When looking through the podcast episode list the other day, one title really worked me up Praise of Incrementalism Surely, in a time where terms like sustaining and incremental innovation have a negative light, who would glorify them? Isn’t there a risk of next radical or disruptive innovation blindsiding the company, potentially bankrupting the organization?
In a world where the image of corporations are sluggish, start-ups are the fast and agile destroyers and the elusive “entrepreneur” is the new golden ticket. What argumentation would they put forward?
It came down to one key argument. Big changes don’t happen overnight. It takes many strategic incremental steps, moving towards an end goal. I thought about this, and I have to agree. Think about Innovation methods like a lean startup and design thinking. They are both circular processes. Iterations of learning and pivoting over time before arriving at the end product.
Have you thought as a leader how your employees could incorporate Everyday Design Thinking?
Even disruption does not occur overnight. Clayton Christensen argues that it occurs through innovations that target a group of people who are currently underserved or not served in the current market. Then, the company develops the innovation for this market. At a point, it becomes more valuable to the incumbent organization’s key customer group. These key customers then switch and the primary organization does not have the capabilities to compete on this new value proposition.
Take a look at Blockbuster and Netflix. When Netflix started in 1998, it was aiming to solve a particular problem of a subset of customers in the DVD rental market. Twelve years later, Netflix had developed new capabilities and shifted focus to online streaming. Whereas Blockbuster filed for bankruptcy protection. Since then, Netflix has developed many original series and films capturing more of their value chain. As a result, they have begun to disrupt the entire film industry. Praise for incrementalism!
I think there is a problem with storytelling in the business world. Everyone seems to agree to talk about the success stories of startups that made it while big corporations missed something and failed. People remember the newcomers that came into a market and completely changed it. Then there are the cases of corporations that focused on incremental innovation, lost a marketing opportunity and no longer exist. A great example is Kodak who developed digital camera technologies. Don’t forget the already mentioned Blockbuster as a further example.
Can Entrepreneurs alone change your organisation? See our discussion on Entrepreneurial Spirit.
There is also the problem that many organizations don’t make the test of time. Only 12% of fortune 500 countries in 1955 were also in 2015. Companies that have stayed on this list are companies like IBM, Whirlpool, and P&G have evolved over time to remain competitive in their individual industries and are now known for the innovation strategies. This image was not always the case.
The problem with corporations is that they must meet so many short term targets. They are regularly pressured by shareholders wanting to optimize profits and increasing ROI. Innovation veteran Phil McKinney highlights a problem in organizations called “The Rule of 18.” After a company has committed budget twice to a new project, it becomes difficult to argue the continuing of importance. The problem compounds when benefits or revenue is still not materializing.
Top Management loses commitment and the company moves onto the next big project. With this mindset, it is lucky that big corporations innovate at all. Nespresso was fortunate enough to have a few committed key personnel. They believed in the potential of the product and took it from an invention to one of Nestle’s best profit makers. After 18 months, Nespresso was nowhere near the original business model of Nestle.
An organization with a grand vision can help incrementalism. Each project is a step on the road to achieving the company’s vision. No organization expects to be able to reach their vision overnight. It is a long-term commitment to a purpose of bettering the world in some way.
Grand Vision also creates flexibility and gives room for creativity. Take a look at Ikea’s vision statement – “To create a better everyday life for the many people.” It states what the company wants to achieve – “better everyday life.” Plus who it wants to target – “the many people.” Yet, still gives leeway for how the management achieves it and how they brand themselves.
Buzzwords like “disruption,” “entrepreneur” and “radical innovation” can help companies think outside the box and focus on new market creation without fixating only on current market successes. But don’t be fooled. Nothing occurs overnight. Consider Incremental innovation as the commitment to long-term commitment to change.
Organizations need to determine their purpose and focus on continuous learning and renewal to be able to stay relevant. It is never ending and the day one rests on their laurels will be the day before they become irrelevant.
Once these building blocks are in place, one can start to consider how to increase the effect of each one of these incremental blocks. May I suggest looking at Salim Islam’s book, Exponential Organisations?