The Three-Box Solution Playbook by Manish Tangri & Vijay Govindarajan

Author:Manish Tangri & Vijay Govindarajan [Manish Tangri]
Language: eng
Format: epub
Publisher: Harvard Business Review Press
Published: 2020-05-04T16:00:00+00:00

Another way to resolve a critical unknown is to study whether anyone else has encountered and solved this problem. Is there academic research you can rely on? Have any startups demonstrated similar projects at conferences? What about your company’s ecosystem partners and their innovation efforts?

On the lines below, jot down where else you might look to find evidence that can validate your assumptions.

Sometimes, companies that are missing key strategic competencies will acquire early-stage companies that may have made some progress testing some assumptions and gotten closer to a product-market fit. The acquisition may be motivated by the smaller company’s technology and talent, regardless of the success of the specific Box 3 idea the startup may be pursuing at the time. Buying versus building can potentially accelerate the idea’s time to market. In certain cases, the buy option may be able to skip the entire incubation process.

In the mid-2000s, for example, Adobe was known as a Photoshop company. Photoshop was a world-class product, but it was also pirated heavily. Adobe’s business model was the traditional software licensing model at the time. Its product development launch cycles were roughly eighteen months long, during which time the company would add features, raise prices, and drive product refresh.

New CEO Shantanu Narayen and his leadership team saw the opportunity to transform the company into a content marketing company and change its business model to software as a service. This transformation was a tremendously difficult move to make as it changed how value was created and sold. A subscription model would price products much lower and require faster innovative updates in terms of product life cycles. However, not only did Adobe recognize the importance of data, but the company also saw signals that engaging consumers online was going to be extremely important. Furthermore, the leadership realized that no single company then owned that space.

One option for Adobe would have been to hire in a web-analytics team and build the competency from scratch. However, given the mammoth opportunity, the desire to build on its digital-creation competencies, and the need for rapid growth, Adobe acquired Omniture, a public web-analytics company, in 2009 to enter the market. The acquisition laid the foundation of growth for the company in the coming decade. Adobe successfully transformed its business model to a subscription business. In 2012, revenues from its Creative Cloud and Marketing Cloud (later renamed Experience Cloud) apps were in the hundreds of millions of dollars, and by 2016, they were more than $4 billion.

IDEAS IN PRACTICE

Imagine it is the late 1990s and you are an executive at AirEng, a hypothetical firm that manufactures aircraft engines. AirEng sells engines to airlines for their planes, such as the Airbus A380. The firm’s current business model is selling hardware (engines) to create an installed base of engines and making money on break-fix service contracts for the life of the engines; when the engines break, AirEng services them for a fee. While there is some software in the products, AirEng gives it away to drive adoption of its engines and increase its installed base.

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