The Business Innovation Insider: What's inside box numbers two and three?

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April 17, 2006

What's inside box numbers two and three?

On his blog, Dartmouth business school professor Vijay Govindarajan ("VG") has outlined the details of his three box thinking model, which has become a powerful framework for enabling senior executives to think strategically. In addition, this three-box model can help to align the goals of employees through a common strategic language. VG explains that most actions companies take can be grouped into one of three different boxes:

Box 1 -- Manage the present;
Box 2 -- Selectively abandon the past; and
Box 3 -- Create the future.

Most companies are trapped inside Box 1, but it is within Box 2 and Box 3 that companies can tap into real innovation:

"Box 1 is about improving current businesses. Box 2 and Box 3 are about breakout performance and growth. Many organizations restrict their strategic thinking to Box 1. This tendency has been particularly acute in the past two to three years, as most leaders have emphasized reducing costs and improving margins in their current businesses.

But strategy cannot be just about what an organization needs to do to secure profits for the next year. Strategy must encompass Box 2 and Box 3. It must be about what a company needs to do to sustain leadership for the next ten years. In fact, the central task of an organization’s leaders is to balance managing the present with creating the future. Examples of successful Box 2 and Box 3 initiatives include: Dell’s direct model in the PC industry, Wal-Mart’s transformation of the discount retailing industry, Apple’s introduction of iPod, and Southwest Airlines’ revolution in the airline industry.

Anyway, if you're interested in learning more about the three box thinking model, check out the videoclips of Vijay Govindarajan in action, as he explains the Box 1-2-3 Framework. Or, you can download a five-page PDF describing this framework.

Tags: VijayGovindarajan Dartmouth VG strategy innovation