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Combining the best of CoreCo and NewCo
on January 13, 2006
I begin this review with an unorthodox suggestion: Read the last chapter first, Chapter Ten, in which Govindarajan and Trimble explain the "Ten Rules," before reading the Introduction and then the nine chapters which follow. Normally I would not presume to offer this suggestion because, in most business books, the presentation of a given "rule," "lesson," etc. is best understood within a specific context. Indeed, Govindarajan and Trimble provide one for each of their ten "Rules." However, one man's opinion, I think it will be helpful to have at least a sense of the conceptual framework before examining the substance of a cohesive, comprehensive, and cost-effective program within which to formulate appropriate strategies.
Govindarajan and Trimble affirm the value of strategic experiments because they can have high revenue growth potential, focus on emerging or poorly defined industries, test an unproven business model, involve radical departure from existing business, require allocation of at least some existing assets and competencies, develop new knowledge and capabilities, create discontinuous rather than incremental value creation, have greater uncertainty across multiple functions, tend to be unprofitable for several quarters (or more), and offer little (if any) indication of performance, at least initially. In other words, strategic experiments can be messy and unpredictable. Why bother?
Govindarajan and Trimble suggest that strategic innovation is a process by which to test new, unproven, and significantly different answers to at least one of three fundamental questions: Who is the customer? What is the value offered to that customer? How is that value delivered? Presumably Govindarajan and Trimble agree that it is difficult (if not impossible) to manage what cannot be measured. Therefore, to their three questions I now presume to add two others: How to measure the value of what is offered? and then, How to measure the effectiveness of the delivery system? To obtain appropriate answers to each of these and other questions, experiments of various kinds are necessary. In my opinion, messiness and unpredictability seem a small price to pay, given the value of what can be learned from the experiments and then applied effectively within the given competitive marketplace.
Of special interest to me is the material which Govindarajan and Trimble provide with regard to three different challenges: "Forgetting" assumptions, mind-sets, and biases which may no longer be valid or even relevant; "Borrowing" assets and resources with concrete value; and "Learning" how to improve predictions of business performance. I appreciate Govindarajan and Trimble's skillful use of two hypothetical companies, CoreCo and NewCo, which facilitate all manner of comparisons and contrasts which help to illustrate the various strategies and tactics which Govindarajan and Trimble recommend. For example, in Chapter One when explaining why strategic innovators need a different approach to execution, they examine the four elements of organizational DNA, cross-referencing CoreCo and NewCo to make their key points. Well-done!
With all due respect to the substance as well as eloquence of Govindarajan and Trimble's narrative, I especially appreciate their use of various reader-friendly devices. For example, Figure 1-1 which lists "Ten characteristics of strategic experiments" (page xx in the Introduction); Table 2-4 which identifies the elements, choices, and results re "Outcomes of CMT's initial organizational DNA (page 39); Table 5-1 which, when used in conjunction with Figure 5-5 which precedes it, enables the reader to assess the intensity of the borrowing challenge (page 87); and Table 9-4 which, when used with Figure 9-14 which precedes it, enables the reader to assess the intensity of the learning challenge (page 182).
For most decision-makers in most organizations (regardless of size or nature), Govindarajan and Trimble do indeed provide -- as indicated earlier -- a conceptual framework for a cohesive, comprehensive, and cost-effective program within which to formulate appropriate strategies. Organizational DNA may have to be re-wired in terms of staffing, structure, systems, and cultural values when facing the three challenges of forgetting, borrowing, and learning. Expect messiness, confusion, frustration, and -- yes -- setbacks while completing that immensely difficult process. Eventually, however, with total commitment of everyone involved, supported by sufficient resources (which include patience), the best of CoreCo can be combined with the best of NewCo.