Entrepreneurship And Innovation At The Mcdonalds Commerce Essay

Creativity, innovation and entrepreneurship are three essential tools of success for companies in the increasingly challenging business environment. Where, creativity is the ability to develop new ideas and discover new ways of looking at problems and opportunities, Innovation is the key to economic development of any country. Inventions and innovations are the building blocks of the future and Entrepreneurship is the process of creating something new with value by devoting the necessary time and effort assuming the accompanying financial psychic, social risks and receiving the resulting rewards of monetary value and personal satisfaction and independence. All three call for ‘new ideas’ and there is an element of risk involved in the implementation and the acceptability of the new idea. Where creativity is the ability to generate an idea, innovation is the process of the idea creation and entrepreneur is the person who performs both to become who he is, takes the risk, implements the idea in the form of a venture. In this fiercely competitive, fast faced global economy creativity is not only an important source of building a competitive advantage but is also a necessity for survival. When developing creative solutions to modern problems, entrepreneurs must go beyond merely using whatever has been used in the past. McDonalds is one such company which has earned its brand image over the years with effective use of entrepreneurship, creativity and innovation all put in right place in the organization allowing the company to achieve massive competitive advantages and an edge at building ‘new ideas’ and defining new and better means of customer satisfaction.

The company serves around 50 million customers in 30,000 destinations worldwide on a daily basis and pulling that off whilst successfully obtaining high revenues is a job that requires continuous innovation and out of the box thinking. McDonalds focus over the years has been nothing less than the customer itself. McDonalds took its strong roots in building a name in innovation during the 1990s and the early 2000ss when the competition first started to grow. McDonalds at that time did not take its brand equity for granted and infused its creative teams’ minds into the thought process that have and continue to generate innovative products and campaigns like Big Mac and Egg McMuffin (Entrepreneur, 2006 [online]).

McDonalds offers an extensive case study of the application of a well thought of and thorough innovation strategy, a product planning and developmental process that effectively reflects the changing industry, its opportunity recognition and analysis to stay on top, and the Mcdonalization culture and leadership embedded with innovation that it follows to successfully practice innovation in all aspects and obtain customer satisfaction that defines industry standards. But even for a company like McDonalds room still exists for improvement. The paper analyses the company on these aspects. The paper after analysis of the corporate entrepreneurship and innovation strategy being following in the company will attempt to establish recommendation for the enhancement of the competitive advantages of the company.

Innovation Strategy

“Think big, start small, scale fast.” This is the innovation strategy being followed by McDonalds. This idea was brought together by the managing director of McDonald’s Ventures, Mats Lederhausen (Entrepreneur, 2006 [online]). The key players are all of the employees of the company who are well ingrained with the 5PS that form the paradox of the company. These 5 PS are: People, Product, Promotion, Place and Price. The innovation that takes place in the company is all customer-oriented and started with people and ends with people making effective use of company resources, offers and tools. The innovation strategy is built on one concept: Customer is king. The insights and demands of the customers are the main triggers of the entire innovation process. The franchisees are known as owner-operators who are a big part of the innovation chain. Keeping such diversified franchises and their thought processes altogether merged with the company objectives and essence is a big challenge which can not be controlled or centralized. The innovation process is decentralized making the owner-operators feel as much important in the company as those who are part of the core headquarters as well as encouraging them to create competitive advantages for the company. McDonald’s seizes every opportunity it can to bring innovation and lead the industry. McDonald’s success is also based upon its suppliers that are part of the three-legged stool. For McDonald’s, the quality of its products is of absolute importance. It specifies highest standards for suppliers in the food industry. McDonald’s focuses on developing close relationships with suppliers. At McDonald’s, everything is done on an open accounting, handshake trust basis (Times100, 2009). McDonalds works closely with the suppliers to develop and improve products and production techniques. This dependency is described as a three-legged stool principle, and involves McDonald’s, the franchisees and the suppliers. The growth and success of the McDonald’s, in this way, is shared by the suppliers of the restaurant who are able to meet the quality standards (Times100, 2009). For McDonald’s, the relationships between franchisor, franchisee and supplier are of paramount importance to the success of the innovation led business.

The Process of Innovation and Creativity

The owner operators are small business owners who have the entrepreneurial zeal in them and offer various ideas and creative insights that form success drivers for the company. Thus, they are involved in each of the innovation steps and processes. Each of the franchise of McDonalds is in itself a mini laboratory that has millions of potential ideas stored just waiting to be explored and the owner operators are the main source of their retrieval and practice.

