The Three Boxes

Last week I talked about Peter Drucker's organized abandonment. If you have yet to read it, click here. This week let us continue, a little further, along that path.

As I mentioned, last week, Jack Welch used Drucker's abandonment concepts to increase the growth of the General Electric company. In point of fact, Drucker's teachings have been instrumental to the development of numerous companies.

Today GE is run by Jeff Immelt. Seeing as Peter passed away in 2005, today, one of the academic who consults with Immelt's GE is Vijay Govindarajan. Govindarajan, also known as VG, is a professor at Dartmouth's Tuck School of Business.

A couple of big areas of research, for VG, are innovation and strategy. In many ways, VG has carried on the lineage of Drucker.

Govindarajan's main model is known as the three-boxes. As a matter of fact, next week VG will release his new book with that very title. So, what are the three boxes?

Actually, Govindarajan's model is pretty simple. Box #1 contains those things which a company does to manage and compete in the present. Boxes 2 and 3 are about the future.

Box #2 is labeled, “Selectively forget the past.” Like Drucker, VG knows in order to compete for the future we must be willing to let go of the past. Boyz II Men or not.

It is only after we have abandoned parts of the past that we can create the future. In fact, that is the title of Box 3, “Create the future.”

Let me put it to you this way. In its simplest terms, economics is about the allocation of scarce resources. I think all of us learned that in school.

For our purposes, the key word is scarce. No person, or organization, possesses unlimited resources. Although, sometimes it feels like Berkshire Hathaway does! But, I digress.

Business decisions are economic decisions. The main business decisions are about the allocation of resources.

By the way, this information applies, with equal veracity, to the world of the not-for-profit. Even not-for-profit organizations are subject to the rules of the market.

Very often our resources are tied up in the past. So, in order to create the future, we must free-up resources that are bound to the past. In theory this sounds rather simple. And, it is simple. But, it is definitely not easy.

Whenever you aim to abandon the past, a lot of entrenched interests come out to object. This is one of the reasons successful business leaders are so well compensated. They make the tough calls.

And, tough calls they are. The reason for the last couple posts is to remind you of reality. Hopefully, a reminder of the ways things truly are will help give you the courage, and fortitude, to let go of yesterday.

In this way we run right into the challenge of that thing Kierkegaard said, "Life can only be understood backwards; but it must be lived forwards."

If you would like to watch a short overview, of Vijay Govindarajan's three boxes, click here to watch a YouTube video.