Ten Rules for Strategic Innovators

General Business

Monday 1 February 2010

Professor Vijay Govindarajan

Ten Rules for Strategic Innovators: How to increase profits and expand into new markets

Blue Fin Venue, London

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“How do you create for the future when managing for the present?” Professor Vijay Govindarajan (VG) asked the London Business Forum. VG argues that most companies misunderstand innovation; they get caught up in idea generation and fail to develop a strategy that concentrates on the successful execution of those ideas. After all, innovation is only worthwhile if it creates more business.

VG emphasised that whilst you need to have projects for the present and the future, it is important to recognise that they must involve different thinking processes. Managing the present involves linear changes, whereas planning for the future requires a non-linear approach.

Tata Motors, said VG, was an example of a company who succeeded in spotting an “opportunity gap” and created a breakthrough business in that space – they created a small, inexpensive car to meet consumer demand in the Indian market. “Why did they see the opportunity and Ford did not?” Because, argued VG, “Ford made the same mistake that every global company makes.” Ford took their existing business model and adapted it to the India’s conditions.

When Ford emerged in the Indian car market there had been passenger cars in India for decades. However, those that owned cars could afford to import a Mercedes or a BMW. Ford was targeting the wrong customer: “Good luck trying to turn a BMW customer into a Ford customer,” VG joked.

“What are you doing to address the opportunity gap?” The more successful you are in the present, suggested VG, the less able you are to plan for the future. “Strategy,” he said, “is about approaching the opportunity gap and creating next practices.” He used a sporting analogy to stress his point. The technique for high-jump has evolved since 1900 from the ‘Scissors’, to the ‘Western Role’, then the ‘Straddle’ and finally the ‘Fosbury Flop’. The ‘Scissor’ technique put a limit on how high you could jump and for the athletes to go on succeeding they had to identify the opportunity and create the future.

VG concluded that you cannot go on “flogging a dead horse”. Even companies with successful business models will eventually hit the ceiling on growth. To survive every organisation must carry out strategic experiments that target untested markets and most importantly they must know how to implement them successfully.