"Restaurant responsiveness in times of crisis" - making strategic decisions and implementing them in day-to-day business operations in a short time and with reduced resources -

"Restaurant responsiveness in times of crisis"

- making strategic decisions and implementing them in day-to-day business operations in a short time and with reduced resources -

author: Enrik Gjoka

Introduction

The aim of this project is to develop rapidly and in a structured way the adaptability of the catering sector.

  One of the critical factors for a company is its ability to react and adapt to changing environments, especially when dealing with a crisis as complex as the present one. These forced changes of direction represent crucial moments in the life cycle of an economic activity. It is essential that these changes take place according to a strategic process restructured and internalized in a short time.

  Facing the consequences of the crisis in the restaurant sector (my daily work), I realized that difficult moments and complex situations, such as the present ones, cannot be overcome with buffer solutions or with ordinary tools.

  Only Decision Making and Problem Solving skills are insufficient to deal with a sprawling crisis that evolves quickly and unpredictably. Even making use of the theories on organizational resilience and the various tools or methodologies inherent to it such as Enterprise Risk Management (ERM), Business Continuous Management (BCM), Supply Chain Resilience Assessment and Management (SCRAM), etc., I realized that they are quite ineffective when it comes to measuring and mitigating the systemic risk associated with the occurrence of unlikely and difficult to predict events (black swans) and during chain stop and go / up and down like those we are suffering in this period. Processes such as ERM and BCM can help to avoid disruptions in production capacity, but they also have some rather serious limitations: are almost entirely aimed at the mere identification of the risk and its prevention but do not lead to a rapid restoration of normal business activities.

  What I needed was a practical method for analytically defining strategies/tactics of adaptation/change and for the structured application of these decisions in business operations. Furthermore, this tool had to give me the opportunity to:

• update and adapt rapidly the strategic and tactical choices based on the change in the context caused by the evolution of the crisis;
• transform strategic and tactical choices into a concrete and easily practicable operational plan;
• execute such a plan in a short time and with the few resources available.

At this point I tried to make a conceptual synthesis, amalgamating various analysis systems and planning models, in the focus of Lean Management, with the aim of developing a lean method to make quick strategic choices (adapting to the context and situation in which the company operates) and implement these choices profitably, optimizing time and resources. The method further synthesizes and develops tools such as Risk Management, Business Continuity Plan, Rings Framework for Strategy Development, etc. combining them with the theory of organizational resilience through a reactive and concrete approach from the operational point of view. This mode of reaction is suitable in situations where time is tyrannical and where concrete actions are needed that produce positive results in the short term.

 

 

Figure 1.  The Business Reactivity Cycle (BRC)

 

To begin, I carried out (1) the Strategic Analysis of the situation and context in which the restaurant company operates in a SWOT analysis key. Then I adjusted (2) the Business Model to the emergency considering the results of the strategic analysis. Consequently, the revision of the Business Plan to convert the Business Model vision into strategic choices and tactical options has become mandatory (3). I preferred to use Porter’s Value Chain (a version previously adapted to the restaurant industry) to (4) map the actions defined by the Business Plan and turn them into an operational plan. I designed the operationalization of the plan as a (5) executive cycle by implementing the operational plan, measuring the results achieved, analyzing the deviations between the budget and the final balance, and taking the necessary corrective actions. The analysis of deviations leads to a review of the new business situation and, in case of significant deviations, would bring us back to the module (1) Strategic Analysis, thus closing a cycle that I would like to define as the Business Reactivity Cycle (BRC).

  I say reactivity (understood as adapting to a constantly changing situation) and not renewal because every now and then I used strategies, techniques, and tools outdated or disused but that have regained value because of the current situation. Returning to the traditional working methods does not mean going back but using tools already tested and that guarantee the achievement of the desired results.

  I designed the cycle as a concrete means that allows you to connect one module to another in a constructive and profitable way. I designed the cycle as a concrete means of connecting one module to another in a constructive and profitable way. I will try to avoid going into particular theoretical details and to explain in detail the analyses and models that make up the five modules. There is a great deal of literature on this subject and I will occasionally give advice on the texts that I consider most complete. My goal is to better explain the concatenation and the connection between the modules and how to make this relationship useful and profitable.

