There is now considerable controversy concerning the role that incremental change plays in the process of organizational transformation. Some scholars assert that incremental change is the primary source of resistance to more radical re-orientations, while others argue that on occasion, ongoing incremental change can produce dramatic transformation. To help reconcile these competing perspectives, in this paper I report the results of an inductive study of one firm's successful attempt to improve continuously and incrementally its core manufacturing process. The principal results of this effort are: (1) to challenge the current view of the source of change in process-oriented improvement initiatives; and (2) to offer an alternative characterization of the mechanisms through which competence-enhancing, incremental change actually occurs. The theory emerging from this analysis provides one path to resolving the dilemma posed by incremental change processes that can, on occasion, produce organizational transformation, but more often limit the organization's ability to adapt to its environment.MIT Center for Innovation in Product Development under NSF Cooperative Agreement Number EEC-9529140