Incrementalism vs Strategic Change

Our modern decision making process promotes incremental thinking: how much better can I make something and what will that cost.  The assumption is that you should stop investing when the incremental payback exceeds the total cost of capital.  If life were nothing more than an investment portfolio, thinking like this might make sense.  But, there is a perverse element at work with incrementalism … the very nature of the declining return on investment can keep you from achieving the “end state” necessary to compete in the market. 

We have an emotional reaction to things like this: “just bite the bullet” or define the ultimate strategy and using the low cost higher return opportunity to help get this approved.

The recent Wall Street Journal article on autonomous vehicles really drives the point home.  As some of the easiest and most valuable features of autonomous vehicles come into widespread use, they then become the “base case” for further automation and improvements.  Consider the analogies here as you read from this WSJ article:

“Many tech entrepreneurs have argued that fleets of robo-taxis would convince us to abandon personal car ownership in favor of “transportation as a service.” Some of them have predicted these robot cars will start populating U.S. roads within the next two years.  But the paradox of how this evolution is playing out is that technology developed to give us driver-less vehicles from the likes of Tesla Inc. and Alphabet Inc.’s Waymo could actually delay their adoption.

 When car makers put these incremental tech advances in human-driven cars, they pre-empt one of the fully self-driving car’s supposed advantages: safety. These new systems marry the best machines capabilities—360-degree sensing and millisecond reflexes—with the best of the human brain, such as our ability to come up with novel solutions to unique problems.”

Strategy matters a lot.  If you don’t have one, you are doomed to incrementalism and will ultimately lose to those who choose the right strategy.

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