  To streamline the cycle path, I would suggest using all the documentation already in the company's possession, making adjustments and changes only where necessary. Drafting from the scratch documents such as Business Plan, SWOT analysis, Operational Plan, etc. would lead to a waste of time and resources. In addition, the depth of these analyses and adaptations depends on the size of the company, the time available, and above all, the size of the team that will deal with it.

  Let us now examine in detail the composition of each of the modules, making examples (taken from the restaurant sector) where possible (we must also consider industrial/business secrecy) to simplify the understanding and use.

 

1. Strategic Analysis

The Business Reactivity Cycle begins with the Strategic Analysis in a SWOT analysis key (strengths, weaknesses, opportunities, threats), through which information are obtained that gives rise to the basic strategic orientation. This, in turn, being intrinsic to the business model and the business plan, is useful for identifying and implementing strategies.

 

 The investigation components of the strategic analysis are:

• analysis of the macro-market or macro-environment;
• analysis of the competitive environment or micro-environment;
• analysis of the company’s internal resources.

 

 

Figure 2.  The Strategic Analysis Module

For further information I would recommend the text of Robert Grant "Strategic analysis for business decisions".

  As a tool to carry out the analysis of the macro-market or microenvironment I chose the PESTLE analysis, highlighting the changes induced by the crisis in the following environments:

• political (situation of uncertainty, sudden and unforeseeable changes, etc.);
• economic (slowdown in economic growth, decrease in average expenditure, etc.);
• socio-demographic (change in habits of travelling, evening outings concentrated on the weekends, lowering employment levels, etc.);
• technological (digital menu, online reservations, etc.);
• legal (sudden decrees, ordinances and anti-Covid regulations, etc.);
• environmental (reduction of pollution causing reduced travel, etc.).

For the analysis of the competitive environment or microenvironment I used Porter's Five Forces analysis:

1. rivalry among existing competitors;

2. potential of new entrants into the industry;

3. bargaining power of suppliers:

4. bargaining power of buyers;

5. threat of substitute products;

For each of the 5 forces I noticed and highlighted changes, novelties, behaviors, and I began to write down any strategies and tactics of reaction.

  Internal resources are generally classified into four categories: physical resources (plant, equipment, sites, brands, logos), human resources (skills and knowledge of employees), organizational resources (culture and routines) and intellectual resources (company know-how, patents, etc.). The Resource Based View and the VRIO framework are the tools I preferred to use in a complementary way for their analysis.

  Through the Resource Based View I have identified those resources, skills, and competences, which can represent a source of sustainable adaptation for the company. I have integrated the results through the VRIO framework, which analyzes the strategy of internal resources and therefore, the relative ability to generate sustainable adaptation, identifying the essential attributes of the resources able to generate it.

 

2. Adaptation of the Business Model

The Business Model describes how a catering company generates value for its customers and turns that value into revenue. For the adaptation of the Business Model, you can use different schemes.

  The Business Model Canvas (by the way, I highly recommend the text "Business Model Generation" by Alexander Ostervalder and Yves Pigneur) is structured in 9 blocks:

1. Customer Segments;
2. Value propositions;
3. Channels;
4. Customers Relationships;
5. Revenue Stream;
6. Key Resources;
7. Key Activities;
8. Key Partnerships;
9. Cost Structure.

“Luigi Bocconi” University of Milan has revised Ostervalder’s model as follows:

1. Offer = Value offer;
2. Customers = Market segmentation + Channels + Relationship with customers;
3. Infrastructure = Key Resources + Key Activities + Key Partnerships + Strategic Partnerships;
4. Financial soundness = Cost structure + Revenue flows.

The elements of Vittorio Coda’s business model are the following:

1. System of offer;
2. Target market;
3. Necessary structure;
4. Information and communication policies;
5. Competitive environment;
6. Operating model;
7. Financial model.

