Building an agile company: the case of McDonalds

Every business needs to be able to keep up with market changes in the face of widespread upheaval. Maintaining this organisational agility isn’t easy, especially for large companies with an international outlook.

Building an agile company the case of McDonaldsbWhile there are plenty of examples of industries that have been up-ended as a result of new competitors and changing conditions, there are also many that have managed to respond to these changes.

Among these is McDonald’s – one of the world’s largest and most iconic fast food brands that has reinvented itself in recent months by focusing on agility and innovation.

Meeting the challenge of a competitive marketplace

The food sector, and fast food in particular, has traditionally been one of the most competitive industries. The relatively low barriers to entry and large customer base have seen organisations compete on price, convenience and the shortest possible wait between ordering and eating.

While these factors have traditionally underpinned the industry, evolving market conditions and increasing competition from “fast casual” dining experiences that focus on quality have changed the industry.

For companies like McDonald’s, international economic conditions, such as slow spending in Europe, have affected sales while a generational shift away from fast food has decreased the number of young consumers dining beneath those iconic golden arches.

In the case of McDonald’s, the result has been slumping revenue and profits. The company’s revenue has dropped 11 per cent, resulting in a 30 per cent decline in profit, according to a report in Fortune Magazine.

To address this, the company has embarked on a strategy to become leaner. This year alone, the company will close around 700 under-performing stores around the world – double the original predictions. However, this shift is going much deeper than simply closing stores – the company is moving quickly to redefine its dining experience.

Reimagining the consumer experience

To reinvigorate global sales, McDonald’s has unveiled a number of new dining experiences that aim to reconnect with younger patrons, while also creating a higher-quality and more personalised product.

One such innovation has been the introduction of the Create your Taste experience in Australia, giving diners the opportunity to build their own burger from a range of 30 different ingredients. This new way of ordering uses touch-screens in participating stores that patrons can use to customise their meal.

This innovation is currently available in around 30 stores, but will be rolled out to 700 stores over the next nine months – underscoring how quickly this service is being scaled across the business.

While the Create your Taste product has been adopted across a large number of stores in Australia, other innovations have also been launched.

In Sydney, McDonald’s has launched The Corner, a redesigned McCafe that is styled to resemble an independent cafe rather than a chain. The design plays down traditional McDonald’s branding like the golden arches in favour of gourmet, personalised offerings served with metal cutlery and a range of cafe style hot beverages.

While the company has no plans to roll The Corner out nationally or internationally, it highlights the creative directions the company is pursuing in an attempt to reinvent its dining experience. This isn’t the first time Australia has seen the trial of new experiences from the company either – the first ever McCafe opened in Melbourne back in 1993.

Has this shift worked?

Transforming one of the world’s largest fast food services into an agile company that embraces modern trends is no easy undertaking. For McDonald’s, it’s too early to tell whether these organisational shifts will reverse the company’s financial position.

At an organisational level, there are signs this move is being embraced, with the company’s Australian CEO Andrew Gregory stressing these changes are designed to build a more transparent and responsive dining experience.
For other business leaders, the McDonald’s experience underscores how it is possible for even the very largest enterprises to become more agile and innovative. As market conditions continue to challenge organisations, developing, testing and implementing new strategies across multiple branches and departments will be a defining feature of successful companies.