Forget Borrow Learn
(Govindarajan Trimble)

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Achieving organizational excellence in innovation. Explanation of Forget Borrow Learn. Govindarajan and Trimble. ('05)

What is the forget, borrow and learn framework? Description

Establishing major innovations within the borders of a large corporation is one of the most complex and important challenges for management. A new business (NewCo) with high growth potential rarely coexists harmoniously with established Business Units (CoreCo). Often, innovation managers face considerable head winds, when they move strategic experiments out of the incubator into execution. The Forget, Borrow and Learn challenges from Vijay Govindarajan and Chris Trimble are helpful in dealing with these headwinds. The framework was first introduced in the article "Building Breakthrough Business Within Established Organizations" in the HBR of May 2005. When the model of Govindarajan and Trimble is applied well, the emphasis in innovation can be shifted to organizational excellence. In this way the organization is becoming less dependent on excellent leadership.

According to Govindarajan and Trimble, NewCo must forget some of what made CoreCo successful, because NewCo and CoreCo have elemental differences. Furthermore, NewCo must borrow some assets of CoreCo. This is the biggest advantage NewCO has over independent competitors. Finally, NewCo must be prepared to learn some things from the beginning.
 

It is important to notice that the three challenges are complex.

• They are present throughout NewCo's lifecycle.
• They are present all at once.
• They are related.
• They can be at odds.
• They need to be balanced.

Origin of the forget, borrow and learn theory. History

The HBR article by Professor Govindarajan and Professor Trimble was adapted from their forthcoming book "Ten Rules for Strategic Innovators - from Idea to Execution".

Usage of the forget, borrow and learn method. Applications

• Guidance on how strategic innovation should be organized within large firms.
• Decreasing dependence on leadership skills in innovation processes.

Principles of the Forget Borrow Learn framework. Elements

1. How to Forget?
   • Don't be isolated (insular). Hire outsiders in key management roles for NewCo and strongly consider an outsider to head the business. Outsiders challenge institutional memory and are instrumental in building new competencies.
   • Don't assign status based on size. NewCo should report at least one level above CoreCo in order to reduce the pressures on NewCo for short-term results and to ensure that CoreCo does not hoard resources.
   • Rearrange the moving parts. NewCo should reconsider how major business functions such as marketing and product development interact. Established patterns of interaction within CoreCo are usually incompatible with the new business model.
   • Build a new dashboard. The company should not base NewCo's performance on CoreCo's metrics. Doing this reinforces CoreCo's formula for success, not NewCo's.
   • Dare to make complex judgments. The company should not judge the performance of NewCo's leader too heavily against plans.
   • Promote new thinking about success. NewCo's leader should create a unique set of beliefs about actions that will cause success. And he should regularly reinforce this set of beliefs. CoreCo's beliefs may not apply in NewCo's environment.
2. How to Borrow?
   • Balance the yin of forgetting with the yang of borrowing. Only create links to lend NewCo a crucial competitive advantage. Avoid links where conflicts are severe. Avoid links to the IT or Human Resources departments.
   • Find common ground. Reinforce values that NewCo and CoreCo share. In most cases, CoreCo will have some values that are inconsistent with NewCo's business model. Still, the senior management team can facilitate cooperation by creating a "metaculture" composed of more general values.
   • Be careful what you ask for. To promote collaboration, reconsider individual targets. Evaluate and reward the managers of CoreCo, in part, according to their willingness to cooperate with NewCo. Avoid strong incentives tied strictly to CoreCo's short-term performance.
   • Co-opt CoreCo. To eliminate resistance from CoreCo's general manager, make borrowing as painless as possible so that he can focus strictly on CoreCo. Replenish CoreCo's resources when NewCo borrows heavily. Set transfer prices high enough to ensure that CoreCo will consider it a priority to help NewCo but not so high that NewCo cannot realistically achieve profitability. NewCo's profitability is a powerful symbol. CoreCo will always be more enthusiastic about helping when there is evidence that NewCo is succeeding.
   • Be alert to problems. Assign a senior executive to anticipate tensions between NewCo and CoreCo and to intervene should those tensions become destructive. The senior executive must be willing to spend a lot of time and energy and must be influential and respected within the corporation. She must continually explain the rationale for the differences between NewCo and CoreCo.
3. How to Learn?
   • Don't try to mix oil with water. Hold separate meetings for evaluating the business performance of NewCo and CoreCo. These meetings must be handled very differently, and combining them can be impractical, if not destructive.
   • Protect predictions. Ensure that executives involved in NewCo's planning process understand the importance of improving predictions and are aware of how this learning process can go astray when predictions are ignored, are manipulated, or become rigid.
   • Avoid being defensive. Evaluate the leader of NewCo not on results but on his ability to learn and make good decisions. Though accountability to plans is an effective practice in mature businesses, it can be crippling in new high-potential businesses. If NewCo's leader is held accountable to the business plan, he will become defensive once targets are missed. A highly likely outcome in any strategic experiment. It will be difficult for him to be open and candid. He may even hide information, perhaps even taking the senior management team out of the learning process altogether.
   • Perform less, faster. Simplify the plans. But plan more often. Each cycle through the planning process creates an opportunity to learn, therefore more frequent planning increases the speed of learning. To make a higher frequency practical, plans must be simplified. Detailed plans (broken down by region, product line, sales channel, and so forth) are useful for mature businesses, but NewCo should focus on resolving critical unknowns, which can be accomplished at a more aggregate level.
   • Analyze through a new lens. Compare predicted and actual trends. Because strategic experiments are dynamic, the pace of changes is often more valuable information than current results.
   • You should measure what you don't know. Identify metrics that are most useful in resolving critical unknowns. These are usually nonfinancial measures and are rarely the most closely monitored metrics at CoreCo.

