The golden strategy of stacked ‘marginal profits’

In 2008, the British cycling team stunned the world by dominating their rivals at the Beijing Olympics: 14 medals in total. Eight gold. How did they achieve such a remarkable feat? It wasn’t groundbreaking technology. It wasn’t an intensive new training regime. It was something much simpler: the aggregation of marginal gains.

In the years leading up to the competition, Sir Dave Brailsford, the team’s coach, calculated that to be competitive, he simply had to string together multiple 1% improvements in every element of his players’ equipment, their endurance and their physical strength. So the team redesigned bicycle saddles. They tweaked the design of the wheels. They tinkered with bicycle frames, swapped out skin suits, tried new diets, thickened their thighs and made dozens of other small adjustments.

The key word here is small: no single change was significant on its own. However, adding all the small changes together — and adding them up over time — produced results. Exceptional results. Great Britain has the most track cycling medals in Olympic history.

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“The whole principle came from the idea that if you break down everything you can think of that is needed to make a bicycle and then improve it by one percent,” Brailsford later said, “you get a significant improvement when you add them all up.”

This concept—what Brailsford called “the aggregation of marginal returns”—represents the idea that small, incremental changes add up to create significant results over long periods of time. The idea isn’t limited to sports, of course. It’s a principle that can (and should) be applied to business and investing.

Unfortunately, that’s rarely the case. When organizations and management teams are struggling, they tend to shy away from the idea of ​​making small adjustments. When there’s pressure to perform in the short term, the typical corporate playbook involves making sweeping, large-scale changes: mass layoffs; canceling product lines; a new CEO who completely changes strategy. On the surface, these big changes can feel productive. They can even Good. But very often these big changes turn out to be short-sighted, and lead to equally big blunders.

This is the reality: as management teams Actually If you want to play the long game, big changes can often be counterproductive to progress. Ironic, huh? Small changes may seem superficial — or even annoying — but stringing them together consistently over time can yield incredible results. This is the power of compounding.

The fact is that it is not entirely our fault that we behave the way we do. Biologically speaking, our brains are not programmed to always optimize for the best long-term decisions. Take, for example, a 2004 study by researchers at Princeton and Harvard that investigated the emerging field of neuroeconomics. Participants in their study—college students—were given two choices: take money now, or get more money later. It’s a simple study, yes. But it had a twist: While the students were making their decisions, the researchers were monitoring their brains using fMRI scans. And what they saw were literally multiple brain regions lighting up—in conflict.

“Our emotional brain has trouble imagining the future, even though our logical brain clearly sees the future consequences of our current actions,” Harvard University economics professor David Laibson later said. “Our emotional brain wants to max out the credit card, order dessert, and smoke a cigarette. Our logical brain knows we should save for retirement, go for a run, and quit smoking.”

In business, it is possible to use a logical brain approach that aggregates marginal gains over the long term. For example, the best products are almost never made all at once. They are the result of countless iterations, each one slightly better than the last. Think of all the products you use every day, from your smartphone to your car. Each product has likely gone through hundreds, if not thousands, of small revisions, even if they are imperceptible to the human eye.

Some of the world’s most influential inventions have gone through long periods of small improvements. Take the telegraph. In popular lore, the telegraph was simply “invented” by Samuel Morse in the 1830s. However, this is only half the truth. In reality, the concept for a long-distance communication device had been in development since the 1700s. Several inventors laid the foundation for a type of device that used electrical wires. Despite these early efforts, it took decades of refinement and innovation before the telegraph was reliable and practical enough for widespread commercial use. In other words, it’s a long road from concept to commercialization.

This speaks to a broader point: innovation or business strategy isn’t necessarily about finding that eureka, “aha” moment. It’s about the years of tweaking and tinkering that follow an initial idea. This concept applies on an individual level as well, whether you’re an executive or investor charged with building or leading an organization.

Back to the sport, let’s focus on Roger Federer. Federer, one of the best tennis players of all time, is known for his particular obsession with small improvements in his game. Over the years, Federer has tweaked his footwork by a fraction of a second. Or refined his serving technique. The most impressive thing for me, however, is simply his life span as a tennis pro: 24 years as a professional in a sport where the average player rarely stays in the game longer than 10 years. And it all came down to his approach of accumulating marginal gains over time.

For example, in 2014, Federer was at the height of his fame — but in a mid-career slump. He was still ranked in the top 10, but he hadn’t won a Grand Slam since 2012, and at age 33, the media was already lamenting his inevitable demise. “Federer is not going to be a better player now than he ever was,” one sportswriter noted in 2014. “He may not be able to stop the decline at all.”

But Federer didn’t give up. He made subtle adjustments, like switching racquets from a 90-square-inch frame to a prototype 97-inch one. This small adjustment allowed him to hit harder topspin backhands. He focused on his footwork. He watched the footage. And then, in 2017, a funny thing happened: He won two major Grand Slam tournaments at the ripe old age of 36. In 2018, he was ranked No. 1 (ATP) player in the world.

Companies can learn from Federer by focusing on his consistency and tenacity. It’s not just about making big moves, it’s about making small changes — incremental improvements — day in and day out. This discipline is what leads to sustained success and compounding over time. The aggregation of incremental gains, when applied correctly, can transform a company’s fortunes — and ensure its success for decades to come.

So, take it slow, focus on the details and play the long game. The compound effect will take care of the rest.