Black MBA - Summer 2008 - (Page 39)

N BMBAA® President and CEO Barbara L. Thomas recently spoke with Don Thompson, president of McDonald’s USA. During their conversation, he shared his personal perspective on how, after recent slumping, McDonald’s stock has become a happy meal for investors all over again. The down-to-earth Thompson also talked about what it takes to move beyond the basics to uncover the insights that others miss, like, for example, how a hamburger company becomes a major player in gourmet coffee. Thompson’s beyond-the-basics philosophy, strategies for growth and keen insights provide a roadmap for other entrepreneurs and MBAs setting out in business. Thompson also shared the story behind the strategy that stewarded in two product lines and led to a turnaround in business. He gave advice to get students started on the professional track and suggested strategies for those in business who want to take the next step of joining corporate boards. Talk about building your own sandbox! How about finding some surprising new sand inside a box you think you already know? BT: In 2007, we coined the phrase, ‘Come play in my sandbox.’ I took on a very ambitious slogan we always hear: ‘Think outside the box.’ My feeling is, I don’t want to think outside the box; I want to create my own box and invite the world in. The grains of sand within this box reflect the endless possibilities life has to offer us, and allow us to use our own God-given creative and innovative skills to reach for the stars and capture the universe. So as I was reading a little bit about you, I said, ‘Don has created his own box – not McDonald’s, but the whole concept of the company.’ You didn’t say, ‘I am going to try to improve.’ You said, ‘I am going to create a whole new concept.’ I wondered, how did you begin to think that way and why? DT: It really started with a basic premise that we’ve always had. And you know a big part of the revitalization of McDonald’s? If you go back to 2002, it was when we started what we call ‘our plan to win.’ At that time, just prior to that, we really had some poor business results with stock. Stock prices were not doing well, and franchises weren’t doing well from the cash flow perspective. The company was not doing as well as we would like and we found ourselves, as I call it, going back to the basics of the business. You’ve probably heard the statement, ‘better, not just bigger.’ We had been at a phase where new growth was fueling all of the growth for us. Organic growth was eroded and we weren’t seeing it, so what we did was go back to the drawing board to see what we stand for. The first point was pretty easy in terms of quality services claimers or QSCs – how restaurants run day in and day out. Traditional management would look at the existing core menu, those operations day in and day out, the convenience factor that we already have some 14,000-odd restaurants – a number that represents about 85 percent of our business – and they would look at new products and say, ‘Wow, that’s what’s driving growth.’ No, that’s not what’s driving our growth. What’s driving our growth is everything we do in those restaurants. So what else did we look at? We looked at consumer trends. We always said we looked at consumer trends, but we took a real deep look and the first thing we found had to do with running the restaurant. The second thing we found had to do with the value proposition, which was different in a lot of different places, so we lost the synergy in one fully leveraged McDonald’s system with the power of one voice. This was when the dollar menu was created. What else did we look at? We looked more closely at the customers and at consumer trends relative to lifestyle trends, and we grew them as one. If you look across the board at that time at the growth categories, it’s interesting that we have the same trends today. These trends sometimes don’t change very fast. In the area of beverages, we were not where we are today. Beverages then were an accompaniment player; if people were coming to buy some food, they had to have something to drink to go with the food. We wanted a destination for beverages and we saw that as a potential opening. We looked at chicken. Chicken was the fastest-growing product at that point. It was just beginning to eclipse beef in terms of consumption in the United States. We said, ‘Wow, we’re still a small player in terms of chicken.’ We looked at one of our biggest trends – breakfast – and asked, ‘What’s going on in the breakfast world? Wow, people are coming in earlier and earlier and earlier.’ Breakfast is projected to grow much stronger than the rest of the menu. So what does that mean? McDonald’s was already a leader in terms of what we had before. Do we have to have even more products? Do we have to extend our hours of operation? Those areas were the biggest areas of that core focus – running a drive-thru and clean restaurant, and providing good food. On the beverages end, for us it was pretty simple – all the areas of growth were in beverages. Our customers didn’t look at our coffee as if it was premium, so we changed it. When we changed it, the media rated the taste of our coffee better than any other coffee that we have ever produced. The word really began to get around and people began to choose our coffee over competitors’ coffee. We started thinking, this is only scratching the surface. We knew that specialized coffee was one of the fastest-growing BlackMBA • Summer 2008 39

Table of Contents Feed for the Digital Edition of Black MBA - Summer 2008

Black MBA- Summer 2008 Contents Mailbag Up Front From the President & CEO Politics of Change Catalyst for Change: Results of our 2008 Political Poll Know Whose Shoulders You Stand On: The Legacy of H. Naylor Fitzhugh Howard University: Changing With the Times Straight Talk: CEO to CEO Creating Your Own Sandbox Dual Threats Avoiding the Faux Pa Invest in Your MBA Everything You Need to Know About...Estate Planning On Campus Plan Ahead The Big Show What's in a Name? On the Move Market Forecast Jeff Friday Keith Wyche Life Lessons On the Ground Real Biz A Golden Opportunity Entrepreneurial Institute Tech Tools Read for Success Stacey Tisdale Advertiser Index

Black MBA - Summer 2008

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