Create Space for Innovation

Create Space for Innovation

Vijay Govindarajan has spent years developing a sense of what it takes to execute innovative ideas within organizations. He served as the first Chief Innovation Consultant for General Electric and today sits as the Earl C. Daum 1924 Professor of International Business at the Tuck School of Business at Dartmouth College in Hanover, New Hampshire. His book with Chris Trimbull, The Other Side of Innovation: Solving the Execution Challenge, came out last fall. In a recent conversation with BizEd, Govindarajan spoke about the obstacles business schools face as they design and implement innovations in their curricula. His thoughts below reinforce the sense among educators that now is the time for change—and that the biggest mistake they can make is to believe that the last century’s model of business education is sufficient to advance management in the years ahead.

On disruptive innovation…

At one level, there is innovation in the business school. As faculty, when we do research, we bring what we learn into the courses we teach. We learn new things, and we write new cases.

But we haven’t seen disruptive innovations in the business school. By that I mean we haven’t seen what has happened in the computer industry when mainframes were disrupted by personal computers or what happened in the music industry when the iPod fundamentally changed how people listen to music. The question is, is that kind of disruptive innovation needed in our industry? My gut feeling tells me it is.

Disruptive innovations happen when there are fundamental, nonlinear changes within an industry. Already, I see three trends that will call for business schools to make deeper fundamental changes. First, we have seen such phenomenal advances in digital technologies, from data to voice to video and now to telepresence, which may be replaced by something else in the future. Second, we have seen the emergence of countries such as India and China, where there is a tremendous need for MBA education. Finally, we have seen the appearance of a whole new set of competitors coming from India and China that are world-class, but they have very different orthodoxies and different needs.

These three trends will affect how we deliver, to whom we connect, what we teach, how we teach, and how we need to be thinking about innovation.

On obstacles to innovation…

If you think of some of the biggest innovations of the last decade, you can wonder, why was Netflix not innovated by Blockbuster? Why was Google not innovated by Microsoft? Why was Skype not innovated by AT&T? I have come to the conclusion that there are three traps that prevent some organizations from becoming innovative.

The physical trap is an organization’s unwillingness to abandon current investments. This was the problem for Blockbuster—it was unwilling to abandon its brick-and-mortar infrastructure even when it saw NetFlix coming. Business schools suffer from that same problem. We have so much infrastructure built to support our current business model—not just our buildings, but our faculty, our reward systems, the type of applicants we attract—that any kind of deep change is difficult.

The psychological trap is about mindset. Look at Kodak, for example. It came up with the digital camera in the early 1980s. It wasn’t that its executives didn’t understand disruptive innovation, the technology, or the product. They had the product. The problem was that they handed the digital camera over to the guy who was running their film business and said, “Make it happen.” But he didn’t make it happen, because his assumptions and biases were all rooted in film.

The same thing happens in business schools. We can’t ask faculty who have spent years working and teaching one way to suddenly do something fundamentally different. We’re not trained that way. Instead, if we want to create innovation in the business school, we have to create a separate space for it.

The strategic trap refers to myopic thinking, which happens when organizations worry only about today’s customers, today’s competitors, today’s technologies. When railroad companies analyzed their competitors, they only looked at other railroad companies. They thought the things flying over their heads had nothing to do with their business!

On making innovation happen…

We are very good at innovating within the current model of business education. The barrier we face is disruptive innovation. For that reason, we must create separate organizations to innovate.

We can learn from a company like IBM. It faced a crisis in the early 1990s when its mainframe business was being attacked from every angle. Talent was migrating away because MBAs didn’t want to work for a company like IBM—they wanted to make billions in Silicon Valley! But after Lou Gerstner took over as CEO, he wanted to show that IBM could be as cool as Google, Amazon, or eBay. So he started the project that created Deep Blue, the supercomputer that beat Gary Kasparov at chess. Then, he launched the project to create Blue Gene, the computer or genetic engineering that was 500 times faster than any other computer at the time.  Suddenly, talent began migrating back, and IBM recreated itself as a services and solutions company. It transformed itself.

IBM took almost a zero-based approach, creating entirely new organizations to take on new challenges. To achieve fundamental disruptive innovation, business schools can’t take the same organizations we now have and ask them to do something different. We have to innovate in different spaces.

On the MBA….

We must broaden our focus beyond the MBA to develop other nondegree programs that allow us to interact with executives at different levels. For instance, ten years ago at Tuck we created a program called the Global Leadership 2020—although we’ ve had to change the name to 2030 because 2020 is coming up too soon! When we started, I asked several CEOs what they thought they would have to do to prepare for what their companies would look like in 2020. Almost all of them said that they would have to develop their own leaders.

So we created this nine-month program in a dedicated space for half a dozen companies. Each CEO handpicks six to ten people who have the potential to rise all the way to the CEO position. We meet for a week in Hanover; then there’s a three-month period where they complete a hands-on project and network with each other. Next, we spend a week in India, and then they complete another three-month project. Finally, we spend a week in China.

This is not how you do an MBA program. We had to create a separate program based on the idea that leadership is developed through knowledge, experience, and networking.

On the purpose of business schools…

What is the fundamental purpose of business schools? We can’t say that our business is to produce MBAs. That’s like Coca-Cola saying that its purpose is to produce cola. Coca-Cola’s business is to quench thirst. Our business is not to produce MBAs, but to transform the world of business.

When we look at it this way, we can see that we’re not just competing with other business schools, but also with corporate universities like General Electric’s Crotonville Management Development Institute. We’re competing with the people at McKinsey, who hire fresh undergraduates and train them themselves. They don’t need MBAs, because they can create MBAs themselves. Once we think of it that way, we free ourselves to actually create disruptive innovations.