Someone from the hospitality industry recently asked us about the organizational structure of the marketing, sales and revenue management teams: should those teams be combined, or run independently?
Org design as communication architecture
We love the way Ben Horowitz, one of the most successful venture capitalists in the Valley and an accomplished entrepreneur himself, talks about organization in his incredible book The Hard Thing About Hard Things: “The first rule of organizational design is that all organizational designs are bad.(…) Your job is to choose the least of all evils.”
Horowitz treats organization charts as the communications architecture for the company: the best way of achieving communication between two people is to have them report to the same person. Since any boss’s capacity is limited, you need to figure out where efficient communication will be most crucial.
Tidal wave of digital transformation
It is important to remember the context in which hotels have been operating in the past 15 years, with the tidal wave of digital transformation changing the way in which customers book hotel accomodations.
First, the great majority of travellers - both corporate and leisure - are purchasing online. This means that your sales teams now need to understand your end customer much better in order to sell well through online platforms.
Second, travellers can constantly compare prices through aggregation sites and check customer experience through review sites. This implies that the brand and promotion teams (traditional pillars of a marketing department) have to be much more integrated with the revenue management team.
Third, expectations on the B2B side are now higher, due to the influence of the “born-digital” players like Amazon, Netflix and Apple. After all, the corporate purchasing department uses the same internet platforms as individual consumers, and expects your brand to be consistently communicated to them in a personalized and targeted manner.
What might be a solution?
To answer the question of organizational alignment, the hotel chain in question should first answer the Horowitz playbook question: how important is communication between the teams in question?
Our strong opinion is that the velocity and quality of communication between the marketing, sales and revenue management teams will determine how quickly your company can identify and then act on commercial opportunities in this new era of e-competition.
We preach (and wrote extensively about) the concept of Real-Time Retail (see “Real-Time Retail: imperative for the threatened brick-and-mortar world” and “The challenge of owning moments”), in which your ability to collect, synthesize and act on data determines how well you move potential customers further on their journey towards purchase, and from a single purchase to loyalty.
The same rules apply to any business - and especially to any B2C business. World-class businesses cannot afford to allow competing incentives of two of their executives to slow down the “fail-fast” decision loops, in which every point of data brings extra revenue, or at least an extra lesson learned.
Digital transformation shifts entire markets and it’s here to stay. Your organization, not just your organization chart, will have to transform, too.