Can large established organizations beat startups at their own game? Absolutely, say Professors Vijay Govindarajan and Chris Trimble, authors of Ten Rules for Strategic Innovators: From Idea to Execution (Harvard Business School Press, 2005). Established organizations have an immense advantage—tremendous existing resources such as brands, relationships with customers, expertise, manufacturing capacity, and more. Startups might take years or even decades to build the same from scratch. There's just one hitch: large organizations were designed to excel at the business of today, not the business of tomorrow.
When companies decide to focus on innovation, they often expend a great deal of energy in the hunt for the Next Big Idea. They hold innovation seminars, workshops, and retreats. But as important as finding a brilliant idea is, in any great innovation story the lightbulb moment is only Chapter 1.
Ten Rules prepares leaders for the back end of the innovation process—the journey from idea to profitability. Breakthrough new businesses face three central challenges in the back end: forgetting, borrowing, and learning. The new business must forget the parent company's success model, borrow its resources, and learn how to succeed in a new and uncertain environment.
Govindarajan and Trimble offer detailed recommendations for each, drawn from comparisons among numerous in-depth case studies they have written since 2000 on companies such as The New York Times Company, Analog Devices, Hasbro, and Corning, where they interviewed Tom Hinman T'83 and Peter Volanakis D'77, T'82. Ten Rules describes how these companies took on what the authors call the triple-flip-with-a-quadruple-twist of general management. "I can't imagine a more interesting research topic for us. The leaders we spoke with described the most compelling experiences of their business careers. They described exhilarating highs and excruciating lows—and they enlightened us on the unique challenges of entrepreneurship within large organizations," says Trimble.
The story of how The New York Times Company created New York Times Digital (NYTD) and managed it to profitability illustrates one of the most important lessons from the book: there is always tension between forgetting and borrowing, and the two objectives must be balanced. NYTD evolved through three organizational designs before reaching profitability. In the first, the new business was too closely integrated with the core business. There were benefits to close integration—access to resources in particular—but the business did not easily evolve beyond a simple newspaper.com operation. In other words, NYTD was able to borrow but not forget. So NYTD rebuilt itself from scratch. It hired a gaggle of outsiders and completely redefined the way it worked. This enabled a burst of creativity—and revenue growth. But because NYTD became so different from the newspaper, tensions between the new business and the parent became problematic and hindered NYTD's drive to profitability. Eventually, NYTD evolved to a distinct-but-linked design that enabled both forgetting and borrowing.
