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The Case Against Radical Change

2011 July 31
radical change

The barbarians are at the gate!  We are on an burning platform in the ocean!  This is no time for incrementalism, we need radical change!

We hear this stuff a lot.  It’s become the Henny Youngman one-liner for the digital age.  A rousing call for sound and fury… signifying nothing.
 
The truth is that radical change rarely works.  It is neither strategy nor action, but rather cry of desperation.  It’s a sign that someone who hasn’t been thinking seriously now yearns to be taken seriously.  Most of all, it’s an indication that the worst is still yet to come.  Here’s why and what you can do about it.

Value Networks

As I noted in an earlier post, a business does not stand alone, but is part of an ecosystem. There are customers, employees, suppliers, shareholders and so on.  All of these have a symbiotic relationship with the company; they need each other in some way.

The concept of value networks is not a new one.  It arose out of Michael Porter’s concept of value chains.  No product or service spontaneously springs forth spontaneously, but is the result of a process and each step requires coordination and collaboration.  The success of any venture is a direct result of those interfaces.

While value chains focused on individual firms, value networks recognize that processes for value creation are often far flung.  Auto companies, for instance, routinely have hundreds of suppliers, thousands of dealership partners and millions of customers.  Verna Allee has pioneered the field of value network analysis to track these relationships.

What should be obvious is that for radical innovation to work on a large scale, the entire value network has to be aligned.  It’s not a simple matter of waking up one day and deciding you would like everything to be different.

The Curious Case of Disruptive Innovation

Clayton Christensen pointed out in his book The Innovator’s Dilemma that firms go to great lengths to keep their value networks happy.  They listen to their customers, find out what they need and work closely with suppliers to deliver it.  Successful companies continually innovate to meet the rising requirements of their value networks.

At some point, their products get so good that they are really better than what anybody needs.  Then, along comes a competitor from outside the value network with a crappy solution.  The existing network rejects the low performance, but those outside think it’s great.  It’s cheaper or smaller or more user friendly or whatever.

That’s the essence of disruptive innovation.  Incumbent companies have a hard time competing because their current consumers demand more and there aren’t enough new customers to support their existing cost structure.  So they usually cede the lower margin segments of their market to the young upstarts, their margins rise and they feel great.

Of course, as the new idea catches on, performance rises and the new firms migrate upwards.  The established players aren’t turning up their noses anymore.  They’ve had enough!  Time for some radical change!

The Flywheel and The Doom Loop

The problem is, as I mentioned above, that radical change rarely works.  In his study of companies that went from good to great, author Jim Collins wrote this:

We kept thinking that we’d find “the one big thing,” the miracle moment that defined breakthrough.  We even pushed for it in our interviews.  But the good-to-great executives could not point to a single key event or moment in time that exemplified the transition.

Further, he found that there was a period of buildup, often ten years long, before all the little things finally rolled into a truly powerful business model.  When the market and the press finally caught on, they would portray it as on big revolutionary idea.  In actuality, it was the result of years of experimenting with and perfecting small ideas.  Collins calls this the flywheel.

He contrasts this approach with comparison companies that went nowhere.  Instead of a flywheel, he found a “death spiral,” where firms lurch from one big, radical idea to the next.  Failure means starting over (often, with a much bigger idea).  All too often, the companies that gpofor the “bet the company” gamble never get any traction.

Outside of the companies Collins studied, there is more evidence that successful innovators take an incremental approach.  Jeff Bezos recently remarked that “Ninety-plus percent of the innovation at Amazon is incremental.”  Andy Grove wrote that his famed decision to pull out of memory chip was mostly confirming factory level moves already made.

True innovators make change a integral part of doing business, there’s nothing radical about it.

Consistent, Unrelenting Change

The dirty little secret of revolutionary change is that it requires an evolutionary mindset.  It’s the thankless day-to-day discipline, rigor and privation undertaken over a period of years that makes things happen, not grandstanding pronouncements and transformative visions.

The future has no formula.  After all, if we knew what the next big thing was it would be the present big thing.  Nevertheless, there are some steps we can take to prepare for our uncertain future:

Skills, Not Strategies:  As I wrote in a previous post about media companies, firms that make big strategic moves usually end up in trouble, while those that take a skills approach succeeded quietly.

So if you want to make a change, bring in new skills; and not just people that can code and and do UX, but sales and marketing people who can integrate those new skills with the rest of the business.

Think Small:  Big companies tend to throw around big resources.  That’s usually a mistake.  Small pilot projects and acquisitions can bring in important new ideas and capabilities without making a large balance sheet impact.  Once they gain traction scaling up is no problem, scaling down always is.

