Using ‘Run-Grow-Transform’ to Change Your Business
We’ve all done it. Maybe it was for a New Year’s resolution. Maybe it was for a birthday. Maybe it was even at the beginning of fall. But we’ve all decided to simultaneously be more productive at the office, lose weight, exercise more, eat healthfully, get more organized, save money, keep the house clean, spend more time with the kids, listen to NPR, and get involved with the community. Chances are, by trying to change so much at once, we failed utterly at all of them.
Instead, you may have found that what worked was to change your diet one month. When that habit got ingrained, then you added exercise. In the process, you lost weight. And so on. By changing just one thing at a time, you succeeded.
Similarly, it’s not unusual for companies to try to change many different things at once. They might try to sell more, achieve higher customer satisfaction, streamline business processes, and upgrade all the software, all at the same time. Needless to say, this doesn’t work any better with companies than it does with individuals.
At the same time, you want to keep track of the things you’re going to want to change later but just haven’t gotten to yet. Otherwise, you could have great intentions for the next thing you plan to change, and then forget all about it as you struggle with the day-to-day issues of keeping the network lights on.
That’s where Run-Grow-Transform comes in.
According to Gartner, which popularized the concept, here’s what the three words mean in this context, writes Richard Hunter, vice president and Gartner Fellow in Gartner’s CIO Research Group.
- Run: Carry out essential enterprise activities that do not connect directly to a particular customer segment (or, to put it another way, to a particular revenue stream)
- Grow: Enhance business performance in established markets serving established customer segments with established value propositions
- Transform: Enter new markets with new value propositions for new customer segments
The Run-Grow-Transform model is also useful for budgeting, writes Karim Vaes in his blog. “Run covers the general day to day expenses of keeping the IT infrastructure running,” he writes. “Grow covers the expenses for expansion of services or growth of the company. Transform covers the costs that are made to change your nature.”
“According to Gartner, companies on average spend 66 percent of their IT budgets to run the business (maintain IT systems) and they spend the rest on growth or transformation projects,” writes Mehmet Erdem in Hospitality Technology. “The ideal, according to Gartner, is a 50/50 split, but achieving it isn’t easy.” For example, even though the hospitality industry has been focusing on using technology to improve guest satisfaction, hotels report that they are still spending 53 percent of the total IT budget on running the business, 29 percent to grow the business, and 18 percent on transformative projects, he writes.
At the very least, any approved budget should include all your Run items and at least some Grow items, Vaes writes. “This part of the budget is in reality the minimal level you need to stay on par,” he writes. “A lower level will force you to start phasing out services from your service catalog!” Cutting Run items could introduce operational risk such as a server failure or a security breach, he warns.
But it’s also important to include more than just “Run” items in a budget. “It’s hard to innovate when most of your money goes toward keeping the lights on,” writes Erin Carson in ZDNet, noting that just day-to-day operations can take up more than half the budget. “The money that’s going towards doing the bare minimum is money that can’t go toward innovation.”
Ignoring the run-grow-transform model can also end up limiting the potential growth in your own job, Florida State College CIO Chris Markham relates in CIO Insight. While many organizations are starting to look at the CIO as the chief innovation officer, focusing too much on the day-to-day “run” aspects creates the risk of pigeonholing the CIO as chief infrastructure officer. “CIOs that don’t effect change are never going to embrace the Gartner strategy of run-grow-transform the business,” he says. “Some will choose to simply run the business, and you really need a good balance of all three.”
Run-Grow-Transform, like any other model, isn’t a panacea, nor is it the One True Way. If you’re using some other method that ends up with the same basic result, there’s no reason to change. But if it feels like you’re busy all the time just trying to keep in the same place, it can be a beneficial way to help the company grow.
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