Sep 22, 2016

Application of Prof Govindrajan’s 3 Box Solution

M. Suresh Rao

The House of Godrej has a lineage of over 100 years. The original Godrej was a locksmith and the business of locks continues into the 21st century extending from locks to latches to security equipment, leveraging the core promise of the brand which is security and reliability. As the basis for security and reliability is metal forming technology, Godrej has been on firm ground keeping abreast in this domain with linear innovations, abetted by accessible reach and acceptable service. This is the Box 1 performance engine, generating cash flow and strategically aligned.

However, is the division tuned to weak signals ( going digital), that portend disruption in the ‘delivery of security’ going forward? Is Godrej aware that this could mean discarding the dominant logic based on in-house sheet metal operations, superior physical distribution and cost plus business model (adjusted for productivity and linear innovations to preserve margins)?

How should Godrej manage Box 2 activity? What are the Timeless elements in the vision and values ( the roots) that should be retained and the Timely ideas, activities, practices, ( the chains) to be jettisoned? Crucially, how will the firm bring about the change in mindset for overcoming the death traps of complacency, cannibalising and competency associated with the dominant logic of Box 1 before embracing non-linear innovation practices and parameters? How does Godrej develop a tolerance for mavericks under-awed by the dominant logic and keen to validate the underpinnings of their non-linear propositions? Will the re-positioning exercise for the brand provide for identifying roots and chains as it did for Mahindra with Mahindra Rise?

With Box 2 conditions in place, Godrej can work on Box 3, experimenting on non-linear innovations by adopting the discipline of planned opportunism in place of the traditional planning process of Box 1. Through planned opportunism the division will build the forward looking competencies, insights, structures and attitudes for responding positively to the weak signals as Mahindra did. Responding positively starts with generating a couple of non-linear ideas. How can they do this? Through ‘martini meetings’, so named because brainstorming at these meetings follows the shape of a martini glass. “ We start at the rim, as far out as we can, and think about emerging technologies and new inventions. Real Box 3 thinking. Then we narrow these ideas down to those that are most promising. As we move closer to the stem, we see how those technologies can be applied to our current product lines”. Then follows disciplined experimentation that methodically tests propositions in order to increase knowledge and uncertainty about non-customers, new technologies, new business models and new types of risk. This is the essence of Box 3 working. Can Godrej develop this capacity to think and experiment faster, better, cheaper than competitors (who may parachute from a different industry) ?

Overall, Godrej has to manage the present core business ( Box 1) at peak efficiency and profitability, rid itself of the traps of the past (Box 2) and innovate non-linear futures. Given the technological and behavioural disruptions looming ahead, brand Godrej faces the reality of being a power brand of the metal age if it does not unreservedly adopt the 3 Box solution.

Can Godrej rise to the challenge?

The company can learn from its response to the weak signals faced by its entrenched furniture and storage product lines in the last decade of the last century when customer behaviour began shifting from ‘lifelong’ to ‘lifestyle’. Godrej steel cupboards and furniture held sway with similar competitive advantages as with security products as long as the target customer segment held on to the ‘lifelong’ mindset. However, the company seemed to have ignored the ‘not so weak signals ’ judging by its inability/reluctance to prepare for the coming shift in buying preference. Not surprising, considering that it was founded a century ago on the dominant logic of sheet metal working, in-house scale economies, and ‘timeless’ value proposition of durability and functionality. Eventually, seeing the writing on the wall, Godrej has undertaken the very painful Box 2 exercise of discarding metal for synthetic leather and plastic, in-house for outsourcing, standardisation for measured customisation and, critically, repositioning as ‘contemporary, quality’ with a sub-brand and a colourful logo. Box 3 is yet work-in-progress as the totally revamped business line was started from ground zero. Pricing has had to give way from cost plus to perceived value pricing and the premium for the brand image has had to be built almost from scratch.

However, the House, or more correctly, the (Real) Estate of Godrej has every chance of restoring its mojo and Professor Govindarajan may not be able to claim all the credit for that feat. Some of it should certainly go to mother earth, which Godrej possesses in large chunks, as land, built up and bare, in Vikhroli and elsewhere. A number of the massive plants that once produced products now serve as rented offices generating cash. The innovation in business model – from producer to landlord – is providing the vital cash cushion for working on the makeover from traditional Box 1 revenues to contemporary Box 3 revenues. While there is brand acceptance for real estate, the brand does seem to be challenged in gaining acceptance for home furniture.

While it is instructive to look at the gap between conceptual application and evolving reality for Godrej, there is no doubt that ‘the three box solution’ represents a useful framework for an organisation to plan its innovation engine.

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