Many established global companies discount the need to innovate when competing in emerging markets. After all, innovation is expensive and risky. So, how can it make sense to spend heavily on an innovation for a market in which customers have so little money? Readers will find out just why it does make a lot of sense. The article discusses five gaps separating the needs of consumers in developed and developing countries, including performance, infrastructure, sustainability, regulatory, and preference gaps.

Fending off new competitors is a perennial struggle for established companies. Govindarajan and Trimble, of Dartmouth's Tuck School of Business, explain why: Many corporations become too comfortable with their existing business models and neglect the necessary work of radically reinventing them. The authors map out an alternative in their "three boxes" framework. They argue that while a CEO manages the present (box 1), he or she must also selectively forget the past (box 2) in order to create the future (box 3). Infosys chairman N.R. Narayana Murthy mastered the three boxes to reinvigorate his company and greatly increased its chances of enduring for generations.

Special teams dedicated to innovation initiatives inevitably run into conflict with the rest of the organization. The people responsible for ongoing operations view the innovators as undisciplined upstarts. The innovators dismiss the operations people as bureaucratic dinosaurs. It's natural to separate the two warring groups. But it's also dead wrong, say Tuck Business School's Govindarajan and Trimble. Nearly all innovation initiatives build on a firm's existing resources and know-how. When a group is asked to innovate in isolation, the corporation forfeits its main advantage over smaller, nimbler rivals-its mammoth asset base. The best approach is to set up a partnership between the dedicated team and the people who maintain excellence in ongoing operations, the company's performance engine. Such partnerships were key to the successful launch of new offerings by legal publisher Westlaw, Lucent Technologies, and WD-40. There are three steps to making the partnership work: First, decide which tasks the performance engine can handle, assigning it only those that flow along the same path as ongoing operations. Next, assemble a dedicated team to carry out the rest, being careful to bring in outside perspectives and create new norms. Last, proactively manage conflicts. The key here is having an innovation leader who can collaborate well with the performance engine and a senior executive who supports the dedicated team, prioritizes the company's long-term interests, and adjudicates contests for resources.

For decades, General Electric and other industrial-goods manufacturers based in rich countries grew by developing high-end products at home and distributing them globally, with some adaptations to local conditions - an approach known as glocalization. Now they must do an about-face and learn to bring low-end products created specifically for emerging markets into wealthy markets. That process, called reverse innovation, isn't easy to master. It requires a decentralized, local-market focus that clashes with the centralized, product-focused structure that multinationals have evolved for glocalization. In this article, Immelt, GE's CEO, and Govindarajan and Trimble, of Dartmouth's Tuck School of Business, describe how GE has dealt with that challenge. An anomaly within the ultrasound unit of GE Healthcare provided the blueprint. Because China's poorly funded rural clinics couldn't afford the company's sophisticated ultrasound machines, a local team built a cheap, portable ultrasound out of a laptop equipped with special peripherals and software. It not only became a hit in China but jump-started growth in the developed world by pioneering applications for situations where portability is critical, such as at accident sites. The team succeeded because a top executive championed it and gave it unprecedented autonomy. GE has since set up more than a dozen similar operations in an effort to expand beyond the premium segments in developing countries - and to preempt emerging giants from disrupting GE's sales at home.

A manager may have a great idea but the only thing that will really matter is great execution. Here's sound advice for making the execution as brilliant as the idea.

Many companies assume that once they've launched a major innovation, growth will soon follow. It's not that simple. High-potential new businesses within established companies face stiff headwinds well after their inception. That's why a company's emphasis must shift: from ideas to execution and from leadership excellence to organizational excellence. The authors spent five years chronicling new businesses at the New York Times Co., Analog Devices, Corning, Hasbro, and other organizations. They found that a breakthrough new business (referred to as NewCo) rarely coexists gracefully with the established business in the company (called CoreCo). The unnatural combination creates three specific challenges--forgetting, borrowing, and learning--that NewCo must meet to survive and grow. NewCo must first forget some of what made CoreCo successful. NewCo must also borrow some of CoreCo's assets--usually in one or two key areas that will give NewCo a crucial competitive advantage. Incremental cost reductions, for example, are never a sufficient justification for borrowing. Finally, NewCo must be prepared to learn some things from scratch. Because strategic experiments are highly uncertain endeavors, NewCo will face several critical unknowns. The more rapidly it can resolve those unknowns--that is, the faster it can learn--the sooner it will zero in on a winning business model or exit a hopeless situation. Managers can accelerate this learning by planning more simply and more often and by comparing predicted and actual trends.

Organizations struggle when trying to manage a mature business and a related new venture simultaneously. The endeavor is fraught with contradiction and paradox. To succeed, the organization's leaders must deal with two conflicting pressures. The new venture must forget much of what has made the mature business successful, which argues for isolating the new venture from the mature business. However, the new venture also must borrow resources from the mature business, which argues for integrating the two units. Based on in-depth field research at 10 organizations, this article shows how to identify what to forget and what to borrow and describes an organizational design that facilitates both.

This is an MIT Sloan Management Review article. The conventional planning process does not work for strategic experiments that are truly bleeding edge. Nevertheless, many companies cling to what they know--planning that holds managers responsible for numbers. But that is not practical for entering completely new territory, when numbers are essentially pulled out of a hat and their underlying assumptions rarely revisited. A better approach to planning comes from researchers at Dartmouth College's Tuck School of Business. It emphasizes learning instead of numbers, and it draws on in-depth studies of such companies as New York Times Digital, Thomson Corp., Corning, and Analog Devices. Their approach, theory-focused planning, diverges from conventional planning in six critical ways. Companies that use it concentrate on a few critical unknowns instead of the usual horde of details in conventional plans; they focus on the theory underlining the predictions rather than the predictions themselves; they look for trends rather than numerical benchmarks; they review the plan often, in response to important new data, instead of annually; in that review, they consider the experiment over time instead of just for the current period; and they emphasize leading indicators rather than financials. Companies still hold managers of strategic experiments responsible for performance, but performance is gauged according to how quickly managers learn from new data. To be successful in uncharted waters, the ability to learn from experience is paramount.