is a water-borne disease. If you can give clean water to the poorest of the poor, you can decrease the incidence of cholera. Mosquitoes carry malaria. If you can provide mosquito nets for any exposed parts of the $300 house, you decrease the incidence of malaria.

What I'm saying is we have to think about living space as a way to promote health, education, and jobs for the poor. Help the poor construct this type of house and in this way we can create jobs in the community. I'm thinking of the $300 house as a metaphor for something broader than just the house itself.

VB: And that's why it's caught on as a major campaign.

Vijay Govindarajan: Most people want to do good. I'm very encouraged and also very humbled by this.

VB: When you say people want to do good do you include the private sector as well?

Vijay Govindarajan: Absolutely. There are already two companies in India who have jumped into this and more companies will in the future. I believe companies must jump into it because this is a big business opportunity. Only large companies have the resources, capabilities, people, and know-how to innovate and execute so I'm hoping more and more will jump in.

VB: It is timely that you were also shortlisted for Thinkers50's Innovation Award for your concept of reverse innovation since HBR Press will publish your next book, titled Reverse Innovation, in April 2012. Will this book also be a must read?

Vijay Govindarajan: It's going to be a must read because of the importance of reverse innovation.

What are the three big agenda items in the U.S. today? They are jobs, jobs, and jobs. We think we can create jobs in the U.S. by focusing on U.S. consumers whereas in our Reverse Innovation book we are saying you create jobs in the U.S. by focusing on poor countries. This may seem counter-intuitive but the fact of the matter is the biggest areas of growth are in what I call the emerging economies. If you want to grow your business in emerging economies you have to innovate. You can't simply send the products you have here to those countries.

The implications of the Reverse Innovation book are profound, which is America has become too insular. This may be because of its historical success. If America is to remain strong we have to be curious about problems and issues in the poorest of the poor parts of the world. If we don't do this we are likely to suffer further economic stagnation.

People somehow make the mistaken assumption we can create jobs in the U.S. by focusing on solving U.S. problems. While we should definitely do this, there are bigger opportunities if we focus on solving the problems in the poor countries. By doing this we can create more jobs in the U.S.

VB: Does your message also apply to Europe and other developed countries?

Vijay Govindarajan: Without question. I used America as a metaphor for the rich world. It could be Europe, which is also in stagnation right now, and Japan.

If we want to grow these developed economies we have to become more familiar with the world. We are too afraid of developing economies because there is a myth that countries like India actually suck American jobs because of the out-sourcing movement.

Instead of viewing India as a place where you out-source American jobs, think of India as a place where you can create American jobs by focusing on innovation for India. We have to change our way of thinking. If we don't, we'll have ever-greater economic stagnation. We need a total paradigm shift at the national level.

VB: Do you have any final comments about the other side of innovation?

Vijay Govindarajan: The big idea is execution. Whereas people think the big idea is to come up with a big idea I say, "In the innovation game 'idea' is not that important. Companies have lots of ideas. What is really important is execution."

Conclusion:
As seen in Vijay Govindarajan's biography he has been recognized numerous times for being a 'superstar' for research in strategy and organization, and as one of the world's leading experts on strategy and innovation. It is fitting that Thinkers50 is currently recognizing him for the breakthrough and innovative ideas related to the $300 house and the concept of reverse innovation. Vijay's enthusiasm was infectious as he described to me the $300 house and that it was a metaphor for so much more which would benefit the 'poorest of the poor'.

Co-authors of The Other Side of Innovation, Vijay Govindarajan and Chris Trimble, say that their key point is "Each innovation initiative requires a team with a custom organizational model and a plan that is revised only through a rigorous learning process." Their insights and observations should make us less apprehensive of 'The Other Side' – the most challenging side.

Vijay Govindarajan's Bio:
Dr. Vijay Govindarajan is widely regarded as one of the world's leading experts on strategy and innovation. He is the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College. He was the first Professor in Residence and Chief Innovation Consultant at General Electric. He worked with GE's CEO Jeff Immelt to write "How GE is Disrupting Itself", the Harvard Business Review article that pioneered the concept of reverse innovation--any innovation that is adopted first in the developing world. Harvard Business Review rated reverse innovation as one of the ten big ideas of the decade.

Vijay Govindarajan writes about the business impact of innovation with an emphasis on execution in his weblog and through his quarterly newsletter.

He has been identified as a leading management thinker by influential publications including Outstanding Faculty; named by Business Week in its Guide to Best B-Schools; Top Ten Business School Professor in Corporate Executive Education, named by Business Week; Top Five Most Respected Executive Coach on Strategy, rated by Forbes; Top 50 Management Thinker, named by The London Times; Rising Super Star, cited by The Economist; and Outstanding Teacher of the Year, voted by MBA students.

Prior to joining the faculty at Tuck, Vijay Govindarajan was on the faculties of Harvard Business School, INSEAD (Fontainebleau), and the Indian Institute of Management (Ahmedabad, India).

The recipient of numerous awards for excellence in research, Vijay Govindarajan was inducted into the Academy of Management Journal's Hall of Fame, and ranked by Management International Review as one of the Top 20 North American Superstars for research in strategy and organization. One of his papers was recognized as one of the ten most-often cited articles in the entire 40-year history of Academy of Management Journal.

Vijay Govindarajan is a rare faculty who has published more than ten articles in the top academic journals (Academy of Management Journal, Academy of Management Review, Strategic Management Journal) and more than ten articles in prestigious practitioner journals including several best-selling Harvard Business Review articles. He has published nine books, including international best sellers The Other Side of Innovation: Solving the Execution Challenge (2010), and Ten Rules for Strategic Innovators: From Idea to Execution (2005).

He works with CEOs and top management teams in Global Fortune 500 firms to discuss, challenge, and escalate their thinking about strategy. He has worked with more than 25% of the Fortune 500 corporations including Boeing, Coca-Cola, Colgate, Deere, FedEx, GE, Hewlett-Packard, IBM, J.P. Morgan Chase, Johnson & Johnson, New York Times, Procter & Gamble, Sony, and Wal-Mart. He is a regular keynote speaker in CEO Forums and major conferences including the World Innovation Forum, Business Week CEO Forum, World Business Forum, and World Economic Forum at Davos.

Vijay Govindarajan received his doctorate from the Harvard Business School and was awarded the Robert Bowne Prize for the best thesis proposal. He also received his MBA with distinction from the Harvard Business School where he was included in the Dean's Honor List. Prior to this, he received his Chartered Accountancy degree in India where he was awarded the President's Gold Medal for obtaining the first rank nationwide.