3 Techniques for Better Product Decisions Inspired by McDonald's

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A few years ago, McDonald’s hit a slump. Sales were down, the US market was anyways saturated and Asian growth was slow. Their stock hit a wall from 2012 to 2015. Today, McDonald’s is not only at an all-time high (which can always change, but is a good sign), but investor confidence is high as well. What did The Yellow Arches do to turn things around?

Breakfast Isn’t Just For Breakfast

For decades, McDonald’s offered breakfast until 10:30am on weekdays and 11:30am on weekends. The company long resisted calls to offer breakfast all day. The challenges were formidable — new equipment, grill space, food storage, supply chain and training employees. It would have been a lot easier to continue to offer breakfast and lunch-dinner separately.

But McDonald’s brand in 2012 was becoming stale. Chipotle’s and other restaurants were gaining steam, and consumers (even fast food eaters) wanted more options. All Day Breakfast rolled out smoothly thanks to smart planning with franchisees and people all over the world are enjoying Egg McMuffins all day long.

But that wasn’t enough to turn McDonald’s around. Sometimes, one major change isn’t enough to turn the tide.

Focus On What McDonald’s Does Best

The second major change that McDonald’s made wasn’t as photogenic as All Day Breakfast, but has almost no detractors on Wall Street. “Refranchising” means selling McDonald’s owned McDonald’s restaurants to franchisees and getting out of the B2C business of selling hamburgers directly to consumers in a local market. According to Forbes, McDonald’s plans to move to 93% franchise ownership by 2018.

Getting out of the restaurant ownership business puts the burden of upgrading restaurants on franchise partners and saves capital.

“We are in the real estate business, not the hamburger business,” is a classic quote by McDonald’s founder Ray Kroc.

On-Demand Quarter Pounders

A third major change to McDonald’s is the “freshly cooked Quarter Pounder”. How many seconds extra would you be willing to wait in order to eat a fresh burger and not one that was keeping warm on a grill for a while?

The chain is rolling out “on-demand Quarter Pounders” in 2018. It will take an extra minute for an “on-demander Quarter Pounder” to land in a customer’s hand. Every second counts in the fast food business, but McDonald’s is betting that today’s consumers will trade a bit of time for quality.

3 Techniques for Better Product Decisions

After hitting a slump, McDonald’s could have made minor changes to their business postponed big issues. But with their back against the wall they took big risks that led to major changes. There were huge unknowns in how each of the strategies would play out. There was zero certainty once each plan went into action. Perhaps McDonald’s realized that stagnation was a 100% certainty if they didn’t act boldly and quickly.

The strategies that McDonald’s rolled out incapsulate essentials that can guide the countless product decisions we take everyday:

  1. Listen to your customers: Make an big investment in something that customers surely want, rather than investing resources on smaller things that they might like. McDonald’s were right to listen to their customers who demanded All Day Breakfast, and to provide it despite the huge investment and effort it required.
     
  2. Focus on what you do best: Single out the one thing where you have a competitive edge and focus your attention an resources on it. McDonald’s executed difficult structural and financial changes that saved capital and added focus to the business, while leaving behind other significant business areas. Be willing to quit the aspects that burden your product development, regardless of how long they have been around. Keep relentlessly questioning what is right for your product, where is your edge today, and be bold on execution.
     
  3. Put quality in your forefront: We might assume that customers prefer lower prices on the expense of quality, but why not let our customers take the choice? We might be surprised to discover that when providing higher quality, people will be happy to pay for it. McDonald’s traded time for quality and it worked. Customers appreciate quality, which in turn increases their loyalty to your brand and overall satisfaction.

The bigger the problem, the bigger the risk and the potential reward. But the riskiest option is to avoid change. As we develop our products it’s always better to keep our decision making and assumptions in check. Are we really listening to our customers? Is product legacy and “holy cows” slowing down growth? Are we compromising quality instead of letting our customers decide? McDonald’s 3 step strategy can uncover crucial product aspects that might need your attention right now.


 
 
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Yonatan Levy