May 2nd, 2008
I love McDonald’s. I do. Or to be more specific, I love the fries… and the Extra Value Meal #2.Now I know what you’re thinking. You’re thinking “Eegads! A woman of your refined upbringing and delicate palate, how could you?” Yeah, well, back off haters. I also ate at Jean Georges in NYC this past Monday (egg caviar and the lobster) and believe that a renaissance person such as myself can burn the fat candle at both ends.
And now I have a business-related reason to love them, as well.
This month’s Fortune is the Fortune 500 issue, and it rocks – especially the article about how McDonald’s has transformed itself from an arrogant “ugly American” company into a true corporate citizen of the world. It’s exciting to read.Complete with photos, the lengthy article details McDonald’s “glocal” strategy. We all remember “think global, act local.” Now, complete with its new-agey description, the company is doing precisely that. How’d they do it? They changed the culture from one that considered Oak Brook, Illinois to be ground zero, to one that is entirely focused on innovation, on the new idea: wherever that idea may come from. And cultural change is great, blah, blah, but talk is cheap. The distinction here is that McDonald’s rebuilt its operations in order to follow through and to ensure future progress.While McDonald’s has never been a completely hierarchical organization, the company started with the US at the top of the food chain (pardon the pun). But as the global economy became real, the company discovered that the old ways of doing things simply weren’t working. Not atypically (think Coke and Pepsi in India), the wake-up call came in the form of a repeated public relations gaffes in European companies where US-style menu choices were not only failing, but reinforcing McDonald’s reputation among activists as the very symbol of American imperialism. The fact that it changed is a credit to the company.McD’s changed its operating policies and adopted a business plan based on “freedom within a framework.” This approach gives regional and national managers considerable leeway to make their own decisions in their own markets. And it was non-egotistical in another way: it took a hard look at the brand and decided what was truly holy and what was not. This is tough stuff for a company with such a rich history (I can hear CMOs everywhere throwing their bodies over their marks right now…). The corporate logo cannot be changed, but local markets run their own advertising campaigns. Furnishings are also customized by market. The company fosters constant communications not only between the US and global markets, but between the non-US markets themselves. America is not the center of the McDonald’s universe. The concept of delivering good food fast is: and “good” is something that differs greatly from one place to another.
It’s tempting to wonder how is it that we thought it could be any other way, when over one billion people in the world’s second most populated country (India) doesn’t eat beef?? You adapt or you die. Is beef what makes McDonald’s McDonald’s? No. But as a long-time corporate executive, I can say with 100% certainty that, at some point, smart people in that company thought that the Big Mac was McDonald’s.
Today, Europe is McDonald’s largest money maker, producing $8.9 billion in revenue, or 39% of the company’s total top line. The US produced 36%. And while the US produced a 2007 increase in operating income of 7%, Europe grew by 32% and Asia-Pacific shot up by 69%.
Things have not always been so great. Mad cow, activist demonstrations, protests in France. But the company is now on track, and has opened communications, innovation and product pipelines that travel around the world – and frequently start far outside Illinois. Here are a few lessons I draw from McDonald’s experience:
* Create the formal and informal pathways by which far-flung operations can communicate what their markets need and want, without fear or hesitation.
* Tie performance appraisals and compensation to the behavior you seek. Calculate bonuses, in part, based on the identification and adaptation of good ideas from other markets. A Board could formally make this a factor in the CEO’s compensation, as well.
* Become a citizen of your community. This is not unlike the advice I give when speaking on the topic of online reputation management: become a respectful member of the marketplace you care about. After a French militant group become disgusted at the prospect of American mystery meat and ransacked a new store in 1999, the company’s European president opened the entire operation for inspection. Staff now shows the public around kitchens, fields all questions (not just the one’s the company likes) and freely discussed the food and its ingredients.
And, as a citizen of your community, be certain that those marketplaces are run by locals. For many years, senior managers outside the US were American expats. No more. Delegate authority to people in and of the market you want to grow.
* Be open with your detractors. When Greenpeace targeted McDonald’s for its use of soybeans from illegally deforested areas of the Amazon rainforest, McDonald’s agreed and asked for the organization’s help in solving the problem. That kind of behavior wins respect – even friends – fast.
I’d like to mention that the Wall Street Journal recently ran a story about Kraft that reflects many of the same lessons McDonald’s has learned and acted upon. You can read that article here. In the meantime, I’m going to surf the web to see if I can buy a box of Chinese Oreos: four wafer sticks filled with vanilla and chocolate cream, coated in chocolate.
Friends: have you seen my new daily blog yet? Subscribers include all the living Presidents. Not really – but they could use some advice.
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