Punctuated and Incremental Change: The UK Water Industry

The punctuated-incremental change paradox is discussed. Four hypotheses regarding change choice are tested using a UK water industry study. Longitudinal, cross-sectional and case study analyses are combined to compare firms' performance. Contrary to previous research, punctuated change processes were often found inferior to incremental processes. Change management implications are explored.Punctuated change is usually defined as a discontinuity in organisational development and is traditionally associated with environmental turbulence; it is also associated with step changes in the performance of an organisation. We discuss the foundations of the punctuated-incremental change paradox, and lay out four hypotheses regarding the moments when such change is adopted and its economic effect. We explore these ideas through a study of the UK water industry: a contrived macro experiment. Our methodology has three dimensions combining cross-sectional and longitudinal analyses of firm performance with individual case studies. This approach, enabled by the simultaneous privatisation of the major firms in the industry, allows direct comparison across firms over time. It overcomes the production of confusing results associated with the adoption of either method alone and permits a more complete picture to be developed. We find that the response to privatisation was varied and that, surprisingly, punctuated change processes were often inferior to continuous processes. This contrasts sharply with the findings of Romanelli and Tushman (1994). We explore the reasons why our results are well founded and what it means for the central debate on change management.