This business model does not consider human resources, relegating this task to the Business Plan, the Business Model Canvas instead does not devote a space to competition.

 

 

Figure 3. Our Business Model Canvas Processing

 

Since I consider fundamental the human resources for alabor-intensive company (like those of the catering) but on the other hand I consider the analysis of the competitive forces’ indispensable for the strategic vision of an enterprise, I resolved it all adding the block "competitive environment" to the Business Model Canvas (dividing in two the block "Value Offered"). It is a personal choice; you can add the "Human Resources" element to the Coda’s model or the "Competition" item to the Bocconi’s model.

  The Business Model describes the logic with which an organization creates, distributes, and captures value (as Osterwalder defines it) synthesizing the set of corporate objectives in a strategic vision and transforming the latter into market positioning.

  To speed up the adaptation of the Business Model I used an existing file modifying objectives and decisions for each block based on the results of the strategic analysis. There was no need to apply significant changes in blocks 1, 7 and 8. By contrast, blocks 2, 4, 6, 5 and 9 absorbed more time and effort than expected.

 

3. Review of the Business Plan

The business model describes how the company positions itself within the value chain of its industry and arranges relationships with suppliers, customers, and partners to generate profits. The Business Plan translates this positioning into a series of strategic/tactical actions and quantifies their economic and financial impact over time.

  The Business Plan, however well done, is just a snapshot of a business model. In essence, the Business Plan indicates how much is necessary, in terms of assets, timing and budget, to put the business model into practice. It follows that the best suggestion is to revise it only after adapting the business model. The text by Cinzia Parolini, "Business Planning", dedicates a chapter to the transition from the business model tothe Business Plan (in case you would like to deepen), however the literature on the subject is very wide and you can find different structures or different schemes in other texts.

  At this point I had the necessary for the review of the Business Plan, which was structured as follows:

1. business summary;
2. the enterprise, the business team and key positions;
3. the target market;
4. competition environment;
5. supply markets;
6. the bidding system;
7. the marketing plan;
8. the technical-industrial, R&D, logistics and commercial structure;
9. organizational aspects;
10. network;
11. legal aspects.

To speed up the review of the Business Plan I used an existing file retouching the strategic choices and tactical decisions for each chapter based on the changes of the Business Model. I quickly flew over the first two chapters and focused on the salient features of the remaining, retouching and correcting only where necessary.

  As far as strategic choices are concerned, I would suggest developing more than one, defining the tactical choices that follow and drawing up the corresponding operational plans. In case it does not work the first one would immediately pass to the following strategic action optimizing in this way the reaction timing. Just having a strategic choice will lead to an executive block in case this does not work.

 

4. Mapping of Actions

At this point I found myself with a considerable amount of data, objectives, strategies, and tactics. To orient myself in their implementation and turn it all into actions with measurable results I used Porter’s Value Chain.

  The Value Chain is a model theorized by Michael Porter in 1985 that allows to describe the structure of a company organization as a limited set of processes or activities. The Value Chain allows you to represent all the activities carried out by the company to acquire, design, produce, sell, deliver and assist its products/services and reflects the vision and strategies of the company.

  The original Porter’s model is mainly suitable for large companies that deal with the production of goods. For its use in catering companies (characterized by simultaneous production and sale of the product/service) I had arranged for its adaptation in 2016 and used it as a reference scheme to map strategic and tactical choices and turn them into actions of an operational plan.

 

Figure 4. Our elaboration of Porter (1985) and Della Corte (2009)

 

The term "chain" indicates that the Value Chain is not a succession of activities that are independent and isolated from each other, and the activities, although analyzed separately, are linked in a way that depends on the context, the history, peoples, and strategies of the organization/enterprise. For the same reason, a change in one of the areas of the Business Model applied to a specific primary or support activity can have a transversal effect on the entire Value Chain.

  For each of the activities I initially listed the aspects of the Strategic Analysis, the objectives of the Business Model and the strategic/tactical choices of the Business Plan inherent to its operation. Subsequently, I compared this list with the current performance of the activity, and I compiled the list of operational actions related to it. As a final step I considered the cascading effect of each action on the other activities.

