Where does business growth come from, incremental gains, or quantum leaps?
There are so many articles written on this question, and they come to virtually every single conclusion. I’d like to take a moment to try to explain why the answer is “YES” and what that means for your business.
The first point we need to make is that both approaches are 100% necessary. Sustained growth for your business requires both incremental gains and quantum leaps. You need to hold them in tension (not balance).
This brings us to point two. The right mix of continuous improvement and bold moves changes over time. And, finally, there is a default pattern that causes organizations to overvalue one type of growth consistently. We are even more likely to make this mistake at two specific points in the organization’s lifecycle.
Let’s dig further into each of these points. We’ll use the Predictable Success model to help us navigate the changing needs in a business as it grows.
Business growth requires both approaches
The very act of starting a company is a quantum leap. Peter Thiel describes it as the act of going from Zero to One, from nothing to something. Starting a business is a bold step. Creating a brand new product requires courage and commitment. Creating a brand new industry is immensely challenging.
The vast majority of these efforts fail. Those who succeed are highly rewarded. Think of today’s visionary companies like
- Apple and the iPhone
- Google and Search
- Netflix and video streaming
- Facebook and social media
- Amazon with its one-click online retail and free shipping
All of these companies took a quantum leap, and several created entirely new industries in the process.
A quantum leap can also take place even if you are entering an existing industry. For example, if you start a plumbing company, it didn’t exist before you started it. That’s a quantum leap for you and the company itself.
Some companies reinvent themselves altogether. Kimberly-Clark, a paper product manufacturer, sold all of its paper mills to focus solely on its commercial operations. Apple, a computer company, invented the iPod and became a significant player in the music industry.
While these landmark changes make a lot of headlines (and a lot of money), they aren’t the whole story. Continuous improvement done correctly is another critical ingredient. It creates the context in which massive leaps forward can take place.
You may have heard it said, “You are just one idea away from a billion dollars.” That is total rubbish. There is not a single billion-dollar anything that happened with one idea.
First off, there are probably dozens, if not hundreds, of bad ideas that will fail. You still need to try out these ideas first to get to any single great idea.
Second, ideas require action, massive action to take route. That action is two-fold. 1. Doing the idea, again and again, and again. 2. Improving on the concept ever so slightly on each iteration.
Third, great ideas don’t start as great implementations. You need to improve them over time continuously.
This cycle of invent, implement, and improve, really is the magic formula. If you lose any one element, the cycle dies.This cycle of invent, implement, and improve, really is the magic formula. If you lose any one element, the cycle dies.
The right mix to grow your business
If both approaches are 100% necessary, how do you know which one to pursue? The context matters. In Early Struggle, almost every improvement is a quantum leap because the starting point is so small. Too much focus on tiny improvements often prevents the business from ever getting off the ground in the first place. Still, too much emphasis on brand new ideas, is equally damaging, preventing any idea from getting the full attention it needs to make an impact.
The answer here is to make sure you start with the big new idea, then get it out into the real world as quickly as possible. Then, if the real world responds well, dig in deep. Try and do as much of that as you can. Then, keep at it until ALL the low hanging fruit is gone. It may get a little boring for the Visionary. But taking your time to do this right is what creates the time, money, and other resources necessary when the time for the next big idea comes.
This is usually what the Fun stage is all about. Enjoying all the low hanging fruit from the last idea AND periodically going after those bigger than life opportunities that feel just out of reach, but somehow you pull them off.
Where we get it wrong
Then, you get into a groove taking risks and making big, bold moves. Then the BIG change comes. You take one too many bites of the apple, one location too many, a new product line that flops.
In Whitewater, you have a decision to make. To accomplish that quantum leap, you need to make continuous, incremental improvements into every department in the company. You need to honor these small, consistent gains just like you do the big hits. You need to start adding systems and processes to ensure consistent quality. You need to slow down the big new ideas to get them in sync with your ability to execute on those big new ideas fully.
It’s easier to say than to do
Unfortunately, this is easier to say than to do, and many business leaders fail to recognize the change that is happening. They notice that things didn’t work out, but they think faster, harder, more is what is going to fix it. Many get this first point wrong. They overvalue big ideas and fail to create the internal structure needed to facilitate continuous improvement and growth.
However, when you get it right, you create a culture of innovation and risk-taking that is adequately tempered by results in the real world, and something truly magical happens. The whole business moves forward, and this time, there is a sense of control you only thought you had before. You are in the sweet spot. Here, a company and its founder can stamp out there place and make their mark in the world. Not only is the business growing, but it is also now scaling up rapidly!
Often, too much of a good thing becomes a bad thing. Too much structure, too much focus on incremental growth, too much emphasis on risk removal will squeeze the entrepreneurial zeal out of any organization and rob it of its ability to take those quantum leaps forward. This problem is particularly troubling because it happens very quietly. Subtle shifts toward efficiency move the company further and further from the bold risk-taking that got them this far.
It’s at this stage that companies become very likely to let go of the quantum leaps, the significant risks. Instead, they favor more predictable incremental gains. What they don’t realize at the time is that this signals the beginning of the end. The company is entering a long, slow slide into irrelevance. It’s tough, if not impossible, to get back.
Wrapping it up
So, where doesn’t business growth come from?
Every enduring institution that is still creating and truly innovating today is doing so by wrestling with the tension of incremental gains and quantum leaps. They do this by committing relentlessly to the cycle of invent, implement, improve, and repeat. I believe you can grow your business the same way!
How does your business balance these two approaches? What quantum leaps and incremental gains are you most proud of?