More is less in McDonalds’ business model innovation
Burger King has struggled for years to capture market share from McDonalds. Let me propose a winning new business model for Burger King.
While driving to Door County, Wisconsin for a short holiday, Nick and I stopped at a McDonalds to quench our thirst. I love McDonalds iced tea as the chain provides real lemons and the drink is always cold.
Or so it used to be. Unfortunately, McDonalds replaced my usual 12-ounce plastic cup with a behemoth disposable cup containing more iced tea than I can drink in a day.
The first sip confirmed my worst fears – there was so much iced tea in the container that I tasted no lemon, and the drink was on the warm side. In this case, more product provided less consumer value.
Far more important, the “32-ounce drinks for $1” promotion also reduces societal value, as Robert J. Stone, a food and fitness blogger hints at:
You can get a large (that’s 32 ounces) Coke, Sprite, Sweet Tea, or even a Hi-C Orange Lavaburst, for only $1. The Coke will deliver 310 calories and 86 grams of sugar to your stomach, while a Sweet Tea clocks in at a slim 280 calories and 69 grams of sugar. For the most bang for your buck, get the Hi-C Orange Lavaburst for 350 calories and 94 grams of sugar. For comparison purposes, 94 grams of sugar is equal to 23 sugar cubes! 3.3 ounces of sugar. That’s just shy of 1/2 CUP of sugar. Isn’t this just what America needs? Cheap, quart-sized sodas for a buck so we can fill our bellies with high-fructose corn syrup?
The US is an obese nation. Our #1 fast food company, a company many argue contributes to the rise of obesity in the US, is only making the situation worse. Its “32-ounces for $1” customer deal is a bad one for its customers’ future health.
The promotion is also a bad deal for McDonalds long-term success. Michael Porter, a renowned Harvard Business School strategist, argues that winning companies of the future will be those that create shared value – they increase societal value, not just customer value by what they provide or how they provide it. In other words, they benefit the community at large beyond customer value and income generation.
Porter is right – in today’s copycat economy, companies that advance society’s interests will attract the best talent and build winning brands. McDonalds therefore is off-trend, looking to me like the successful cigarette companies of the 1970s. More important, McDonalds, in my book, is finally open to another assault on its market share. The last worthy assault came when Subway lured McDonalds customers away with fresh and lower-calorie meals.
Burger King could grab share from McDonalds by re-branding itself around healthy choices for parents who want to raise kids with healthy eating habits, and adults who want healthy fast food options. If Tata can figure out how to make a car for under $2,000, then a fast food restaurant can figure out how to create an affordable healthy meal.
A fast food hamburger meal could be much healthier – whole wheat rolls, limited condiments, low-fat ground beef, baked sweet or russet potato chips replacing greasy fries, and refreshing drinks with no corn syrup. The business model innovation rests in defining processes and creating partnerships to offer affordable and healthy consumer solutions.
I can see the advertising strategy that positions Burger King right up against McDonalds. Show an obese Ronald McDonald, with print copy reading: “Is this what you want for your children’s future?” Show cool, thin kids leaving Burger King in their team uniforms next to fat kids sitting at McDonalds looking bored. Redesign the Burger King space to hold dance parties for teenagers from 8pm to midnight every Friday and Saturday and fun workouts for Moms and toddlers every morning from 9:30 to 11:00am. Provide literature with every meal offering tips for healthy home-cooked meals. Form partnerships with healthy drink brands, like low-calorie flavored water companies. Offer low-fat peanut butter and jelly sandwiches on fun-shaped whole wheat bread for the toddler set.
Behind our rising health care costs lies America’s growing waste lines. These costs contribute to our rising federal deficit and, because many employers provide health care benefits, rising unemployment. Our regulators won’t stop dangerous practices like the “32-ounces for $1″ promotion. McDonalds has too much money in Washington DC shaping federal farm, legal and restaurant policies to advance its interests. The only power to create change rests in consumers who vote with their dollars.
The sooner Burger King or another existing or new fast food chain sees the hole in the market McDonalds behavior creates, the better off we all will be.