Why Product Managers (Should) Love McDonald’s.
I’ll admit I do not love McDonald’s. I don’t eat there. But I do love the McDonald’s story as told in the movie, The Founder.
You might interpret it as the tale of how the unscrupulous Ray Kroc (Michael Keaton) duped the inventive yet hapless McDonald brothers, Mac (John Carroll Lynch) and Dick (Nick Offerman) out of their own business.
Instead I would implore you to read it as a love letter. A love letter to product management…
Innovation culture
Its easy to forget how innovative the original McDonald’s concept was in the 1950s. Fast food outlets are now so ubiquitous. However, The Founder shows us Ray, Mac and Dick applied a range of innovation, growth and product management principles to the McDonald’s business.
Market analysis
At first McDonald’s followed the 1940s trend of drive-in restaurants. Mac and Dick explain to Ray just a few the problems with this model:
Large menu of made-to-order items
Labour intensive: high service staff costs running back and forth car-to-counter
Slow customer service
High equipment cost, e.g. replacing broken crockery and glassware
Data insight
Dick analysed product sales data to discover that 87% of revenue came from just 3 products from their 27 item menu; burgers, fries and soft drinks. Simple!
Zag when everyone else is Zigging.
Their disruptive solution to the drive-in was:
Self-service, counter ordering
Small simple menu of standardised products (reducing complexity)
Disposable paper-based packaging (we’ll hold the environmental judgements)
They effectively audited the friction for both the customer and business operation.
Differentiated proposition
The unique selling point for McDonald’s that the brothers focused on was the speed of service, “30 seconds not 30 minutes.”
To achieve this they invented “The Speedee System”. Which leads us to…
Rapid prototyping
Dick realised that the cook and serve process needed to be optimised for speed. This would require custom kitchen equipment and an obsession with process efficiency. What follows is a masterclass in human-centred design, team collaboration and rapid prototyping as the brothers set about re-designing their kitchen and order kiosk.
Dick takes his entire staff to a tennis court where he and Mac draw to-scale chalk-drawn layouts of their kitchen and then have their staff act out their kitchen roles.
We are told how for 6 hours Mac and Dick draw and redraw their designs and are not afraid to turn each iteration on its head and then back again until they are satisfied that they have the design and process they need.
They focus on the efficiency of the process, spotting moments where staff might collide, slow each other down or cause accidents. Each iteration is tested and validated by their teams performing a burger-making ballet as they simulate their roles around each of the prototype designs.
The lesson for product teams is involving your customers and internal teams to not only get insight and understanding, but also to get buy-in and a sense of ownership from your team members who are going to use and build the product with you.
The extent to which this was ahead of its time can’t be over-stated. Think that terms like “user experience” and “human-centred design” would not enter common business vocabularies for another half a century… and these principles are still only slowly being adopted.
WATCH: The Founder movie clip : The McDonald’s “Speedee system” is developed with user-centred design and rapid prototyping. Jump to min 6:00 to see prototyping design process.
Comfortable losing a customer base
To trial their new service offering, the McDonald brothers shuttered their “thriving business for months” to redevelop the building.
In addition they consciously alienated their existing “less than desirable clientele; teenagers, hot-rodders and hooligans”. They removed jukebox entertainment and cigarette machines in favour of a new family-friendly environment to cultivate a new customer base and usher away their old one.
With modern eyes it seems strange to think of McDonald’s as a place designed to alienate teenagers.
Customer education and resilience in the face of disaster
Despite the genius of their design process, things still weren’t plain sailing. At launch customers were alienated by the service. Some stayed in their cars beeping their horns for service. Mac is seen coaxing families up to the order counter. In time customers learn the new process. As Ray waits in line to order his first McDonald’s burger, another customer reassures him that the wait isn’t long. Customer advocacy!
Their attempts at a grand opening end in disaster as a fly-storm envelopes the launch event.
Models for growth and profit
Ray sees franchising as the solution to scaling the business. What he doesn’t realise is that his franchise model is unprofitable.
It takes outside advice for him to see that owning the land is key to unlocking profitability as well as accessing capital investment. The model is flipped (pun intended) from selling burgers to leasing real estate, giving Ray Croc’s new business dependable recurring revenues in the form of lease payments from franchisees.
WATCH: “You’re not in the burger business. You’re in the real estate business.”
Vision and brand. Not all money is equal.
The McDonald brothers have a clear vision for their business.
Dick insists on high quality, dependable products and service. He objects to Ray’s efficiency drive suggestion to introduce powdered formula milkshakes, “We have no interest in a milkshake that contains no milk… Real milk, now and forever!”
In another perception busting moment Ray brokers a sponsorship deal with Coca-Cola. Dick again rebuffs him “there’s lots of things we could do to make a quick buck, it doesn’t mean we should” adding he has “no interest in indulging in that sort of crass commercialism. Its not McDonald’s.”
Dick designs and builds a concept restaurant with “Golden Arches”. Ray is so taken with the arches concept that he extends this vision, “those arches… signify families, community… McDonald’s can be the new American church!”
It’s hard to argue that this has not happened.
In one the final scenes, after he has prised control of the business from Mac and Dick, Ray reveals to that he believes the name, “McDonald’s” was a key element to the success of the business. Now there’s something to ponder…
Is McDonald’s a platform business?
It is arguable that long before Facebook or Amazon, McDonald’s created one of the first modern platform business, connecting fast-food buyers with fast-food sellers. If so it is one of the most tightly controlled platform businesses in the world.