I saw a bold headline a few days ago: “Why McDonald’s wins in any economy.” As far as I am concerned, this is more of an advertisement for an article than a headline, and I am wary of flashy advertising, but it lured me in anyway. I figured a small investment, a few minutes of my time, might pay off in providing some perspective for you and your business. Fabricating metal has little to do with selling burgers and fries, but I thought the article might have a few strategic nuggets that apply to any business.
The crux of the company’s recent success, which is a streak of more than eight years of increasing same-store sales, is based on attracting new customers while keeping its core customers. That sounds simple, but it’s a big improvement over some other strategies McDonald’s has pursued in the past.
- The company’s previous strategy was expansion; in 2001 it was opening more than three restaurants each day. This took the focus off quality and service, both of which suffered.
- It pursued diverse business interests, such as investing in Chipotle restaurants, and—don’t laugh—it once had a chain of hotels in Switzerland.
A tip for fabricators: Focus on steady growth. Getting in a hurry to expand, especially if it means adding another building or moving into a new one, might have more than a few advantages, but be careful that you’re not rushing into something that doesn’t have an iron-clad business justification. On the other hand, if you have plans to expand and you find a good building in a good location but it has too much floor space, don’t cross it off your list right away. See if you can lease out the extra space to a paint shop or some other business that complements yours. Do not, under any circumstances, convert the extra space to hotel rooms.
To snare additional customers, McDonald’s tries new products all the time.
- It has had its share of failures, but it learns from its mistakes and moves on.
- At first blush, snack wraps, fruit smoothies, and oatmeal might not seem like good complements to burgers and fries, and in fact they aren’t. These products draw new customers and give the traditional burgers-and-fries crowd some alternatives.
A tip for fabricators: Don’t get stuck on carbon steel; experiment with other metals, and maybe even composites, especially if this means you would be able to deliver entire assemblies, rather than just individual components, to your customers. Beware of offering capabilities or services that your customers don’t want (remember the McPizza?). Focus on your strengths and let your competitors dream up the next big McFailure.
McDonald’s stays focused on efficiency.
- The snack wrap idea paid off. The company was already in the breakfast market in a big way, so it later developed the McSkillet™ Burrito, using the same tortilla it used for the snack wrap.
- The customers have an expectation of efficiency too. Any new food item has to be simple enough that the crew can make it quickly. Sixty seconds is the maximum.
A tip for fabricators: Don’t be afraid to consider new processes, but consider them carefully. If you can’t figure out a way to make a decent margin and meet your customers’ expectations, take a McPass.
Things change. Customers’ preferences and business processes are anything but static.
- A few years ago the company tested some new coffee-cup lids. The CEO, Jim Skinner, didn’t like the new lids but he didn’t stand in the way of this change (although he did secure a supply of the old lids for his own use).
- When Skinner started working at McDonald’s, each restaurant made its own french fries from raw potatoes. Considering the importance of consistency and efficiency these days, this borders on laughable, but it was OK in 1962.
A tip for fabricators: If you’ve tried offering a new service or experimented with a new process and it didn’t work out, there’s nothing wrong with saying, “We don’t have any expertise in that area” or “That’s not a core strength of ours.” Stop yourself if you hear yourself telling your customers, “We don’t offer that service” without first giving it a try. Your competitor might have a different answer. Likewise, stop yourself from saying, “This is the way we’ve always done it” if an employee has an idea for a better way to do something.
Prevent a power vacuum. Get ready to be ready.
- McDonald’s Corp. had three CEOs in 2004. Former CEO Jim Cantalupo died of a heart attack in April; his successor, Charlie Bell, resigned for medical reasons in November.
- Skinner insists that every executive trains at least two replacements, one ready to take over immediately and one to be ready at some point in the future.
A tip for fabricators: Put your company in a good position to run smoothly if you have to be out of the office unexpectedly for some sort of emergency or if you elect to take an unexpectedly long vacation.
Although the article didn’t come right out and say it, I think it’s safe to say that McDonald’s focuses on offering two things: food and beverages that have a good value (adequate quality relative to the cost) and fast service. Your business model is more complex than this, and of course I can’t guarantee you’ll win in any economy, but hopefully this blog and the full article have a few McTips you can put to good use.