There is a truism we quote frequently in our business: organizations are perfectly designed to get the results they’re getting. Organizations that are properly aligned with their growth strategy typically meet their expected goals. However, when organizations struggle with growing pains, it often indicates gaps between how the organization is designed and its growth strategy.
One company that has received considerable media attention in recent months is Peloton, which markets stationary exercise equipment and remote fitness classes. The home-based exercise industry was already growing before the COVID-19 pandemic accelerated demand. In 2020, Peloton’s value more than quadrupled to $40 billion as home-bound customers flocked to its goods and services. Company leaders realized in March 2020 Peloton would have a banner year, as stay-at-home orders closed gyms and more people were confined to their homes, Bloomberg Businessweek reported. Third-quarter revenues in 2020 tripled over the prior year. By early 2021, the company had sold more than one million exercise bikes and treadmills and memberships totaled 3.6 million.
However, the company’s explosive rise to the top of its industry also brought growing pains. The New York Times reported that skyrocketing demand overwhelmed Peloton’s overseas manufacturers, its international supply chain, and its domestic shippers. Those factors led to extensive delays in delivering products to customers. Peloton continues to work on these supply chain logistics, delivery delays, canceled orders, and customer service issues, but they have threatened its future growth and potentially damaged its brand.
Could something have been done to help Peloton be ready for the influx of demand that it is now experiencing? From an organization design standpoint, Peloton’s experience raises some important questions. The answers to these questions can ensure your organization anticipates and plans for the impact of a successful growth strategy:
- Who is looking ahead and anticipating negative outcomes of growth?
- Whose job is it to plan for and address organizational threats or gaps?
- What approaches, tools and methods can an organization deploy to address possible gaps where there might not already be a process in place?
For Peloton, what steps could have been taken in advance to prepare for the growth it encountered? Two years ago, no one anticipated the COVID-19 pandemic, nor the global disruption that has followed. However, the at-home exercise market was already booming in the late 2010s and Peloton’s popularity was rising. The company introduced a new exercise bike, cut prices on its existing models, and added new streaming classes in 2020. It was positioning itself for growth (although perhaps not at the rapid rate it was achieved).
With an eye towards future expansion, whose job was it to see the organizational risk signals related to its growth strategy? Was someone charged with bringing the organization’s attention to the deficiencies that were apparently already in the works and prevent Peloton from falling behind? This question comes down to ownership. We might assume that somebody did not do their job. However, it is more likely that it was not crystal clear whose responsibility this was. John probably thought Jill was doing it; Jill thought John was doing it. Now the company faces record sales while disgruntled customers ask, “Where’s my bike?”
Once we identify who will take ownership, how does the organization build and design what it needs to move forward? This issue illustrates why having a good organization design approach including tools and trained facilitators makes sense. Maybe we have internal staff members who are skilled or can be trained to help support the initiative. Perhaps we could access good external facilitators who can help redesign the organization. Either way, the goal is creating a working model that addresses the key components of the organization (strategy, structure, processes, metrics, staffing, culture, leadership) that need to be set up and aligned to the growth strategy. This is not intended as criticism of Peloton, but a simple case study of how a growth strategy can place outsized demands on the organization and its capabilities.
Now that someone is thinking about organization design, how do they accomplish the redesign? They need the right tools and processes to create an aligned organization. This scenario calls for a springboard such as our Cube Model that facilitates organizational transformation by making sure all the major components are identified and aligned.
Organizations of all types confront these kinds of organizational misalignments and gaps. Peloton is under the microscope today because it is trendy and popular, and it has encountered some notable challenges. But it is certainly neither the only nor the last organization to encounter an organizational gap that it won’t be well equipped to address. A few years ago, United Airlines’ customer service faced similar scrutiny. We could go down a long list of organizations and find many more examples.
The Peloton case illustrates a central challenge facing leaders of all organizations. How do you anticipate the impact of your growth strategy on your organization – particularly rapid growth? How you anticipate, plan for, and react to those changes will go a long way towards ensuring your organization’s continued success as it grows.