Heroes, Hold-outs and In-Betweens:  I noted in a previous post about turnarounds that you can usually split your people into three groups: about 10% are heroes, excited for change, another 10% holdouts who will resist new initiatives and the rest who will sit on the fence and see which way the wind blows.

It’s important to identify who these people are and then celebrate the heroes and sideline the holdouts.  If the situation is not dire, this can usually be done quietly and without drama.

Once you have these three things in place, you are ready for long haul, constant and unrelenting change.  That might not be as sexy as big radical change, but in truth it’s the small things pursued rigorously that make the real difference.

- Greg

13 Responses leave one →
  1. July 31, 2011

    What a well written and thought provoking article.

    It makes total sense.

    I may have to revise my marketing strategy.

    My problem is that the small idea I had long back kept growing incrementally as people asked questions. Now it is revolutionary.

    But I have been very careful to retain the incremental element when it comes to implementation…

    Maybe I am a good businessman after all…certainly I always have my eye on thinking such as this and I am pleased to be given this wider perspective. A great article. Thanks again Greg. How about connecting?

    Regards,

    Edward

    [Reply]

  2. July 31, 2011

    Nice, Greg! Reminds me of the “Little Bets” approach: http://petersims.com/2011/03/04/little-bets-qa/.

    Greg

    [Reply]

    Greg Reply:

    Yes, it’s a similar idea. However, at some point little bets need to become big bets in order to have an effect. The one problem that I have with “little bets” (and this is more semantic than anything else) is that it lends itself to a shotgun approach. Little bets need sustained commitment. If it’s just throwing stuff at the wall to see what sticks it’s not going to work. While Peter Sims does seem to understand this, I don’t think he stresses it enough.

    One of the best things I’ve heard recently was from a senior executive at Google who told me “We learn from every failure.” I think that’s exactly the right attitude and it does require that you make little bets, but it’s the sustained appraoch that makes it work.

    - Greg

    [Reply]

    Greg Ivanov Reply:

    Absolutely. The approach does need to be a systematic, deep-rooted attitude for it work.

    [Reply]

  3. Wim Rampen permalink
    July 31, 2011

    Hi Greg,

    Indeed. Disruptive innovation hardly ever comes from companies that try to change radically.. But one should not use the terminology interchangeably like it’s apples and apples, imho.

    Wim

    [Reply]

    Greg Reply:

    Wim,

    I’m not completely sure that I get you, but I think you mean that disruptive innovation and radical change are often confused. If so, then I certainly agree and would even go further. I think it’s essential to understand that the term “disruptive innovation” refers to a specific business situation not an idea that someone thinks is more clever than most.

    - Greg

    [Reply]

  4. August 1, 2011

    Hi Greg,

    I do agree. Even Gladwell in his “Outliers” demistifies the idea of a genius, showing that every seeming genius has the “10,000 hours” rule to thank. Graduality, it seems, is not just winning over disruption but over any sort of quantum or quality leap in results and performance.

    I have been constantly amazed at how well “Shock and Awe” of Milton Friedman has been bought, spread and used in politics, economies and businesses. One explanation might seem plausible. Any sort of radical, quantum or disruptive rhetoric is usually sensational, and perhaps more visionary. It appeals easier to wider audiences who see in the radical change a cut from their (under) performance and promise of improvements.

    Just my 2 cents.. Also keen if you check my post on “Emergence” and what you thought of it (I didn’t blog for quite some time – doing a reality check!).

    [Reply]

    Greg Reply:

    Thx. Can you give me the URL to your “emergence” post?

    - Greg

    [Reply]

    Hayk Reply:

    Hey Greg,

    Sorry i thought I put it at the bottom of my response. Here it is:

    http://fail92fail.wordpress.com/2011/07/28/emergence-and-failure-of-societies-first-take/

    Thanks again.

    [Reply]

    Greg Reply:

    OK. I’m a bit slammed right now but I’ll check it out.

    Greg

  5. August 17, 2011

    Wonderful post Greg! I am excited to see this discussion around Incremental Action. Ever since I have been learning about Incremental Action, I have been exploring its various facets in our networked world. I have written a post on it in my blog from the perspective of innovation. http://www.venkinesis.in/2011/08/innovation-is-like-joke.html Would love to hear your thoughts on it!

    [Reply]

    Greg Reply:

    Cool! I love both innovation and jokes;-)

    Seriously though, very good post. I just tweeted it.

    - Greg

    [Reply]

    Venky Reply:

    Thanks Greg! Your appreciation really means a lot to me:)
    Venky´s last blog post ..Tuesdays with a farmer – Science and Surrogates

    [Reply]

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