As we enter a new decade, it’s interesting to look back at a company that’s stood the test of time.
Despite the growth of well-financed chicken-focused start-ups, a plethora of new burger chains, mounting pressure to reduce our dependence on meat, and a growing addiction to fancy coffee, McDonald’s has managed to thrive. This year McDonald’s is celebrating its 80th anniversary with a market capitalisation of around $150 billion — up roughly 10% over last year.
McDonald’s started when Maurice and Richard (Mac and Dick) were invited by their father, Patrick McDonald, to help flip burgers at his diner, the Airdrome, which the brothers rebranded in 1940 as their namesake. The two spent almost ten years tinkering with their business before they introduced the “Speedee Service System” — a technique that was pulled from the factory assembly line model, enabling them to serve customers incredibly quickly.
The McDonald clan ran their single-location hamburger stand for almost twenty years before a man called Ray Kroc came along, asking to franchise the concept. Mac and Dick had the skills to create a successful one-location business, but it was Kroc who took their modest restaurant and made it world-famous. The rest is history.
What got you here won’t get you there.
There are skills that are essential to survival as a start-up, but you must “unlearn” these in order to grow a business. While these talents are prerequisites for getting a business off the ground, they become a liability as time goes on. What are these hurdles?
In the early days, when cash is scarce, you need to do a lot of the heavy-lifting yourself. Instead of hiring full-time employees, you may subcontract work to a partner. This arrangement works well as you pay subcontractors only when you have work, and they pay their expenses. The problem is that your contract employees may have other clients and can’t be at your beck and call when you need them. So you end up doing a lot the work yourself.
Your customers may become over-reliant on you. They start to ask for so much customisation that the only person in your company with the technical and personal skills to fulfil their requests is you. More and more of your time is spent dealing with the customers you’ve got, instead of finding new ones.
Doing a lot of the work yourself is a prerequisite at the beginning of any business, but it actually becomes a liability as you grow. You can only be in one place at a time. There are only so many hours in the day. Would Mack and Dick have turned McDonald’s into a worldwide success on their own? In a word, no.
If you’re self-financing your business, you have no choice but to make it profitable from day one. If it doesn’t make you money today, you tend not to do it. This discipline of getting an instant return on cash invested allows you to get your business off the ground. But the problem with fixating on immediate profit is that it can undermine your ability to grow.
For example, redesigning your website won’t make you more profitable this month, but it could be a necessary investment to attract larger contracts from more significant customers in the future. Not spending on the website may seem like a short term gain, but it’s actually creating a long-term problem.
You can never overlook profitability entirely, but it is a good idea to place an equal emphasis on top and bottom-line results — even if the investment doesn’t pay off right away. To increase value in your business means avoiding the thrifty approach.
When you start a business you need to be nimble, fleet-of-foot. Things happen quickly and you need to be flexible enough to react. And you can afford to be flexible as there may be just you and a couple of others in the company.
But what about when you grow bigger? It’s not flexibility you need, but immovable certainty. You need:
- to know where you’re headed, and how to get there.
- the data and data insights to show what’s happening.
- a robust strategy that’s implemented regularly.
At the beginning you can get away with chopping and changing, making it up as you go along. But only for a short period. Then you need systems, plans, strategies in place that you can trust.
If you’ve already built your business to a reasonable size, you’ll want to know exactly how you’re doing. Are you clinging to the ideas you had when you started, or have you developed new strategies and approaches to generate value? There’s one way to find out. Take the Value Builder Scorecard. In the time it takes to eat a McDonald’s Happy Meal, you can find out your current business value, and more importantly, what it could be.