A Model for Growth

Recently, I have been having a lot of conversations about business transformation. The question that keeps coming up is how best to navigate through a company’s growth process (as defined by many criteria such as: increased revenue, number of transactions, people, etc) without destroying culture or base capability – How do you blend the old with the new?

Determining the right way to change is part intuition, part experience and part risk tolerance.

In fact, this is an issue that we here at M Corp are continuously talking about. We have been managing considerable growth for many years, not only from a revenue standpoint, but also geographically and structurally, but we are the first to admit that we are – and probably always will be – a work in progress.

A simple model

Regardless of the stimulus for the transformation, whether it be externally or internally imposed, I have always struggled to get my point across on what that looks like in a way that everyone can grasp. So, I have been reverting to a model I built about 20 years ago when I did my first startup and had to communicate how we were going to be successful in our next iteration.

castro-model-growth-01
The amount of past you “keep” will affect your rate of change, and the amount of risk involved while making those changes.

The idea is actually pretty straightforward. To get to the next evolution of where you are going, you can’t bring all of the past with you – but you better bring that which is good, that which makes you valuable to the market today. This means there are elements of your business (people, processes, technologies) that have to go away, to put it in a very indelicate way.

The overlap between where you are today and where you go tomorrow is what you keep – though often you have to make enhancements to those things too if they are to support the new model. The rest is ALL new, and THAT is the scary part.

The past, the future

Think in terms of what happened when the car took over from the horse and buggy.

horse-vs-car

The driver stayed, so did the passengers, the seats got better, the roads got better, but the horses went away, so did the whip makers, and a few others (like farriers and feed stores) saw a marked decrease in demand.

Change is elastic

The model (let’s call it the ‘Castro Model’ for entertainment value) is elastic. If you slide the new box too far up the growth curve, it will require the invention of your company or government department to change drastically. You are betting the ranch that the new business will see near-term success. This radical of a shift can introduce a tremendous amount of risk into your growth model, but sometimes, when you need a disruptive shift to increase momentum, this can be a good thing. It can accelerate the amount of growth that the new iteration generates. Clearly, this is the risk and reward model.

castro-model-growth-02
Less overlap of old and new (upper sketch) allows for faster change. More overlap (lower sketch) will limit your growth, and be less risky.

Alternatively, if you have a huge overlap, meaning you keep a lot of what was there before, your growth will be limited. There might not be enough of a change for the market to notice, and this slows down the benefits. But, it can be more comforting to your existing team, and can show them that future changes won’t be as scary or risky as they feared. So, maybe this is a baby step before a bigger step? It limits the effectiveness of the next step, and you have to go into that with eyes wide open.

A lot of times, I have the conversation about ‘well, we did all this stuff but only got this far’. Well, this is why – you didn’t fully discard what was no longer useful. Unfortunately, this can cause the organization to revert back to old habits and the old model.

Hesitance is normal, and in some cases, smart. It is possible to inadvertently lose something if you aren’t careful.

I see this in our consultancy with legacy modernization clients. They want a brand new system, but don’t want to give up the old way to doing things. Often, this is criticized by advocates of transformation – but the hesitance is normal, and in some cases, smart.

It is possible to inadvertently lose that which is essential if you aren’t careful – the business rules, the data, and the metadata that supported your core business must be understood and in many cases, even retained, even if you implement new processes and technology. But, if an organization is too resistant, by the nature of the ‘Castro Model’ it is clear that the amount of gain will be nominal, even though the expense or pain of transformation remains constant. This is where the value generated by this can be questioned.

Balance is key

The trick is picking the balance of what is going to give you the best results for where you are in your transformation. Too much movement at the wrong time up the growth curve will introduce massive risk, but maybe that’s the right move? Not enough discarding the old minimizes the amount of growth, and that might be the incremental step you need. There is no set recipe and frankly, determining the right way to go is part intuition, part experience and part risk tolerance.

Just keep in mind how much and how quickly you want to grow directly impacts how much you have consciously discard to get there. There are all kinds of catchy phrases™ I could plug in here, but will spare you.

Either way, recognizing the cause and effect through this model can help structure the base conversation for how to move forward, and these first conversations will get the ball rolling.

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