Sources of Ideas

For McDonalds, following are the main sources of ideas.

Consumers are the foremost innovation triggers. These include potential as well as existing ones. They are given great importance and attention to point to new directions. This attention takes the form of informally monitoring potential ideas and needs and formally arranging for consumers to have an opportunity to express their opinions (Bygrave, 2008).

Existing products and services in the market are also continuously monitored or evaluated to uncover ways to improve the services. This results in innovative products and services that have more market appeal with better sales and profit potential.

Owner-Operators, like mentioned above, are the biggest and most effective source of ideas for McDonalds as they offer insights of local appeals surrounding the franchises, which are then incorporated into new products and services. McDonalds’ introduction of Apple and Walnut salads is one such example of its catering to the local demands, which were communicated effectively by the owner operators. But there are also many demands, such as Shrimp salads that McDonalds cannot currently cater to, because of lack of resources.

Federal Government is also a source of new product ideas in two ways. First, the files of the Patent Office contain numerous new product possibilities. Although the patents themselves may not be feasible, they can frequently suggest other more marketable product ideas. Second, new product ideas can come in response to government regulations (Drucker, 2008)

Research and Development is yet another but large source of innovative ideas for McDonalds. McDonalds has its mini-laboratories in each of its franchises as well as large laboratories in its head-quarters in US which are continuously engaged in bringing in new product ideas and ingredients and recipes to win customer satisfaction.

The Creative Process

Although, creative ideas may appear to strike McDonalds as suddenly as a bolt of lightning but they are actually the result of the creative process, which involves the following steps:

Preparation

Investigation

Transformation

Incubation

Verification

Implementation

Preparation involves getting the mind ready for creative thinking. Preparation includes a formal education, on the job training, work experience and taking advantage of other learning opportunities. This training provides a foundation on which to build creativity and innovation. Investigation is where a solid understanding of the problem, situation or the decision at hand is developed. Transformation involves viewing similarities and differences in the information collected. This phase requires two types of thinking: convergent and divergent thinking. Convergent thinking is the ability to see the similarities and the connections among various data and events. Divergent thinking is the ability to see the differences among various data and events. The subconscious needs time to reflect on to the information collected, this is done during the incubation phase. Next comes the illumination phase, where a spontaneous breakthrough causes the light bulb to go on. McDonalds Innovation Council then verifies the ideas where it conducts experimentation to test the success potential in the idea generated. Implementation then follows where the idea is transformed to reality (Entrepreneur, 2006 [online]).

Opportunity Recognition and Analysis

A business opportunity represents a possibility for the entrepreneur to successfully fill a large enough unsatisfied need that enough sales and profits result. Recognition of an opportunity results from the knowledge and experience of the company and its employees. McDonalds makes effective use of its knowledge base and maintains proper records of its previous industry analysis to point to new directions and market niches to exploit profits out of. Each and every innovative opportunity is carefully assessed through an opportunity analysis plan. This opportunity analysis plan comprises of four sections:

A description of the idea and its competition;

An assessment of the domestic and international market of the idea;

As assessment of the entrepreneur and the team; and

A discussion of the steps needed to make the idea the basis for a viable business venture.

Product Planning and Development Process

Once ideas emerge from idea sources or creative problem solving, they need further development and evaluation. The product planning and development process at McDonalds is divided into five stages:

The idea stage

The concept stage

Product development stage

Test marketing stage

commercialization

Organizational Culture

McDonalds has succeeded because it offers consumers, workers, and managers efficiency, calculability, predictability, and control. This constitutes the McDonald’s model of work practice and work design, known as McDonalization. McDonald’s is a global capitalist organization that transforming the production, consumption and distribution of food – more importantly everyday life. McDonald’s employs Taylor’s and Ford’s methods in its assembly line production.

Ritzer discerns four elements of Mcdonalization:

Efficiency

Calculability

Predictability and

Control (Haworth, n.d.)

McDonald’s offers efficiency, which is the optimum method for getting from one point to another. This means that McDonald’s offers the best available way to get from being hungry to being full. For working people, quick and easy access to food is a blessing and McDonald offers just that through its efficient work practices. This fast-food model offers people an efficient method for satisfying many needs. (Ritzer, 1996, Pp. 9-11)

To achieve this efficiency, workers in McDonaldized systems function efficiently. They are provided with training to work this way by managers, who supervise over them closely to make sure they come up to standards. This is ensured by organizational rules and regulations regarding production of highly efficient work.

