| McDonald’s turnaround offers crucial lessons for all operators
By CONOR
CUNNEEN
At his first conference call, he told his audience, “Clean restrooms and hot, fresh food served in our restaurants would be a change.” McDonald’s had forgotten the basic vision that customers wanted clean restrooms and hot food. Few would suggest it was a new or dramatic vision, but it was clear and it was compelling. Cantalupo energized the giant corporation around that vision and demanded improvement in standards across all aspects of the business. Lesson 2: Restroom marketing is critical. Restroom marketing relates to the “non-negotiables” that businesses must get right. Failure to do so will result in customers boycotting your business. Cantalupo and his successor as chief executive, Charlie Bell, told franchisees, investors and analysts at every opportunity that McDonald’s would have the “cleanest restrooms in the industry.” It was a “non-negotiable” for restaurant success and also a career in McDonald’s. Failure to identify and understand what is non-negotiable for your customers will result in significant customer dissatisfaction and ultimately lost business. Lesson 3: Innovation does not have to be innovative. One of the most intriguing aspects of the turnaround—and indeed the improved overall perception of the fast-food sector—is that it owes much to lettuce, tomato and regular protein. It really is extraordinary that the most successful menu innovation in the sector in more than a generation is something as basic as salads. The lesson: Innovation that drives growth does not have to be complex, just new and relevant. The other rule breaker in this context is that McDonald’s was not even the first to market with good quality salads. The launch of McDonald’s Premium Salads came more than a year after rival Wendy’s introduced Garden Sensations, which did prove to be just that—a sensational success for the Dublin, Ohio-based chain. The aggressive launch of McDonald’s Premium Salads not only encouraged customers back to the chain but also helped change consumer perception. In a sense, they proved to be the ultimate in innovation: VIP products, which result in incremental volume, incremental image and incremental profit. VIP products are the Holy Grail of innovation. They occur rarely, but McDonald’s has hit VIP standards with salads, white chicken strips, coffee and snack wraps. Why? Because the products are relevant to the customer base. Interestingly, “relevant” was a very popular word in the vocabulary of Charlie Bell and now Jim Skinner. Lesson 4: Stay focused. Cantalupo’s predecessor, chairman Jack Greenberg, wrote in 2001, “We know that there are a number of distinct meal occasions that McDonald’s does not meet—when you want pizza or ethnic food, for example…so we are developing new concepts to…capture additional meal occasions.” McDonald’s brand was not always center-stage as management endeavored to create a multibrand corporation by investing in Boston Market, Chipotle Mexican Grill, Donatos Pizza and the United Kingdom-based sandwich chain Prêt A Manger. As management appreciated that McDonald’s could legitimately offer healthier options and compete comfortably against the fast-casual sector, these other concepts were no longer deemed relevant to a growth strategy. Lesson 5: Execution of a relevant strategy drives corporate health. Cantalupo also changed strategy. Primary growth in the future, he said, would come through “adding customers to restaurants” rather than adding “restaurants to customers.” The corporation went back to basics to make this happen. Indeed, it is a lesson in Marketing 101. Today, the corporation in its “Plan to Win” emphasizes five P’s–People, Product, Place, Price and Promotion. The five P’s are being executed in very disciplined and effective manner and producing the results for chief executive Jim Skinner and shareholders. One example of quality execution is coffee, where McDonald’s packaging—insulated cup and lid with closure—is significantly better than that of Starbucks. Strategy does not have to be innovative or exciting—simply relevant. The most profitable auto company in the world, Toyota, does not have an exciting strategy. But it does provide relevant products for its customers and executes incredibly well against that strategy. Autos or restaurants: Execution of a relevant strategy is what ultimately drives profitability. Lesson 6: Bench strength. Few companies could move through three chief executives—Cantalupo, Bell and Skinner—within a seven-month period and do it seamlessly. McDonald’s USA president Ralph Alvarez replaced Mike Roberts in 2006 when he unexpectedly resigned, and just recently the corporation announced that corporate controller Peter Bensen would replace the retiring Matt Paull. In “Good to Great,” author Jim Collins wrote about the importance of having the right people on the bus. McDonald’s has a big bus! Conor Cunneen is a professional speaker, humorist and consultant. He is author of “Why Ireland Never Invaded America—An Insightful Unique Look at Corporate Strategy,” and a winner of Chicago Toastmasters Humorous Speaker of the Year title. He can be contacted at cc@sheifgab.com. | 
