10 Rules for Strategic Innovation (Vijay Govindarajan and Chris Trimble – Idea to Execution)

Rule 1: In all great innovation stories, the great idea is only Chapter 1. Building breakthrough businesses requires forgetting, borrowing, and learning. These central challenges demand more than just talented and ambitious leaders; they require leveraging the power of organisational DNA [staff, structure, system, culture].

Rule 2: Sources of organisational memory are powerful. Organisations naturally cling to CoreCo’s orthodoxy, even when moving into new environments. But NewCo needs to operate in fundamentally different ways [what got you here won’t get you there].

Rule 3: Large, established companies can beat start-ups if they can succeed in leveraging their enormous assets and capabilities.

Rule 4: Strategic experiments face critical unknowns. No amount of research can resolve these unknown before the business is lunched. Therefore, success depends more on an ability to experiment and learn than on the initial strategy. [OB is more important than strategy when it comes to innovation.]

Rule 5: The NewCo organisation must be built from scratch, with new choices in staffing, structure, systems, and culture. This is the only way to defeat the powerful forces of institutional memory. Conversational awareness of the differences between NewCo and CoreCo business models does not suffice.

Rule 6: Managing tensions is job number one for senior management. The health of the links between NewCo and CoreCo deteriorates easily. There are several natural sources of tension, driven by dynamic forces – particularly the changing demand for and supply of capital within the organisation.

Rule 7: NewCo needs its own planning process. CoreCo’s norms for evaluating business performance will disrupt NewCo’s learning.

Rule 8: Interest, influence, internal competition, and politics disrupt learning. To ensure learning, you must take a disciplined, detached, and analytical approach to making predictions and interpreting differences between predictions and outcomes.

Rule 9: Hold NewCo accountable for learning and not results. You can achieve accountability for learning by insisting on a disciplined learning process. Accountability for results against plan, while simpler to practise, is counterproductive.

Rule 10: Companies can build a capacity for breakthrough growth through strategic innovation. Skills in forgetting, borrowing, and learning are the foundation. Managers must start building these organisational skills early in a company’s life.