On the other hand, McDonald’s also offers calculability, which is an emphasis on the quantitative aspects of products sold (portion size, cost) and service offered. Quantity has become equivalent to quality; that is something that must be good. The common customer’s perception of ‘bigger is better,” is very successfully satisfied with McDonald’s Quarter Pounder, the Big Mac, and the large fries. People quantify these things and realize that they are getting a lot of food for quite less money. For consumers this is the best deal but for the food-food outlets this is the extraordinary profitability. (Ritzer, 1996, Pp. 9-11)

Consumers also calculate the time it takes to drive to McDonald’s, be served the food, eat it, and return home; and then, they compare that duration to the time required to prepare food at home. They believe that it takes them less time to get it from McDonalds than prepare the whole meal at home. This calculation obviously supports home-delivery franchises such as Mcdonald’s, which emphasis on time saving.

The McDonaldized institutions combine the emphases on time and money. Workers at McDonaldized systems emphasize the quantitative rather than the qualitative aspects of their work. This causes the workers to focus more on the amount of work they do rather than how well they do it, at times. This is how McDonald’s employs Frederick Taylor’s Scientific management work practices, that related the work directly with pay. (Daft, 1997)

The third element of the McDonalization is that McDonald’s offers predictability, the assurance that the products and services will be the same every time and in all outlets. For example, the Egg McMuffin in New York is identical to those in Chicago and Los Angeles. To be more precise, those eaten next week or next year will be identical to those eaten today. This provides a great comfort in knowing that McDonald’s offers no surprises, it’s service is predictable. People know that the next Egg McMuffin they eat will taste about the same as the others they have eaten; it will be what is expected and in mind of the consumer. The success of the McDonald’s model explains that many people have come to prefer a world in which there are few surprises, because unpredictability can be dangerous too (Ritzer, 1996, Pp. 9-11) .

Relating this to the work practices at McDonalds, the workers in McDonaldized systems also behave in predictable ways. They are confined by the corporate rules as well as the dictates of their managers. McDonalds offers extensive training to its employees, which is so standardized that whatever the employees say at customer touch points is scripted by the managers themselves. McDonald’s has pioneered in the routinization of interactive service work (Ritzer, 1996, Pp. 9-11).

Fourthly, McDonald’s practices control, especially through the substitution of nonhuman for human technology. A human technology is controlled by people; a nonhuman technology (controls people. The people who eat in fast-food restaurants are controlled through lines, limited menus, few options, and uncomfortable seats. All of these enable the customers to eat quickly and leave (Ritzer, 1996, Pp. 9-11).

The employees in McDonald’s working under the McDonaldized organizations are also controlled to a high degree. They are provided trained to do a limited number of tasks in precisely the way they are ordered to do them. The technologies and the way the organization is set up reinforce this control. Managers and supervisors make sure that workers follow the line. (Ritzer, 1996, Pp. 9-11).

How does McDonalds makes sure employees follow up to this control? It threatens them to replace them with technology. But employees cannot be controlled from fouling up the system’s operation. The manager cannot control a slow worker, who can still make the preparation and delivery of a Big Mac inefficient and worker who refuses to follow the rules might leave the pickles or special sauce off a hamburger, thereby making for unpredictability. And then a distracted worker can put too few fries in the box, making an order of large fries seem skimpy. It is for these reasons, McDonald’s has been obliged to steadily replace human beings with non-human technologies, such as the soft-drink dispenser that shuts itself off when the glass is full, the french-fry machine that rings and lifts itself out of the oil when the fries are crisp, the preprogrammed cash register that eliminates the need for the cashier to calculate prices and amounts, and, perhaps at some future time, the robot capable of making hamburgers. Such technologies increase the company’s control over workers. And in this way McDonald’s can assure customers that their employees and service will be consistent (Ritzer, 1996, Pp. 9-11).

Increasing Competitive Advantages

Being an innovation leader in the food service industry, McDonalds does not let its creative heads fall asleep. It is always looking for new directions to improve its customer services to pave way for profitable business. Following are the ways in which McDonalds can sustain and increase its competitive advantage in the face of aggressive rivalry in the food service industry.

