The Innovator's Dilemma

The first logical problem in chain-link situations is to identify the bottlenecks, and Marco did that—quality, sales’ technical competence, and cost. The second, and greatest, problem is that incremental change may not pay off and may even make things worse.

turning around a chain-link system requires direct leadership and design. Conversely, the excellence achieved by a well-managed chain-link system is difficult to replicate.

The unanticipated problems and opportunities then essentially fight the deliberate strategy for the attention, capital, and hearts of the management and employees. The company has to decide whether to stick with the original plan, modify it, or even replace it altogether with one of the alternatives that arises.

Apparently, neither Starbucks nor Toyota had sufficient people or processes in place to assess how those incremental changes could individually, or in the aggregate, have a negative impact on their value proposition. As a result, both corporations stumbled badly.