#584  Innovative Leader                 Volume 12, Number 9        September 2003

The High Cost of Incremental Innovation
by Robert "Dusty" Staub

Robert "Dusty" Staub is the founder and CEO of Staub Leadership Consultants www.staubleadership.com. He is author of Heart of Leadership and The Seven Acts of Courage (Executive Excellence, Provo, Utah, 1997,1998). 

What is the price of driving innovation in your organization? The upfront cost might appear to be only slightly less expensive than not innovating. Yes, settling instead for incremental change in processes, ways of working and operational practices can lead to disaster.

Why the urgent need for a work environment and culture that drives innovation?

In the radically shifting realities of our fast-paced global marketplace and our demanding customers, incrementalism is often the path to extinction for a company.

Not too many years ago there was a company called Hechinger, based in the Washington, D.C. area. It had grown into a billion-dollar retailer and was a symbol of success, the dominant player in its niche in the market. It had expanded beyond its home market along the Northeast corridor and had reached down into North Carolina. The company had great core values and a rich 80-year history of success and profitable growth. The organization was known for its social conscience and its marketplace performance.

Hechinger's executives also were well informed and diligent. In the process of scanning their marketplace they identified a strong threat in an up-and-coming competitor within their industry. The company, Home Depot, was only a fraction of Hechinger's size, but it had developed a radically new format, structure and set of processes that lowered its cost of doing business. This allowed Home Depot to operate profitably, provide better service and make money at much lower margins.

The executives at Hechinger tried to copy the format with two new larger stores it opened in North Carolina. Yes, it only incrementally addressed its own structure, processes and ways of managing.

The organization found that it was very painful to address issues in its cost structure, and that the margins on the new stores were far less than they could tolerate. Thus, Hechinger backed away for smaller improvements and changes, leaving the field of innovation in the hands of Home Depot.

Within eight years, Home Depot was the dominant player in the industry, much larger and much more profitable than Hechinger. The old, venerated company was out of position strategically. In desperation, with profits plummeting, it jumped on innovative experiments to try to save the company.

Yes, Hechinger has waited too long and was driven out of business in a few years.  Incrementalism has been the more risky and losing strategy, as it has been for so many other organizations and management teams.

Given this reality, why do so many leaders choose tinkering versus innovating? How do you know if you are falling into this trap? Here are some warning signs:

1. Do you see the price of innovating as more painful than saving market position?

2. Do you convince yourself that you can succeed by making cosmetic changes?

3. Do you think that everyone else must change but you are exempt?

4. Do you ignore the human dimension of change, approaching it as if it were a mechanical process, neglecting to plan for feelings, thoughts and patterns of interacting with the people involved?

5. Do you lack the tools, methodology and formats to enable team-based innovation?

6. Do you fail to create a compelling vision and story for innovating and reinventing?

7. Do you feel, perhaps, too comfortable with the way you currently do business?

There are effective ways to initiate and manage innovation. The data shows that dealing with the growing pains of innovative change is much preferred to the dying pains of too little, too late.

The energy, excitement and commitment that comes out of a company engaging in an effective effort of this sort is simply incredible.

Are you willing to pay the price to innovate--or not to innovate? Do you have the courage to challenge yourself and then others to change the ways of thinking, interacting and relating to each other and to your customers?