Recipe for Success: How 3 Organization Design Principles Helped a Business in Crisis

Everyone loves a success story.  We like to root for the underdog and celebrate achievement.  Even through the business difficulties of the past few months, there have been some shining examples of business organizations that have succeeded by utilizing organization design principles. 

Prior to early 2020, the restaurant business in the U.S. was booming, and dining out had reached a zenith of cultural and societal significance.  By mid-March the restaurant industry had been rocked by the coronavirus pandemic and restaurant closures and layoffs now threatened the livelihoods of millions of people.  ABC News reported that by July, over 26,000 U.S. restaurants had closed, leaving 8 million restaurant employees out of work.  Most closed restaurants will likely never reopen.

In cities and towns across the country, restaurants have lost almost all of their catering opportunities and an estimated 90 percent of their revenue streams.  According to Rick Paz, a restaurateur and industry leader in Salt Lake City, “the toughest aspect of this was that virtually everything has been unknown, whether we’re talking about the long-term timeline of COVID impacts, public health and regulatory and compliance challenges, or the unknowns of our supply chain.”  

“In the middle of this fracas, I needed to find ways to survive,” said Paz.  “With tight profit margins and in-person dining limitations, we were hit with the disheartening reality of empty tables and customers staying away in droves.”

Three Organization Design Principles for Success in Crisis

Despite the odds, Paz’s restaurant survived where many others failed. The organization design principles that helped save this restaurant are relevant to any business going through a crisis.

Principle 1:  Preserving Competitive Differentiation

Competitive differentiation means clarifying what value your business offers and why it is different from other organizations.  Differentiation encompasses the ability of your team to precisely articulate how your company is unique in your market.  Competitive differentiation will include solutions you can offer your customers to set you apart and/or meet an unmet need. 

Preserving competitive differentiation is vital to any business, especially during a crisis.  Your strategy will describe how you will win, how your organization will differentiate itself, what will be offered, and what will not be offered.

In the case of the restaurant business, what had made Paz’s fine dining establishment so uniquely successful in the past was their amazing food and excellent customer service.  With that differentiation strategy in place, clearly articulated, and understood by their team, they were able to focus on taking the necessary steps to ensure they maintained their differentiated identity in their customers’ eyes.

Principle 2:  Ensuring Capabilities Support Strategy

Aligning an organization includes determining how the organization’s capabilities will drive the strategy.  As we point out in Mastering the Cube, a strategic capability is the power and ability to deploy a strategy – made up of dozens of processes, structures, systems, human resource practices, skilled people, and values, all interacting through an organization.   Capabilities may need to be developed by establishing groups to perform new work, create new processes, develop new jobs, form new vendor relationships, or find new ways to measure your progress.

Building capabilities starts with a willingness to look at things differently.  Human capital often needs to be repurposed in a powerful way to ensure delivery of products and services.  Some processes might need to be eliminated or changed, and a crisis like COVID-19 may demand swift implementation of the company’s strategy.  Such was the case for Paz, who helped his team think outside the box to develop new capabilities and then implement them quickly.

“Some of the capabilities we developed varied significantly from the traditional model of a fine dining restaurant, but we still adhered closely to our overarching strategy of providing amazing food and excellent customer service,” he said.

These new capabilities included the following:

  1. Changing the dining experience to allow people to order curbside or to have meals delivered.
  2. Replacing in-restaurant dining with customizable three-course dinner “bundles,” which were available for curbside pickup.
  3. Utilizing connections and business relationships in the community to seek opportunities to provide custom-tailored dining experiences.
  4. Re-purposing people as needed to facilitate each of the changes above.

Principle 3:  Understanding Trade-offs and Choices

Strategic alignment always demands strategic trade-offs.  With limited resources, business leaders must choose where value will and will not be offered.  Recognizing the third of our organization design principles will enable your organization to be smart about where you focus your resources and where you prune costs.  It is about making choices around people, data, processes, and/or technology in ways that will deliver unique value to your customers.

Business leaders know that there are always trade-offs when we look at new or different choices.  When considering the decisions to be made in order to align your strategy, it can be very beneficial to solicit and utilize data and input from your team; and you may discover ideas or choices that would not likely have been considered prior to the crisis.  In the case of Paz’s fine dining restaurant, the following choices increased their success:

1)   Simplifying the menu to decrease overhead expenses, while ensuring that remaining menu items were of the highest quality, therefore maintaining their differentiation.

2)  Creating prix-fixe items to allow customers to reduce their spend while enjoying the restaurant’s unique offerings. 

The future becomes much more promising when a leader uses organization design principles to align business strategy, establish the right capabilities, and implement creative changes.  Refining the differentiated business model can be the key to saving jobs and surviving a crisis.  

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