Complexity bites McDonald’s isn’t a “man bites dog” story. It is simply an illustration of the unintended consequences of complexity and how it “bit” its latest victim, global restaurant power McDonald’s, the world’s most pervasive, and successful seller of hamburgers and fries. McDonald’s menu has spiraled out of control, causing expense without the corresponding profit.
The USA needs growth in the private sector, because growth creates jobs, and ultimately that improves the US economy overall. McDonald’s jobs are at a lower tier in pay, but many other jobs are created at McDonald’s suppliers too, as a byproduct of its success. When a major US company hits a flat spot, it suffers. When many of them do, the entire country suffers.
McDonald’s had a pretty good run during the last decade, however recent events indicate that McDonald’s isn’t “Lovin It” so much any more. When you are known around the world for burgers, fries and Coke, it’s hard to expand outside that dominant market position in the minds of customers. No less an authority than Jack Trout has been saying this for years. It’s a very powerful position, owning a place in the consumer’s mind, but “that sword cuts both ways”. Once you own that space, expanding outside of it is perilous indeed.
McDonald’s has tried countless menu items and variations to tap into growth with the health conscious, parents and the dinner crowd. It was fortunate to grab an early, preeminent position in the fast food breakfast market with its Egg McMuffin® and variants on that simple, but hugely successful product. It seemed a natural to introduce gourmet coffee drinks to capitalize on that strong morning traffic. Alone, that might have been manageable, but the prep time is longer, and the service speed is slower.
McDonald’s business model aggravates the complexity problems it faces. Many of its restaurants are franchises, and franchisees must execute new items flawlessly, even if they are not within McDonald’s complete control. Complexity tends to work against flawless execution, and it also bogs down service speed, which is another one of McDonald’s competitive advantages, or at least it was.
After moving from mass production to mass customization over a decade ago, with its “custom cooking system”, McDonald’s has realized that its new menu offerings don’t flow through that system as quickly or as easily as made-to-order burgers and french fries.
More space, and time is required to assemble/prepare new items. Many of the new McDonald’s offerings were entering market segments that were already filled with competitors (like “wings”). Its snack wraps were a good idea that only went a little wrong due to complexity, a proliferation in types and sizes.
Alone this too, might have been manageable. But as part of the wide array of new McDonald’s items, the restaurants (and even the menu boards) staggered under the overload. Consumer ordering slowed because of so many new choices, which further bogged down speedy service.
Complexity is insidious, sneaking up on companies albeit created with the best of intentions, the quest for growth (via innovation). However, proliferation is not the same as true innovation. Worse yet, proliferation creates complexity.
Complexity doesn’t hit all at once. One day, it’s all just there, strangling the company and its people with more and more work caused by a product variety that must be produced and served flawlessly and fast. Even worse, customers remember early miscues (like slow service or poor quality) and are not very forgiving. Neither are boards of directors and senior management. Missteps lead to management turnover, and that makes the challenges bigger and more complex.
Unwinding this kind of problem is simple, but not easy. The challenge is to decide which way the solutions lay. Simplify the product assortment, focus on best sellers and delete the rest? Or alternatively, redesign the systems to embrace/accommodate the higher variety, if the profitability warrants the adverse consequences on franchisees who must cope with them.
As it is, complexity bites McDonald’s at a very challenging juncture in its history. No matter which way McDonald’s goes, it needs to get moving, to identify the root causes of complexity and manage them. The choices are to either “lose it” (simplify) or “use it” (systematize it). It is very hard to split focus between simplicity, and complexity as strategic directions. This has left many companies in worse shape than before, sometimes far worse.
McDonald’s menu has spiraled out of control, causing expense without the corresponding profit, McDonald’s management needs to get back on track, and stay focused on doing what it does best. And that is serving fewer items, better, faster, and it is the kind of food people expect to find in a McDonald’s.
When major American companies like McDonald’s “get it right” again, they will contribute to growth in the economy which leads to jobs, albeit lower wage jobs, including additional jobs at all of McDonald’s suppliers too.
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