Enhancing Organizational Creativity

McDonalds can enhance its organizational creativity by:

Embracing diversity – one of the best ways to cultivate a culture of creativity is to hire a diverse workforce. When people solve problems or come up with ideas, they do so in the same framework of their experience. Hiring people from different backgrounds, cultural experiences, hobbies, and interests provides the company with crucial raw material needed for creativity.

Expecting Creativity – employees rend to rise- or fall- to the level of expectations of entrepreneurs have of them. One of the best ways to communicate the expectation of creativity is to give employees permission to be creative (Morris, 2009)

Expecting and tolerating failure – creative ideas will produce failures as wells as successes. People who never fail are not being creative. Creativity requires taking chances and managers must remove employees’ fear of failure. The surest way to quash creativity throughout an organization is to punish employees who try something new and fail.

Encouraging curiosity – McDonalds may keep its managers and employees asking the question “what if” and take a “maybe we could” attitude to break out of assumptions that limit creativity.

Viewing Problems as Challenges – every problem offers an opportunity for innovation. Entrepreneurs who allow employees to dump all of their problems to desk to be “fixed” do nothing to develop the creativity within those employees.

Providing Creative Training – almost everyone has the capacity to be creative, but developing creativity requires training. Training accomplished through books, seminars, workshops and professional meeting can help everyone learn to tap their creative capacity.

Providing Support – the higher level management of McDonalds should give employees the tools and resources they need to be creative. One of the most valuable resources is time.

Rewarding creativity – they can also encourage creativity by rewarding it when it occurs. Financial rewards can be effective motivation but non-monetary rewards such as praise, recognition, and celebration can be more powerful incentives.

Modeling Creative Behavior – creativity is “caught” as much as it is “taught”. Companies that excel at innovation find that the passion for creativity starts at the top. Entrepreneurs set examples of creative behavior, take chance and challenge the status quo will soon find their employees doing the same (Morris, 2009).

Improving the Creative Process

Teams of people working together usually can generate more and more creative idea. Three techniques McDonalds can use to improve the quality of creative ideas that follow from its Innovation Council: brainstorming, mind-mapping and rapid prototyping.

Brainstorming is a process in which a small group of people interact with very little structure with the goal of producing a large quantity of novel and imaginative ideas. Another useful tool for jump-starting creativity is mind mapping, an extension of brainstorming. The strength of mind mapping is that it reflects the way the brain actually works. Rather than browsing out ideas in a linear fashion, the brain jumps from one idea to another. Generating creative ideas is a critical step in the process of taking an idea for a product or a service successfully to the market. However, entrepreneurs find that most of their ideas won’t work and that’s where rapid prototyping plays an important part in the creative process. The promise behind rapid prototyping is that transforming an idea into an actual model will point out flaws in the original idea and will lead to improvements in its design (Hisrich, 2009).

Conclusion

Dick and Mac were the ones who opened the first McDonald’s restaurant in 1940 in San Bernardino, California, and at that time they could not have imagined the worldwide phenomial success that McDonald’s now enjoys. What got them famous was their winning formula of selling a high quality product cheaply and quickly. The business really began to grow immensely once Ray Kroc, a Chicago based salesman, who was a marketing expert, joined the team (Watson, 2002). He decided to spread McDonald’s formula throughout the United States and beyond. McDonald’s now has more than 30,000 restaurants all over the world. Its serves 46 million customers everyday, that is equal to a lunch and dinner for every man, woman, and child in the world! McDonald’s enjoys sales over $38bn from the entire world, which make it the biggest food service company internationally. McDonalds’ paradox of success lies with innovation and giving customer satisfaction the priority for its service offerings and operations. It keeps track of industry changes, anticipates consumer preferences and incorporates them into the product. Also, insights and communication with owner operators provides new product ideas and a highly effective and successful innovation process that is dealt by the McDonald’s innovation council and together with the organizational culture of McDonalisation, it is practicing innovation in all aspects and providing innovation embedded services all around the world. But even a company like McDonalds has room for improvement, whereby it can enhance the creativity of its organization by infusing the culture of innovation more predominantly than before into each organizational level and improving the overall creative idea generating process. In the face of globalization, innovation offers a highly effective opportunity which companies like McDonald are making effective use of but it is more of a continuous process rather than a one-time thing.