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Firm of the Future: Engine 1 and Engine 2

Senior leadership teams should make sure both Engine 1 and Engine 2 are firing on all cylinders.

Video

Firm of the Future: Engine 1 and Engine 2
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To succeed over the long term, companies need an active Engine 1, which focuses on the core business, and an Engine 2, which innovates for the customers and capabilities of tomorrow. Dunigan O'Keeffe, a partner with Bain's Strategy practice, explains why senior leadership teams should make sure both Engine 1 and Engine 2 are firing on all cylinders.

Read the Bain Brief: The Firm of the Future

Read the transcript below.

DUNIGAN O'KEEFFE: The challenge of innovation requires companies to drive two engines of growth. Engine 1 is all about today's customer. It's your core business. It's your core proposition. It's how you're delighting those individual customers in growing with them.

Engine 2 is about tomorrow's customers and tomorrow's capabilities in new markets with new competition. You need both of these engines to be firing over the long term. Engine 2 is very different. It's about creativity. It's about, how do I take small insights about the customer and innovate and experiment with them to build whole new businesses?

And this is very, very different. If you think back on your Engine 1, the core mentality and the core capabilities you need to sustain growth in Engine 1 is very different. It's about discipline. It's about continuous improvement. It's about repeatability. It's about optimizing a very proven financial model.

Engine 2 is experimentation. It's agility. It's about taking bold steps into the future, not knowing, actually, where this is going to play out and how you're actually going to get all your financial returns back initially. So these are very, very different.

So as you're sitting, as a senior leadership team, thinking about how you run both of these engines, there's a whole set of very important operating model questions you have to confront. First of all, how close should these two engines be when I'm growing them? Does Engine 2 need to heavily draw upon the capabilities of my current engine? Or does it need to be off very separately?

How do I think about the scarce talent and resources of my organization? How do I allocate them across these two engines? And in fact, do I need an entirely different set of talent, different culture to really foster Engine 2?

How do I think about us at the center and how we're going to be able to be the best parent for both of these? Do I, at the center, have the capabilities that are going to support both Engine 1 and Engine 2? And as I step all the way back, does that imply that I actually, perhaps, need to actually acquire Engine 2, because in my current setup, it's going to be so hard for me personally to cultivate that new engine of growth?

However you answer those questions, they're unique to each individual business situation. What we do know is that the firm of the future will require having both of these engines firing. Eventually, Engine 1 stalls. Eventually, Engine 1 can no longer deliver the growth. And if you're not investing and thinking about Engine 2 early enough, you won't be able to sustain growth into the future.

Read the Bain Brief: The Firm of the Future

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