Strengths of the Forget, Borrow and Learn method. Benefits

• Framework provides advice on a very difficult and important challenge within large firms.
• Helps innovation in organizations, which will result in stimulation of the economy.
• Provides guidance on how strategic innovation should be organized within large firms.
• The framework decreases resistance in organizations.
• It helps to decrease dependence on leadership skills in innovation processes. There is shortage of such skills.

Limitations of the forget, borrow and learn theory. Disadvantages

• Even when this framework is used to its full capacity, the problem it was designed for will likely remain.
• The framework helps to decrease, but not to end the need for strong leadership in innovation.
• The three challenges are sometimes at odds, they are interrelated and they must be balanced.

Assumptions of the forget, borrow and learn framework. Conditions

• Strategic experiments constitute the highest-risk, highest-return category of innovation and require a unique managerial approach.
• A new business with high growth potential rarely coexists harmoniously with established Business Units.
• Through improving the capabilities of the organization surrounding the innovation leader, his work can be made easier.

Book: Govindarajan, Trimble - Ten Rules for Strategic Innovators - from Idea to Execution -

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H2 Achieve Strategic Innovation? Pitfalls?

"Can anyone share experiences of implementing Strategic Innovation in setting a business strategy. Many companies today apply the emergent strategy model, and simply look to improve the bottom line earning over the previous year. How do you change the thinking of your management team to become more innovative in their thinking? And what are the pitfalls / dangers to Strategic Innovation?"

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Christopher Bean - UK

What is Innovation?

"It might be useful to define what is meant by innovation, I like Schumpeter’s trilogy of: invention, innovation and diffusion hence tend to read articles in this context, (cognitive abstract) of innovation being the allocation of commercial resource, capital and labour, to invention which requires exploitation through the scale of diffusion to be successful. The challenge though, as always, is to understand the complexity, the nature of the system you are dealing with."

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Henry - Canada

Ways of Shaping Innovative Companies

"Govindarajan's and Trimble's framework focuses on building a (seperate) breakthrough business within an established organization to achieve strategic innovations. I wonder what other ways to encourage innovation within large organizations are known?"

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