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The Power of Being Different Lesson 1: What
is incrementalism? In the dictionary increment is described as "added amount" or "increase."
See, the problem with incrementalism is, that sooner or later you'll hit, what Hamel (2000) calls, "the wall of diminishing returns:" Your revenues will continue decreasing, up till the moment that you will pass your break-even point and start losing money! For think rational; how long can you continue to upgrade processes? How long can you continue to polish existing models? How long can you maneuver within the maintenance of old, established wealth without creating new ones? (Read Gary Hamel's Leading the Revolution, 2000, p. 37, if you want to deepen this out).
To make it even more clear how disastrous incrementalism can be in business, here's a paragraph, borrowed from Thomas Homer-Dixon's The Ingenuity Gap, (2000, pp. 302-309): "Incrementalism assumes that our circumstances are reasonably stable and change is slow. Because the past isn't that different from the present, decision-makers can draw on what they have learned from the past - their practical knowledge, habits, and standard operating procedures, for instance - to guide their decisions in the present. But today our circumstances are sometimes marked by sharp upheavals and swift obsolescence of technologies and past knowledge. Also, today people often don't have the luxury of making small, provisional decisions and then waiting to gauge the results: as we have seen, for instance, in the Asian financial crisis, micro-events and decisions can have macro-consequences, and by the time a decision-maker realizes that the consequences of a small decision aren't good, it may be too late to change the course of events." (http://publish.uwo.ca/~mcdaniel/incremen.html) Bruce Vladeck writes in his article Medicare and the politics of incrementalism "incrementalist models fit extremely well with patterns of actual policy making, bureaucratic behavior, and even popular discourse. Incrementalism also provides the basis for a remarkably coherent historical narrative, beginning with the political system's Madisonian constitutional design and affirmed by the broad patterns of two centuries of America." Vladeck warns us for using incrementalism as a strategy in our work, personal life, or any other area. Gary Hamel calls for companies to "get off the treadmill of
incrementalism." It is Hamel's definition of incrementalism that we will use in
this course. Hamel's message is about strategy; it's about
customers; it's about the supply chain, but more important, it's about
innovation and radical new business models. That's what he calls: the end of
incrementalism. In an interview with William Finnie, published in the Jan/Feb 2001 edition of "Strategy and Leadership", Hamel states, "The returns on incrementalism are not what they used to be. We are reaching a point of diminishing returns on most of the traditional improvement programs that companies have been pursuing. Companies need strategies that are radical, and they need to develop them at a faster clip than ever before." To make his point even more clear, Hamel states, "In an increasingly non-linear world, a company's future depends on
its ability to generate and exploit non-linear ideas. Incrementalism is no
longer enough. Any company with a largely undifferentiated strategy will be
consigned to mediocrity. So what is radical innovation? From where does it
come? And how do you increase the odds that it will bubble up in your company?" A good way to explain incrementalism
is found in Hamel's article "What CEOs can learn from America" where he explains: There is a reason that many Industrial Age paragons--from AT&T to Coca-Cola to Motorola to Intel--are struggling to adapt to a world where change jumps and spins, tumbles and careens. Along with virtually every other company born before yesterday they are much better at optimization than they are at rule-breaking, game-changing innovation. Incrementalism is wired into their metrics, woven into their management processes, and baked into their compensation criteria. Innovation, experimentation, and creativity are tolerated when safely corralled in R&D or product-development units, or locked up inside of incubators and new venture divisions, but they are seldom full-throated rivals to optimization and incrementalism. Put simply, most companies don't do paradox well. This lopsided enthusiasm for incrementalism was perhaps forgivable in a world where change meandered rather than lurched. But in a discontinuous world, an inability to manage the paradox of optimization and innovation amounts to a mortal sin. The recipe for failure here is simple: pour ever more energy into optimizing what is already there. So let's get to the point. In this lesson the following ideas are crucial: Self test: Summarize for yourself the most essential lessons you think you have learned from this session. Save them, and you'll have a great tool for the future. What did we do: Write, in not more than 100 words, what this lecture was about in your opinion. What have I learned: Summarize in not more than 100 words (your own words) what this information about incrementalism means to you specifically. How will I apply it: Explain in not more than 200 words how you think you will apply the knowledge you gained through this lesson in your professional life. (Application in your personal life will be discussed in the next lesson, but you may already start to think about it if you want). Congratulations! You're now ready for: Lesson 2 | |||||||||