Continuous improvement is good. But it's no longer good enough.

Companies that rely on a “continuous improvement” or “incremental change” approach may be simply putting a bandage on the issue that will decide their future. To truly address business changes head on and emerge as a leader, today’s enterprises must be willing to make a different kind of change—transformational change.

Swift, bold, transformational change
Most everyone is familiar with continuous improvement—the approach of improving products, services, and processes through small, incremental but constant changes. It stems from the principles of “kaizen”—translated from Kanji as “good change” and often credited to Dr. W. Edwards Deming—that guided rebuilding efforts in Japan after World War II.

Popularized through Six Sigma and Lean manufacturing, continuous improvement took hold in businesses of all types several decades ago as a means of honing efficiency, productivity, and competitiveness. It maintains a prominent place in all industries and facets of business today. And still serves a very important purpose.

But we have reached a point in the accelerating business lifecycle where continuous improvement is no longer “good enough” for making the changes required to remain competitive. In fact, we’ve seen more and more clients that are extremely good at continuous improvement struggle when it comes to making the swift, bold, transformational changes that their markets now demand.

Don’t treat a hemorrhage with a bandage
Transformational change fundamentally shifts “business as usual”—removing and rethinking entire chains of processes, embracing innovation as a foundation for success, and setting a bold and compelling vision for the future. It’s swift and sweeping rather than evolutionary—because for many organizations today, there simply isn’t time to evolve.

Factors ranging from new regulation to economic uncertainty to industry consolidation are forcing even the highest-performing enterprises and industry leaders into situations of transformational change.

Consider the movie rental industry. Industry players large and small were slow to react as streaming video became accessible and eventually commonplace. Some never saw it coming. For those that did finally break through the mindset that movies actually are just bits of data that can be delivered in ways other than via a shiny disc, it was too late. A new set of competitors was better equipped to meet new consumer expectations. Even the best continuous improvement capabilities in the world wouldn’t have helped. The change happened too fast.

There are many other examples in many other industries that are just as significant or more so—and they are still materializing.

Utilities have spent years “hiding from customers” (an exact quote from one industry executive); they didn’t want customers to even think about them. Now, as smart grid technologies and infrastructure improvements are set in place, utilities need relationships with their customers in order to influence behavior and advance demand-side management programs. But guess what? They don’t know who their customers are or how to interact with them. And customers don’t really want to have to interact with their utility.

Healthcare is another example. Regulatory changes and the emerging business-to-consumer model are deeply affecting the way both providers and insurance/payer organizations operate. These organizations now must figure out how to interact one on one with consumers—and they need to do so in a hurry.

In the publishing and music distribution sectors, new channels and changing consumer preferences have changed the face of the industry in just a few short years.

And so on.

In truth, there is hardly an industry where there isn’t some transformational change taking place. No one is immune. Everything is in play. Technology is a common instigator—for example the shift to mobile technology is forcing enterprises from financial services to entertainment to government to transform or miss the window of opportunity. But it’s not the only one.

Consumers, too, are driving business transformation. Technological and service advancements have programmed them to expect immediate gratification—near instantaneous access to information, answers, services, and products. If one business can’t provide a consumer with what she needs and expects today, she’ll look for another that can.

Approaching any of the situations above through incremental change could be like putting a bandage on a hemorrhage. A bolder, more aggressive treatment is needed.

It’s time for a new lens
Of course, transforming a complex business on a dime is not easy. Embracing transformation starts with having a strong transformation agent—internal or external—to help break through barriers and guide a radically new perspective about functions, operations, and technology.

In short, continuous improvement remains an important capability within today’s enterprises. But given the sheer pace at which the business world is changing, competitive enterprises need to look at change with a new lens. The market won’t wait for them to evolve.

West Monroe Insights
Code42
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