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11/11/2014 ‘Differential Growth’ – This USED to be a successful transformation model | Transformation Hydraulics

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Transformation Hydraulics

THOUGHTS ON BUSINESS STRATEGY, AND HOW TO MAKE ITWORK. BY NICOLAS SCHOBINGER.

A growth business provides formidable mechanisms for transformingan organisation. By allocating overproportional growth resources tothe ‘new’, you will gradually dilute the ‘old’. I call this: differentialgrowth.

The problems start when growth no longer happens.

But, before we go there, let’s examine how differential growth works. Iwill use a professional services business in technology as an example.It has projected revenues growth of say 5% annually with 10,000professionals on board and an attrition rate of 10%.

By applying the concept of differential growth, hiring (the net of newand replacement employees) should occur in the segments you want

‘Differential Growth’ – This USED to be a

successful transformation model

Nov

01



to transform. During a typical threetofiveyear strategy cycle, you

will dilute the ‘old’ in a way that the ‘new’ will represent up 40% of the

total after three years, and 60% after five. No pain, no noise. It just

happens mechanically.

Transformation success in that model is maximized. There are no such

things like change resistance if you make the correct newhires.

But this model of differential growth does not work anymore for manybusinesses I’ve been talking to: They lack the underlying growth. The

concept needs a CAGR of at least 4+% and an attrition of 7+%. Thenexus in Tech (mobile, realtime, cloud, social) and the economic

environment are the key reasons why differential growth is notapplicable anymore.

So what can you do? In normal times one would have a few options at

hands:

1. Hire: Hire the ‘new’ into the organization (e.g. differentialgrowth)

2. Reskill/Redeploy: Train/redeploy resources so

they become the ‘new’3. Replace: Force attrition to make room for hiring the ‘new’

The first – most elegant – option has currently limited impact for the

reasons stated above. The others all have some commonalities which

make your job as a transformation executive more challenging: High

costs, organisational pain, and some expected noise. The risk is that

your transformation gets a connotation of a restructuring.



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It takes an adaptation of your toolbox and a lot of mobilisation to givepurpose to your transformation. Providing vision and preparation forwhat impacts the customers, organization and/or the individualemployees will face is of essence. These aspects are too oftenforgotten when the pressure mounts.

Transformation success is more than ever dependent on your boldnessand stamina in driving these things across the business.

Follow me: Twitter | LinkedIn | Xing |

Copyright 2014 Nicolas Schobinger. All Rights Reserved.

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