McDonald's Successful Innovation Strategy - Be Global, Act Local

Ever wonder how McDonald's has been so successful in its growth into a diverse range of international fast food markets?

Their secret is that they are becoming global by acting locally! In the United States, the McDonald's brand has been synonymous with affordable hamburgers for decades. But that is not the case in McDonald's foreign markets. I tell the story of the beginnings of McDonald's' transformation in Chapter 7 of my book, Living in the Innovation Age. It all began in 2003 when McDonald's' new chief executive officer, Jim Cantalupo, redefined their primary customer from real-estate developers and franchise holders to the people eating at their restaurants. That decision had profound implications in the way McDonald’s did resource allocation. McDonald’s reallocated resources from centralized corporate functions to regional managers, who were encouraged to customize local menus and store amenities to suit local tastes. Until 2003, McDonald’s had a fairly common menu (i.e. hamburgers) worldwide. It now serves breakfast porridge in the United Kingdom, soup in Portugal, and burgers that are topped with French cheese in France.

A recent blog posting in HBR by Nataly Kelly further picks up on the elaborate menu that McDonald's has in its international markets. For example, if you go to a McDonald's in Singapore you can order jasmine tea and a Shaka Shaka Chicken, which you create by dumping spice powder into a bag and a quick "shaka" of the bag coat your chicken patty in the bag with local spices. In Japan you can order a Koroke Burger, which consists of mashed potato, cabbage, and katsu sauce. In Hong Kong you'll find a burger that is served not between sesame seed buns, but between rice cakes. And finally, visit India, where eating beef is against religious rules for about 80 percent of the population, and you won't find any beef burgers on the menu whatsoever. Nataly summarizes the following five key takeaways from McDonald's' success in expanding into such wildly different international markets:

1. Don't confuse your brand with your products. 
2. Figure out which products have international appeal.
3. View a new market as a chance to take on new brand attributes. 
4. Remember that "small markets" may very well define your future. 
5. Let your customers tell you what they want. 

The Bottom Line

As I explain in my book, defining and understanding your primary customer is absolutely critical to successful innovation. More importantly, it's essential to realize the differences that exist in the "tastes" of your primary customer by market. As you find yourself expanding into diverse markets, remember McDonald's' strategy, which I have summarized as "Be Global, Act Local."

GM's First Mover Disadvantage

One of the topics I discussed in my book, Living in the Innovation Age, is the fallacy of the first mover advantage. While there are cases where first movers have been highly successful, there are plenty of cases of disillusionment and despair as well. I used the meteoric success of TiVo followed by a decade of sagging profit as a case-in-point in my book. Here's another good example. The October 1 - October 7 issue of Businessweek discusses how GM too might have fallen prey to the "First Mover Advantage Fallacy" with its early introduction of the redesigned  "2013 Chevy Malibu" in February 2012. While the initial results following the introduction were positive, it turns out that GM might have been better served if it had delayed its launch until it had the complete lineup ready. That's exactly GM's competitors - Toyota, Honda, Nissan, Ford, and Hyundai - did. They waited and learned from early customer reactions to the Mailibu, which is a major reason why today the Malibu is having a tough time matching up in key measures such as prices, gas mileage, and technology gadgets.

Check out the Businessweek article titled "GM's First Mover Disadvantage."

The Bottom Line
Don't be too quick to assume a positive correlation between successful innovation and being first to market.

Is the P&G Innovation Well Drying Up?

I talk quite a bit about P&G in my book "Living in the Innovation Age." P&G is an admirable company that has thrived for 175 years with one innovative product after another. Starting with their "Ivory" soap in 1879 to the first all-vegetable shortening oil "Crisco", to "Deft" and now "Tide", Crest, Pampers, Pringles, Febreze, and Swiffer, the list goes on with amazing products that are household names. Over the decades, P&G has not only innovated products but has innovated product "categories"! As a testament to its commitment to innovation, P&G has more than 1,000 Ph.D.’s among the 8,000 employees at its 26 innovation facilities around the world.

Businessweek recently published an excellent article titled "At P&G, the Innovation Well Runs Dry." The article explains how lately there’s been a dearth of pioneering brands emerging from the world’s largest consumer-products company. Spending on research and development in fiscal 2012 ended June 30 was $2.03 billion, or 2.4 percent of sales, the same as the prior year and down from 3 percent of sales in 2006. Add to that the fact that P&G’s most recent homegrown blockbusters - Swiffer cleaning devices, Crest Whitestrips, and Febreze odor fresheners - were all launched at least a decade ago. Considering that the company’s current product pipeline is mainly focused on “reformulating, not inventing, products," the situation does appear a bit dire for P&G.

So, is P&G losing it's edge in the game of innovation? I encourage you to read the aforementioned Businessweek article, which does a decent job of exploring this question with a combination of facts and expert opinions.

The Bottom Line
P&G has become a household name because of its ability to innovate - new products and new product categories. Sustaining its competitive advantage depends on it being able to maintain its leadership with such homegrown, innovative products that are not just "reformulations" of existing products but true revolutions that continue to delight its customers.

Part 2 - Can Big Companies Innovate? The Saga Continues...

On September 28, I had posted a blog entry titled "Big Companies - Can They Innovate or Not?" in which I had discussed two seemingly "ying and yang" blog postings in the Harvard Business Review (HBR) blogs on innovation at big companies. Well, today, the author of the second blog post that discussed why big companies were often not set up for innovation posted another post titled "How Big Companies Should Innovate" in which he talks about how such big companies could innovate.

I am just smiling away... not just because I find this discussion amusing but also because his ideas line up quite nicely with the five principles I discuss in my book "Living in the Innovation Age". So, there's the plug for my book... now go read it! :)

The "Opposable Mind" of Steve Jobs

I just read an excellent blog posting titled "Was Steve Jobs a Role Model for Leaders?" in the Harvard Business Review (HBR). In his post, Darren Overfield discusses the "polarizing" discussion about Steve Jobs as a leader. Darren summarizes this with reference to a recent Wired article by Ben Austen that aptly labeled these two camps "acolytes" and "rejecters". Acolytes see Jobs as brilliant, citing his leadership as the reason behind Apple's phenomenal results. Rejecters see him as arrogant and deeply flawed, leading Apple to meteoric success in spite of his often boorish behavior. So, which one is it?

Darren leads the reader through an interesting discussion and concludes with what I believe is a brilliant deduction -

"the best way to be an effective leader is to become a master of opposites — simultaneously developing as a "people leader" and as an innovative, strategic leader with a bias for execution."

Insightful!