This blog first appeared as Steve Wunker’s piece for Forbes
By: Steve Wunker
Donald Trump scares many people, and business builders are no exception. But, rather than dwell on the uncertainties hammered endlessly in a day’s headlines, focus for a moment on the lessons Trump’s political success holds.
For companies striving to grow, his story and the converse tale of the GOP’s vertigo-inducing descent show perhaps better than any business parable the importance of keeping in touch with what customers truly care about. The Republicans’ current crisis also demonstrates how an organization – whether it is a company or a political party – needs to master three competencies at once to ensure its ongoing relevance.
When companies get upended, it is typically because they cease to see the world through the customer’s eyes. From their own product-pushing vantage point, they have a certain market share among customers buying a category of product, and that will persist because…well, perhaps just because. The data about past purchases lines up in neat graphs, and it is reassuring to extrapolate trend lines. So you get companies like Digital Equipment Corporation, which even during the PC revolution of the mid 1990s asserted that its minicomputer business was doing fine because in the market segment of workstations costing $6,000 - $10,000 it was the clear leader. One problem: the customer did not define the market the same way Digital did! For them, simple PCs got the computing job done with more choice and less cost than Digital’s pricey workstations, no matter what the pretty charts said.
For the GOP, it’s a similar phenomenon. The party has hewed, ostensibly at least, to an orthodoxy that has changed little in three decades. It has measured the percent of voters it turns out who care about certain issues, and it saw itself as having a consistent base it could rely upon no matter what the year’s news might read. No doubt, the Republicans had charts so beautiful they put Digital’s to shame.
It didn’t matter. Trump – through marketing prowess or luck – recognized that people had underlying needs which the existing party infrastructure catered to quite poorly. When voters feel vulnerable, or stuck in a dead-end, the philosophical orthodoxies of Friedrich Hayek aren’t sure vote-generators anymore. They’re like an $8,000 workstation – nice in theory, and once useful, but not clearly a fit for the task currently at hand. Trump provides simple answers for these underlying issues, so he wins the votes.
What the GOP neglected was what the Dartmouth business scholar Vijay Govindarajan calls “The Three Box Solution.” In The Three Box Solution, to be published in late April, Govindarajan lays out a simple and compelling formula for staying relevant:
In Box 1, run your core enterprise efficiently, embracing what he calls linear innovations that extend upon your existing model
In Box 2, selectively destroy old orthodoxies that are no longer relevant and which hold back your adaption to the future
In Box 3, create new solutions and experiment with new approaches, looking for the growth formula for the future
Govindarajan’s book concentrates on deeply-researched and vividly-told business examples and doesn’t apply this framework to our current political situation. But let’s explore what his approach could mean in that context. Most organizations, the GOP among them, execute Box 1 well. This is all appropriate, of course. Over the past four years, for example, the party funded a massive effort to collect data on likely voters and discern what issues will drive them to the polls. There must have been slides galore. Yet, it doesn’t matter much when voters stop choosing their candidate based on the issues.
Box 2 is a rarity. Few enterprises systematically and continuously prune initiatives, or old ways of thinking, that constrain future options. They usually wait to purge until a crisis comes along, rashly making decisions based on a need to fight fires rather than creating room for building new long-term competencies. Looking at the GOP, an extraordinary amount of effort has gone into bashing food stamps and non-military foreign aid, which collectively comprise under 1% of the federal budget. Eventually, there must be a point of diminishing political returns – from a budgetary standpoint even total elimination of these programs wouldn’t really matter. If an organization is excessively oriented toward largely pointless endeavours, it cannot concentrate on energizing people about new undertakings.
Box 3 creates the future, in a manner that humbly recognizes all the uncertainty inherent in any bold project to build new engines of growth. The Republicans tried this, very tentatively, after the 2012 election, but as resistance emerged the party quickly dispensed with those efforts. Instead, it doubled down on the old orthodoxies. The Democrats, for their part, haven’t exactly been trailblazers either, although some long-term growth initiatives like their project to turn Texas blue do have the hallmarks of solid Box 3 projects. To be sure, the GOP has its think tanks that create ideas, but when one runs into an old orthodoxy it has been too easy to ditch the new thinking (think cap-and-trade).
When an institution neglects Boxes 2 and 3, it invites a Trump – a rival connecting with customers’ latent needs, upending old ways of doing business, and pushing in totally new directions. One doesn’t have to be fond of Trump to recognize that he filled a gaping void for many voters – a vacuum left by the Republicans’ focus on politics as it used to be. Because the GOP did not follow the Three Box process in an orderly and sustained way, chaos may now ensue. May your business do better.
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