The Multiplier Effect of 1% Better Everyday

In these days when disruption and disruptive growth is very much fashionable, talking about 1% growth might be a tad bit out of place. In fact, unless businesses weave in disruption into their narrative, it is likely that the shareholders and investors will look down upon them, and their value will take a beating; consequently the ‘1% better every day’ theorem may come out to be a complete misfit. However, while one still needs to continuously reengineer one’s business to stay future fit, you must equally make sure that you grow consistently with what you have today. That’s where the power of 1% comes handy.

Don’t get me wrong, while there are be instances when a challenger can deliver disruptive solution for people to jumpstart growth, these instances are far and few. Many cases as an incumbent you will need to work much harder and go against the grain of the organisation and spend substantial resources to crack this; on the contrary you may realise that if you had focused on delivering everyday incremental improvements, you would have seen a more dramatic multiplier impact. Everyday sequential growth, bit by bit, over the years, would yield much better outcome than running after the elusive silver bullet growth which can jump start and dramatically change business trajectory.

This concept is a lot like how the famous Shatranj, or Chess story goes where the king was giving away a grain of wheat for each square of the board, thinking that it was nothing but later made him realise what an exponential amount it was. Let me explain with the illustration above. Should you focus on a 1% increase in sales you can deliver a 5% increase in profitability; similarly a 1% increase in price will yeild 15% increase in profitability and cumulative impact of 1% price increase and 1% reduction in costs can lead to as much as 24% increase in profitability. Hope the case is clear.

As incumbent, if we focus on making our core processes more efficient, focus more on incremental growth, savings and strengthen our core business bit by bit, we could deliver a much better outcome.

While I am not undermining the importance of reengineering and reinventing our businesses, I also believe that we should not take off our eyes from what is our core and see how you can improve this bit by bit over the years. It’s a transformation, just not optically as radical but can have a deeper impact.