Saturday, October 20, 2012

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."

3 comments:

  1. I couldn't agree more! Many corporations such as Coca-cola also follow the same approach. Though the formula for Coca-Cola concentrate doesn't change, there can be slight differences in sweetness since bottling agencies may change the amount of sweeteners used to fit the local population’s palate, and some versions of the cola are said to be sweeter or sharper in other countries.

    Keep the post coming! :)

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