Efficiency Won’t Keep Your Business Alive

Danny Meyer isn’t planning to reopen his restaurants “for a very long time — probably not until there’s a vaccine,” he told Bloomberg last month. “There is no excitement on my part to having a half-full dining room while everyone is getting their temperature taken and wearing masks, for not much money.”
The business models of restaurants like Meyer’s — along with retail stores, gyms, airlines, hotels, and beauty salons — are going through the Great Inefficiency Reckoning. Even when Meyer’s restaurants open, they will likely operate at a 50% reduction in capacity. We’ll probably see a similar reduction in capacity across a number of industries.
The drive for efficiency shapes how we work, live, and entertain ourselves. Open office plans, despite their association with free-flowing collaboration and kombucha taps, have been a prime efficiency tool to pack in as many people per square foot as possible.
Businesses perfected cost-effectiveness at scale. Because of this, certain industries like retail started over manufacturing. Airlines, in order to make each of their trips as efficient as possible and to squeeze more money from passengers, started offering the growing à la carte menu of auxiliary services, like checked bags, legroom, meals, and pillows. Low-budget airlines also ran ridiculously short routes in the name of efficiency: A fifth of the European market last year was made up of flights of less than 300 miles.
Across industries, companies have long aspired to stay lean to keep profits high. No one wanted cash sitting in their balance sheet or inventory sitting in their warehouse. But now they are learning the value of inefficiency in real-time. Here are four of the biggest de-efficiency shifts we’re seeing across industries, as companies reevaluate their strategies in the wake of the pandemic.

1. Despecialization

For efficiency purposes, mass production divides tasks into simple, routine categories based on functional specialization. Every employee is responsible for what they are hired to do and what’s expected of them. This model still largely applies, even in creative industries like advertising or fashion. But specialization is ill-positioned to solve problems like redefining the role of physical retail or modernizing sales processes. Answering how to use physical stores to drive revenue across channels or how to change cost models to support the new role of stores requires a holistic perspective and a versatile skill set.
The best talent doesn’t define themselves through hyperefficient specializations or roles that focus on one singular type of task. They bring value to the organization through their ability to grow its business, move the wider culture, and help others do their job better no matter how their priorities or consumers shift due to external factors.

2. Decentralization

“I spend around £35 million on the property in a year. I would much rather invest that in people than expensive offices,” said ad agency founder Sir Martin Sorrell in a recent Financial Times article at the end of the office. In the same piece, Jes Staley of Barclays noted, “The notion of putting 7,000 people in a building may be a thing of the past.”
In retail, smaller, more decentralized stores are quicker to adapt to crises than massive ones.


One of Max Weber’s six pillars of bureaucracy is formal rules and requirements. He believed strict rules and strategies were required to ensure operational and organizational uniformity and predictability. But now, strict rules for business are a liability, and the messiness of improvised strategies, products, and marketing is key to survival. Industries like groceries, restaurants, and fashion have been forced to improvise to keep their business going during this crisis. Restrictions have forced companies to create new types of products, forms of working, and business models.
Luxury, which operates on value versus volume principle, is not efficient.

4. Demassification

For more than a century, the majority of consumers have found it cost-effective to own and use machine-made things, enabled by mass production and our consumer society. The machine aesthetic of functionality is visible in modernist furniture like Ikea. Cars, Apple products, kitchens, bathrooms, and appliances frequently present the approachable aesthetic of mass production. But handmade and locally produced items have never completely disappeared. And during the pandemic, some handmade and locally produced items and marketplaces like Etsy have made a comeback.
Luxury, which operates on value versus volume principle, is not efficient — it strongly revolves around putting in the time needed for the production of excellence and time needed to create desire. In 2019, Rolls-Royce delivered a historic annual sales record with a total of 5,152 cars. Instead of increasing the volume of production, the company enhances the value of each car it produces. Ferrari purposefully limits its sales to around 10,000 cars a year but is judged more valuable by investors than GM, with more than 7.7 million sales. Hermès creates a deliberate production bottleneck: It takes a craftsperson 20 hours to make one bag. This approach pays off for customers with disposable income whose shopping habits have shifted during a crisis — according to CNBC, a Hermès store in Guangzhou made $2.7 million in sales the day it reopened from lockdown in April. In air travel, a demassification shift for consumers means traveling less frequently and more expensively. It also means exploring other ways to travel less quickly than air, like taking road trips or train rides.

This article was originally published in The Sociology of Business.
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