Organizational Governance
What I Learned About Sustainability At REI, Part 3:
Incremental vs. Breakthrough Changes

This is the third in a series of posts on things I learned while leading Corporate Social Responsibility at REI for the past seven years (read parts one and two).I’m often asked if incremental improvements can really lead to sustainable business outcomes. In my experience leading sustainability and corporate social responsibility efforts at REI the answer is: yes and no. It all depends on what happens next.

By Kevin Hagen | Published 11 years ago | About a 3 minute read

This is the third in a series of posts on things I learned while leading Corporate Social Responsibility at REI for the past seven years (read parts one and two).

I’m often asked if incremental improvements can really lead to sustainable business outcomes. In my experience leading sustainability and corporate social responsibility efforts at REI the answer is: yes and no. It all depends on what happens next.

Sustainable business is a different way of thinking about business and in my view; incremental improvements are a great place to start. At REI, incremental improvements helped us learn new skills and competencies, trained the organization to think differently about problem solving and enabled us to gain confidence to treat environmental and social indicators as real business metrics that can drive better outcomes. While we celebrated incremental success, we didn’t accept them as the end state, rather as a stage of change that led to innovation and breakthroughs. Over a period of seven years REI made improvements that enabled the co-op to double in sales to $2B, turn the corner and start reducing its absolute environmental impact all while delivering record dividends to members every year.

Two ideas are helpful to explain what was happening under the surface. One challenge is that eventually incremental improvement reaches the “point of diminishing returns,” that place where effort increases while results don’t. In the landmark book Natural Capitalism, written with Paul Hawken and Hunter Lovins, Amory Lovins argues that we can “tunnel through” the diminishing returns curve (here’s the chapter to learn more). The idea is that by pushing beyond the point of diminishing returns you can solve the problem in a new way. He uses building his home in Colorado as an example — adding more and more layers of insulation was more and more expensive but the benefits peter out. However, eventually the house was so well-insulated that passive solar heating could make it comfortable and thus he didn’t need a furnace or air-conditioning — a huge first cost savings, plus he eliminated fossil fuel costs forever. He had jumped past the diminishing returns to a new, better state. By pursuing incremental improvements with intention, we give people the opportunity to innovate like this.

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The second phenomenon that helps springboard from incremental improvements to breakthroughs is the idea of radical incrementalism. Here’s a book review from the creative commons on the topic. Here the idea is that through one small change, the next change becomes more obvious and from there, the next. The series of changes leads to radically different outcomes — breakthroughs.

The bottom line is this: Making incremental improvements is necessary but not sufficient. Use the success in financial and environmental terms to prove that “it’s working” within the organization to keep momentum moving and feed enthusiasm among employees as well as leadership. Use the opportunity to inform, teach and learn skills and competencies of collaboration and metrics that will help drive bigger innovations. Spot the breakthrough ideas early and nurture them. Celebrate success.

Incremental improvements are a great stepping stone to big changes if you use them to set up ‘what’s next.' The key in my experience is to celebrate the success correctly. Don’t let people think it was luck or “doing the right thing” or business as usual. Point out the aspects of the project that required new ways of looking at things. Identify ways in which the change used environmental or social metrics as an indicator of a business opportunity. Show it works and keep the momentum for change rolling.

This post first appeared on Kevin Hagen's blog on May 6, 2013.

Part 4

Kevin Hagen

VP, Environment, Social & Governance Strategy
Iron Mountain Inc.

Kevin Hagen is Vice President Environment, Social & Governance (ESG) Strategy at Iron Mountain (NYSE: IRM) the global leader in storage and information management services with $4B in sales operating over 1400 facilities in 56 countries.

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