  I will give an example to explain myself better. In the programming (or better, reprogramming) of the menu I kept in mind:

• the results of the PESTLE analysis (macro-market analysis) to understand how the market has changed;
• the results of the analysis of the Porter’s Five Forces (analysis of the micro-market) in order to know the reaction of the competitive environment;
• the change of the system of offer (based on data, objectives, strategies and tactics extrapolated from the Business Model and the Business Plan).

Later I looked at the menu still in use to understand which dishes were in line with the changes listed above.

  I continued with the drafting of the actions to be taken, for example:

1. adapt the menu to the Italian clientele considering the decline in tourist presence;
2. reduce references and design plates based on the same raw materials to streamline the need for raw materials;
3. in view of the economic uncertainty, the decline in purchasing power and the decrease in the average level of expenditure, lower prices to maintain competitiveness on the market.

  Subsequently I proceeded with the evaluation of the cascade effect generated by each action, for example:

1. the adaptation of the menu to Italian customers will affect the methods of communication and consequently the marketing activity at an induced level and CRM (Customer Relationship Management);
2. the decrease in references will affect purchase costs (decrease in the need for raw materials) and labor cost (decreasing references helps to decrease the volume of work in the kitchen) and consequently will affect the procurement of raw materials and warehouse management, food processing and preparation & food cost control, and administration, accounting, and finance.
3. etc.

Once the mapping of the actions has been completed, I have compiled a synthetic list of operational actions for the following reasons:

• to avoid duplication, conflict or overlapping of actions;

• to easily sequence the implementation of actions based on their importance and priority;

• to identify the departments involved in the implementation of each action and those responsible for implementation for each of them.

• to have the possibility to review or discard the actions that do not produce positive results without risking to consider them again (this can happen when the analytical phases repeat and overlap or when the list of actions is particularly long).

After the sequencing of the actions and the attribution of responsibility, I defined the implementation times, thus completing the operational plan. In the case of numerous actions to be implemented, I would recommend organizing the operations via PERT diagram and Gantt chart.

 

5. Executive Cycle

 

Figure 5.  Extended Cycle of Business Reactivity

 

I conceived the Executive Cycle module as a cycle within a cycle, consisting of four sub-modules as follows:

5.1. implementation of the operational plan;

5.2. measurement of results - verification action;

5.3. gap analysis - direction review and readjustment through the executive cycle or retracing the Business Reactivity Cycle (BRC);

5.4. corrective actions.

After the implementation of the operational plan, a verification action is required, measuring the results achieved (through the main Key Performance Indicators - KPIs) and an analysis of any deviations between the expected and current data. Based on the thickness of the deviations, we proceed with a direction review, evaluating whether to continue with corrective actions remaining within the Executive Cycle in the event of slight deviations or retrace the Business Reactivity Cycle (passing to the 1st module of the Strategic Analysis) in case of significant deviations. This conceptualization of the Executive Cycle allows maximum flexibility both in the implementation of the operational plan and in the direction review and involves significant savings in terms of time and resources involved. 

  The Business Reactivity Cycle creates resilience only if the modules that compose it come together harmoniously: excessive separation would lead to the collapse of the system, while excessive bonding would result in the loss of adaptive capabilities.

 

Closing consideration

As you can see, the path of the Business Reactivity Cycle requires a considerable amount of energy both in physical terms and in terms of intellectual effort. Personally, I used the company’s most important asset, the Team.

  I shared with colleagues and collaborators the weight of the situation by deciding together objectives, strategies to reach them and the action plan. Those who know me or have worked closely with me know that I apply the principle of "shared decision making" with conviction, as it facilitates the understanding of the strategic vision and the implementation of the operational plan, minimizing resistance to change, the errors during the implementation of the plan and the times of implementation. The adoption of the "shared decision making" broadens the base of know-how and the necessary experience drawing on the skills and competences of the entire team. This sharing generates motivation and at this difficult time I consider motivation to be a key factor for economic and social recovery.

  Good work to everyone.