The most natural response to underperformance is incremental improvement. Revenue is growing too slowly: improve the sales process. Margins are compressing: reduce costs by 10%. Working capital is straining: tighten collection by a few days. Quality is inconsistent: add another inspection checkpoint.
Each intervention is sensible. Each produces a measurable improvement. Each is approved because it is low-risk, quantifiable and consistent with the existing operating model.
And each, in certain circumstances, is the wrong approach, because the problem is not that the system performs at 90% of its potential. The problem is that the system itself is the wrong system for the company's current economics, competitive position and strategic ambition.
A company that makes its outdated process 10% more efficient has a more efficient outdated process. A company that replaces the process with one designed for its current reality has a fundamentally different cost structure, speed, quality and scalability. The difference between the two is the difference between optimisation and redesign, and the trap is that optimisation is always easier to approve, always easier to measure and always less threatening to the organisation, even when redesign is what the economics demand.
Why Companies Fall Into the Trap
Optimisation is psychologically safe
A 10% improvement to the existing process does not threaten anyone's role, expertise or institutional identity. The team that built the current process is the team that improves it. The metrics that measure the current process still apply. The organisational structure that supports the current process remains intact.
Redesign threatens all of these. It implies that the current process is not merely suboptimal but fundamentally wrong. It may eliminate roles, require new skills, invalidate institutional knowledge and disrupt the power structures built around the existing system. The organisation resists redesign not because redesign is irrational but because it is disruptive, and disruption creates losers as well as winners.
Optimisation is measurable
A 10% cost reduction produces a number the board can evaluate: Rs 5 crore saved. A process redesign produces a projection: we believe the new model will reduce cost by 40% once fully implemented. The first is certain. The second is uncertain. The board's natural preference for certainty over ambiguity favours optimisation over redesign, even when the redesign's expected value is several times the optimisation's.
Optimisation is faster
A process improvement can be implemented in weeks. A system redesign may take 12 to 18 months. The board faces a time preference: Rs 5 crore in savings this quarter versus Rs 20 crore in savings starting next year. The time preference, combined with the certainty preference, makes optimisation the path of least resistance.
When Optimisation Fails
Local optimisation degrades global performance
A company that optimises its procurement process to reduce unit costs may create a system that is cheaper per unit but slower, less flexible and less responsive to demand changes. The procurement team celebrates lower costs. The production team absorbs the cost of delayed deliveries. The sales team loses customers because lead times have increased. The total system performs worse because one stage was optimised at the expense of the others.
Diminishing returns exhaust the improvement curve
Every process has an efficiency frontier. The first 10% improvement captures the largest and easiest gains. The second 10% captures smaller gains at higher effort. By the fourth or fifth round of optimisation, the improvement per unit of effort is marginal, and the organisation is investing significant management attention in extracting small gains from a process that has been optimised to its structural limit.
The signal that optimisation has exhausted its potential: increasing effort and decreasing returns. When the last improvement round produced 2% gain at the cost of six months of management attention, the process has reached its frontier. Further improvement requires not optimising the process but replacing it.
The process is solving the wrong problem
A company that optimises its invoice-processing workflow to reduce the time from 15 days to 10 days has improved a process. A company that redesigns its billing to eliminate the invoice entirely (through automated billing, prepayment models or subscription arrangements) has eliminated the problem. The first approach makes the wrong process faster. The second approach removes the need for the process entirely.
The Redesign Test
In Northrop Management Private Limited's performance improvement work, we apply a structured test to determine whether a process should be optimised or redesigned.
Question 1: Has this process been optimised more than twice in the last three years? If yes, the easy gains have been captured. Further optimisation will produce diminishing returns. Redesign should be evaluated.
Question 2: If we were building this capability from scratch today, would we design it this way? If no, the process is a legacy that has been improved but not reconsidered. The zero-based question reveals whether the current approach is structurally appropriate or merely historically inherited.
Question 3: What is the theoretical minimum cost, time or resource requirement for this activity? If the current process operates at 3x the theoretical minimum after multiple optimisation rounds, the gap is structural, not operational. Closing it requires a different approach, not a better version of the same approach.
Question 4: Could this activity be eliminated entirely rather than improved? Some processes exist because of historical decisions, regulatory requirements or organisational assumptions that may no longer apply. Before optimising a process, confirm that the process itself is still necessary.
Question 5: Is local optimisation of this process degrading the performance of connected processes? If yes, the system needs redesign at a level above the individual process. Optimising one stage at the expense of others is not improvement. It is reallocation of cost from a visible location to an invisible one.
The Economic Comparison
The board should evaluate optimisation and redesign proposals using the same framework:
Optimisation: Cost of improvement initiative + ongoing cost of the improved process = total cost. Incremental savings per year = return. Payback period. Sustainability of the improvement (will the gains erode as the organisation reverts to prior behaviour?).
Redesign: Cost of redesign + implementation disruption + transition risk + ongoing cost of the new model = total cost. Total savings per year (not incremental, but the full difference between old and new model) = return. Payback period. Structural durability of the improvement (does the new model remain efficient without continuous management attention?).
In many cases, the redesign's total return over five years is three to five times the optimisation's, even accounting for higher upfront cost and implementation risk. The board that evaluates both on the same framework will make a different decision from the board that defaults to optimisation because it is easier to approve.
Ashish Chaudhary frames the transformation choice directly: "Some businesses do not need better processes. They need fewer processes. The 10% better trap is the assumption that improvement means doing the same thing more efficiently. Sometimes improvement means doing something fundamentally different, and the company that recognises which situation it is in will create more value than the one that keeps polishing the same machine."
Questions for the Boardroom
- How many times has each of our major processes been "improved" in the last three years, and are the returns from each round diminishing?
- If we built each major process from scratch today, would we design it the way it currently operates?
- What is the theoretical minimum cost or cycle time for our three most expensive processes, and how far are we from that minimum?
- Are we investing management attention in optimising processes that should be eliminated or redesigned?
- When was the last time we approved a process redesign rather than a process improvement, and what was the outcome?
Closing Implication
The 10% better trap is the preference for incremental improvement over structural redesign, driven by the certainty, speed and organisational safety of optimisation. It produces a company that is progressively more efficient at doing things that may no longer be the right things to do.
The escape from the trap is not abandoning optimisation. It is recognising when optimisation has reached its limit and redesign is the higher-return intervention. The signal is diminishing returns: when each improvement round requires more effort and produces less result, the process has reached its structural frontier. What remains is not a better version of the current system. It is a different system entirely.
