How marginal gains can boost SME profits

28 July 2015 -

The man behind Team GB’s track cycling dominance has managed to replicate the success in the torturous French mountains. The secret to his success? Marginal gains

Jermaine Haughton

As Chris Froome crossed the finishing line in Paris on Sunday evening, he became the only Briton to win the Tour de France twice. It was also the third victory in four years for Team Sky, having won the event in 2012 (Sir Bradley Wiggins) and 2013 (Froome).

Much like the proverbial London buses, having waited 99 years for one Tour victory, three have come in quick succession. Previously, Britain’s dominance was confined to the velodrome – with the track cyclists racking up vast amounts of Olympic medals over the past decade – making household names of Sir Chris Hoy and Victoria Pendleton, among others. Just what has changed?

Both successes have a common thread: Sir Dave Brailsford – previously performance director at British Cycling and now general manager at Team Sky – and his relentless commitment to the "marginal gains" philosophy.

Through the constant analysis of Big Data by sports scientists, the management theory aims to create incremental improvements across every area of a cyclist’s activity, including diet and lifestyle, provides the boost needed to win races.

“The whole principle came from the idea that if you broke down everything you could think of an improved it by 1% and put it back together again you will get a significant increase,” explained Sir Dave.

“There’s fitness and conditioning but there are other things that might seem on the periphery like sleeping in the right position, having the same pillow when you are going away and training in different places, hygiene. They’re tiny things but if you clump them all together it makes a big difference.”

The principle has been translated to other sports, such as football and athletics, as well as the business world with numerous examples of success.

Marginal Gains in Business?

Data analysis company QuantumBlack consulted a large engineering multinational to introduce a series of small adjustments to its team composition, that were mostly in the 0.5%-to-1% improvement range. The process resulted in a 22% rise in productivity improvement and performance.

Similarly, Toyota has used a variation of the marginal gains principle by allowing its own employees to stop the production line and make ongoing improvements to its products. The “kaizen” method is also commonly used by many other big and small Japanese firms, such as Sony.

Bosses must be mindful that in some cases the impact of making a series of small changes to products, can almost be as disruptive to customers as large makeovers.

Although Facebook's experiment to change the sentiment of user pages only had a less than 0.1% effect on posting behaviour by members, the improvements caused some short-term uproar with users posting their dissatisfaction for the changes online.

During the week-long secret test of almost 700,000 Facebook users in January 2012, the social network found users were more likely to post positive content if they were shown happy words, while they were more prone to project negative thoughts if they were shown content that was sadder than average.

As Facebook researchers explained, "given the massive scale of social networks such as Facebook, even small effects can have large aggregated consequences"

Steve Jones, Global Lead for Master Data Management at Capgemini, explains that businesses must be mindful of being over-reliant on big data analysis in determining marginal gains as it can create more questions than solutions.

“There is no silver bullet. Regardless of the hype, there is rarely a single answer that explains why product X isn’t selling, or a way to predict with complete accuracy how a particular stock will perform,” said Jones. “Big Data cannot predict the future. In fact, the bigger the quantity of data, the more questions it can create.”

“But behind the software vendor hype lies a fundamental shift in the way businesses are using information,” he added. “A shift from simple questions and answers towards a stream of marginal improvements that together add up to significant gains, even in a complex business environment. Expanding pools of data, from an increasing range of different sources, offer organisations the opportunity to identify fresh perspective – a new way of tackling an old problem. This different standpoint is the platform on which marginal gains are built.”

Inspired by Olaf Swantee, chief executive officer of telecommunications giant EE, here are the four key steps to successfully implementing marginal gains strategy to your company:

1. Identify the goal – through a combination of statistical, anecdotal and observational evidence, define clear and non-conflicting targets and aims for your firm
2. Work out the gap between current performance and that goal – build a tangible measure for assessing how far the goal is, and how well the company is progressing towards the target
3. Break down what is needed to close that gap – recognise the major and minor differences between the position the firm is in now, and its target. Use a successful company as a model of comparison and create a plan of how to close the disparity
4. Execute – commit to carrying out the plan meticulously and reassure employees of the importance their role and responsibilities play in the process

Images courtesy of Radu Razvan, Mitch Gunn & OmniArt via Shutterstock