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Business – What McDonald’s Can Teach Us About Recovery

Mats Lederhausen

With all the news coverage today on financial mismanagement, I can tell you from first-hand experience about a company that continues to prosper amid all the chaos. And I think it is worth trying to understand why.

I have spent most of my career inside McDonald’s. First, as a crew member, peeling potatoes and flipping burgers in my native Stockholm, Sweden; then, as most McDonald’s executives, advancing through the ranks and learning the tricks of the trade through marketing, training, HR and operations. After nearly 10 years at the helm of the Swedish operations, I moved to the U.S. to assume the role of chief strategy officer.

This was a time when McDonald’s was facing its toughest headwind in the history of the company. Some of it was self-inflicted; some of it was just evolutionary. Most institutions die young, as they fail to reinvent themselves. As we celebrate the 200th anniversary of Charles Darwin, it is important to remind ourselves that only the most adaptable species indeed survive. So it didn’t come as a real surprise that after decades of steady growth rates, even McDonald’s would stall. It happens to almost everyone. But as I studied the corporate history books, I realized that the rather short list of companies that had reinvented themselves was intimidating and certainly humbling.

At McDonald’s, we tried many things. Some might say, too many things. But at least we tried them with a sincere intention to find our “inner voice” again. The job of chief strategist in times of rediscovery is closer to “corporate psychiatrist/philosopher” than traditional strategist. Your tools are less about spreadsheets and data and more about introspection and deep discovery. If you once were successful, chances are that somewhere in the past lie the building blocks of your future. Your job is to find whatever it was that connected you to your audience in the past and then to adjust it to be more relevant in today’s marketplace — without losing its essential connectivity.

Fortunately, there were many people wanting us to succeed. But there were also many, often loud, voices that couldn’t wait to see us fail. Perhaps they inspired us to try harder. Few things motivate us as much as proving the cynics wrong.

What emerged out of years of hard work were two important insights. Both are simple and powerful.

The first was that there was really nothing wrong with the original premise of our business model. As our chief marketing officer at the time, Larry Light, said: “The time we need a new business model is when we believe that our customers no longer ‘Deserve a Break Today.'” Clearly, in today’s time-starved landscape, this was not the case.

The second insight was that we had confused size with success. Over time, we started to believe that one more restaurant meant “job well done.” And sooner rather than later, all our metrics, all of our incentives and all of our capital were chasing growth — the bad form of growth: growth from quantity, not quality.

As we dug in, we realized that growth must be “deserved” in order to be sustainable. As long as you are getting better, it is good to get bigger. But if you are buying size, particularly at the cost of quality, then you are on a slippery and ultimately unsustainable slope.

In 2003, we launched our new strategy, “Growth from being better.” We aligned the entire company around this very simple idea. Human and financial resources were now directed at truly improving, not just increasing, their activities. The rest is really history. The turnaround of McDonald’s has been a remarkable one.

To me, it has been a labor of love for a few reasons. First, McDonald’s is an important company. Its success matters to so many — particularly the hundreds of thousands (probably millions) of people who get their first job there and who learn critical skills for life. Secondly, McDonald’s is a decentralized company. It is really a system of companies — thousands of them. Most of them are small entrepreneurs who have invested their savings in a dream to be in business for themselves, but not by themselves.

I believe there are four important lessons that can be learned from the remarkable turnaround at McDonald’s.

1. How you grow matters as much as that you grow. The financial services industry would have benefitted from a focus on “growth by quality, not by quantity.” Clearly, the “growth at any cost” credo of some led to exactly that: any cost.

2. Changing your business model may not be needed, but belief in it is. Start by asking yourself what business you are in and whether customers still have a need for it. If they do, commit to it — fully. At McDonald’s, we knew that people still “deserved a break today” and we were willing to let go of all other initiatives (many of them very exciting) in order to demonstrate unwavering commitment to the core business.

3. None of us is as good as all of us. It’s the system, stupid! Understanding that you are leading a system, not a company or a person, is a critical insight if you want to successfully change something large. McDonald’s is extremely good at this. To some people (me included), it is a frustrating process. It takes time. It requires buy-in and plenty of patience and tolerance from everyone. It also requires adequate policing, oversight and incredibly detailed measurement systems. This is tedious work, and intimidating to those being measured. But it’s needed.

Large systems work best with a hard-wired operating system in the hub that enables innovation, entrepreneurship and decision-making in the nodes. The Internet would not have happened without HTML. Our country would not have prospered without the U.S. Constitution. But it is worth all the pain. And it must start with the humility that you are in the service of something larger than your own institution. As we say at BE-CAUSE — the company I founded — a purpose bigger than your product.

4. Plan your work, and work your plan. At McDonald’s we created a “plan to win.” Some would argue that it wasn’t perfect. Perhaps it wasn’t, but we decided that it was. And we haven’t looked back. Even through tragic circumstances — losing two CEOs in less than one year due to tragic deaths — the plan stayed intact and is still central today to the focus and alignment of the organization.

So often, companies feel a need to change something for the sake of changing it. I say, “If it works, don’t change it.”

Mats Lederhausen is a former senior executive with McDonald’s and the founding partner of BE-CAUSE, a company focused on building businesses with a purpose bigger than their product.

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September 30, 2009 - Posted by | Uncategorized |

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