Dr. Kanish Debnath
Head of Research,
MYRA School of Business, India
Vijay Govindarajan’s (VG) best-selling book ‘The three-box solution’ provided an innovative strategic framework that helped organizations and business managers to survive and grow in times of deep uncertainty and change. At times when Artificial Intelligence (AI) has the potential to significantly disrupt traditional managerial roles by automating many tasks, VG’s three-box solution for managers is more pertinent than ever. While the framework was developed and adopted by several organizations much before the age of AI, I feel that this simplistic yet powerful idea holds true even today.
Vijay Govindarajan’s framework involves categorizing actions into three boxes:
- Box 1: Managing the present by optimizing current operations,
- Box 2: Selectively abandoning the past – ideas, attitudes and practices, and
- Box 3: Ideating and investing for the future.
Vijay Govindarajan (VG) argues that every successful organization needs to balance the three boxes wisely. Ideally, organizations and business managers should systematically allocate resources and attention across the three boxes. For Box 1, managers should focus on near-term customer needs and optimize operations to achieve high efficiency or the lowest reasonable cost. Innovations are feasible within Box 1; however, they are predominantly incremental and do not provide the competitive advantage necessary for future success. Innovations need not be incremental and linear, and to continually stand out in a world that is Volatile, Uncertain, Complex, and Ambiguous (VUCA), one must take Box 3 seriously. Box 3 requires significant bandwidth for creativity and experimentation. Yet, most managers fail to invest or see value in Box 3. VG laments how greater focus on the current business (Box 1) and past practices and perspectives (Box 2) comes in the way of Box 3 innovations. In his book, VG provides several examples of organizations that faced this and corrected their stance.
In an increasingly Artificial Intelligence (AI) driven world, managers are often overwhelmed and unable to react appropriately. AI systems can analyze vast amounts of data, make data-driven decisions, and optimize processes more efficiently than humans can, in many cases. As AI continues to become more sophisticated, it can handle more managerial tasks once thought of as uniquely human domains. AI systems may soon be able to undertake increasingly complex and nuanced tasks that require decision making, problem solving, and strategic thinking. In my opinion, rather than resisting this change in the business environment, managers should embrace AI using Vijay Govindarajan’s (VG) three-box solution. The approach that managers should adopt is outlined below.
- Box 1: Optimize current operations by leveraging AI tools,
- Box 2: Identify and discard practices that AI can replace, and
- Box 3: Develop new competencies that utilize AI capabilities.
As discussed earlier, Box 1 is about maintaining and optimizing current activities. Managers can take the help of AI to optimize their current tasks, such as writing emails, taking meeting notes, scheduling meetings, getting quick summaries of documents, and reaching out to customers faster using chatbots. These are all incremental changes, and probably everyone will eventually be doing it. However, barring organizations in the Information Technology industry, I often find managers holding on to their old and outdated processes and practices. The slowest to change are executives in government organizations and public sector enterprises. Unsurprisingly, they allocated less mental and physical resources to Box 2. Finally, Box 3 holds the greatest promise.
In a later follow-up playbook by VG and Manish Tangri, the Box 3 journey takes up the entire discussion. The journey involves ideation, incubation, and scaling. While there are risks of failure during incubation and execution, there is a much bigger downside of obsolescence if such risks are not taken. An organization can stand out if it allocates significant resources to integrate AI into its products and services. A popular example that comes to mind is an Autonomous Vehicle, a self-driving car that uses AI to learn and process data. Microsoft and Google have embedded AI in all of their products, enabling users to utilize AI as they search the internet, create a document, or analyze data.
Although the pace at which AI continues to advance holds much promise, it is still prone to making mistakes owing to its high complexity, faulty or false data, hallucinations, and poor training. Currently, AI systems still need human-level override. By taking advantage of this, managers can position themselves as AI-enabled executives. For instance, AI can analyze vast amounts of data to identify trends, make predictions, and offer insights that inform high-level business strategies. The use of AI can reduce the chance of human oversight and error, whereas manual oversight can ensure awareness of the environment and organizational values. AI-powered tools can assist in employee performance evaluations, resource allocation, and even in aspects of team building and conflict resolution. Thus, by utilizing this three-box solution and leveraging AI systems effectively, an AI-proof manager can free up time to focus on the creative and interpersonal aspects of their roles.
TRIVIA: If you have made it this far, this fact is for you. In his book, VG also draws parallels between his three-box framework and Hindu mythology. An organization that balances the three boxes, alters between the values of preservation (box 1), destruction (box 2), and creation (box 3). In Hinduism, Vishnu is the God of preservation, Shiva is the God of destruction, and Brahma is the God of creation. As per Hindu faith, creation-preservation-destruction is cyclical, without beginning or end. This symbolizes life and evolution.
DID YOU KNOW: Vijay Govindarajan’s book ‘The Three-Box Solution’ has a MSB edition. In the preface to this edition VG writes and I quote him – “These three boxes of innovation underscore the core values and emphasis MSB one of the Best PGDM College near Bangalore has always given in providing its students with the right skills, abilities, knowledge, and exposure to develop as entrepreneurially inspired, innovative thinkers with an ability to contribute to the changing dynamics of the global economy.”