Last weekend I finally found the time to watch« The Founder » (2016), the story of how Ray Kroc (aka He-who-made-McDonald’s-a-Company) stole MacDonald’s from his true founders: the brothers MacDonald, Richard & Maurice.
Ray Kroc, turning the chain into the most successful fast food corporation in the world.
The movie is entertaining – at least for a rainy Sunday evening, but its cinematographic qualities did not urge me to write an article about it. No, what truly stroke me are all the insights about entrepreneurship, lean-manufacturing, frugality, business making and breakthrough innovation that you can find in the first half of the movie. Each one is illustrated with several scenes that give shapes to the concept. Two of them especially draw my attention:
- The frugal approach to design and test the “Speedee system”, McDonald brothers’ revolutionary kitchen organization ensuring that “The order is ready in 30 seconds, not 30 minutes”.
- The illustration of what is a breakthrough innovation and what it means to bring it on the market.
The first scene about the frugal approach, taking place on a tennis field where the Richard & Maurice test several configurations using at scale chalk sketches of the kitchen, has already been analyzed a lot. I won’t spend time discussing it here. On the contrary, the second is still blank of any comments yet very rich to understand when we are dealing with a breakthrough innovation and how to identify such situations.
So let’s go – watch out, spoilers incoming in the following paragraphs!
FYI : the scene analyzed here takes place between 00:17:40 and 00:25:00 of the movie.
Act 1 – From the drive-in just like others
1950’s. The heyday of the drive-in restaurant model in the US. Here is the principle: you arrive by car at the restaurant and stop in the parking lot. A carhop (waitress in uniform, usually on roller skates) comes to your window, takes your order among the very large choice of food, beverage & desserts and gets payment. Your hamburger-fries-cola-milkshake menu is prepared on demand at the kitchen. The carhop comes back with your order. You eat your hamburger-fries-cola-milkshake in your car.
“Within metropolitan city limits of Miami, there are some 150 drive-ins operating throughout the year » – Source
This allows a customer to eat faster than in a traditional restaurant, where you have to get off your car. Moreover, eating in your car, in the US of the 50’s where private property and cars are “sacred cows”, is AWESOME. The restaurant is then only made of a kitchen, smaller and thus cheaper than a traditional restaurant to set up.
The drive-in was very popular among young people wearing blue jeans and listening to Chuck Berry and Elvis Presley. So drive-ins also developed features for this population: jukeboxes, cigarette vending machines, etc.
This was a roaring success at the time, the dominant design that is spread among all the US, the “cash cow” for restaurant owners. So the MacDonald brothers, freshly arrived in San Bernardino, chose to get in, and built the MacDonald’s Barbecue they were so proud of: “27 items on the menu, uniform, waitresses bringing food directly to the car… It went gangbusters!”. But not for long.
Act 2 – To the fast food, and beyond!
But then, the sales stagnated due to some limitation of the drive-in model itself, according to Richard & Maurice:
- The target population: young rock-music listeners are bad for business. They do not always pay, steal or broke dishes, flirt with carhops…
- The waiting time: even if they are faster than traditional restaurants, getting your food at a drive-in restaurant still take a lot of time since the food is still prepared on demand.
- The cost of running a drive-in: the building itself is cheaper than a traditional restaurant but the payroll is the same. Moreover, due to the large menu choice, stock management is huge and unsold food is thrown away – which results in a net loss.
The McDonald brothers then decided to tweak several characteristics of the traditional drive-in restaurant, in order to deal with these limitations. First, they removed all the unnecessary.
- The menu is limited to 3 items: hamburger, French fries, cola. And that’s it.
- Carhops are removed: No more roller skating carhops to serve you. You’ll move your legs one after another (called “walking”) to order and get your food yourself at the desk.
- Dishes are removed. Disposable paper packaging is used instead. Take that, goddamn Mother Earth!
- All superfluous features are also removed. No more jukebox or cigarettes.
These helped Richard & Maurice deal with just points 1. and 3.
Then, to tackle point 2., the McDonald brothers invented the Speedee System, a new way to organize the kitchen, in order to deliver an order in “30 seconds, not 30 minutes”.
At the end of the day, what did they change compared to the traditional drive-in? Quite a bunch of things:
1. From the value & usage point of view:
- Their value proposition is to get food fast, not to get food without getting off your car.
- You are not served in your car anymore; you have to order at a desk.
- A choice is limited to 3 items, not tens.
- You eat wherever you want, just like a sandwich, not necessarily in your car.
2. From the business point of view:
- They drastically reduced the cost of operating their restaurant.
- The market target is families and not “juvenile delinquents in blue jeans” anymore.
3. From the technical point of view:
- The kitchen organization is reworked from scratch to deliver food fast, and not inherited from drive-ins.
Several deep-rooted elements of the traditional drive-in have been changed, especially from value & usage point of view. Moreover, each change is a drastic & hard one. They completely reinvented the “drive-in” model.
These 2 factors (number and/or the depth of the changes) are distinctive of breakthrough innovations.
Two other insights can help say “Breakthrough innovation incoming!”. First, they have changed so drastically the model of the drive-in, that it’s hard to label their restaurant “drive-in” anymore. They are too different from each other. Actually, the MacDonald brothers created a new category of restaurants: “the fast food restaurant” – just like Apple created the category “tablet computers” with the IPad. Breakthrough innovations usually open new categories of objects, thus we are not comfortable to call them the same as their closest alternatives on the market (“drive-in” for MacDonald’s, “computers” for Appel’s IPad).
Second, people think they are mad. And indeed they are. They are closing their MacDonald’s Barbecue drive-in restaurant, their “cash cow” that make them eat decently and sleep in a comfortable house, in order to reconfigure it on a brand new model they don’t even know if it is working. Crazy guys! Breakthrough innovations usually face remarks like that “it’s crazy”, “nobody does that”, “why changing a business that works like a charm?”. A great indicator to spot them.
Act 3 – Maurice, we have a problem.
Richard & Maurice were all set to open their new restaurant. And they did open it.
And it was a complete disaster. An epic fail.
People think they arrive at a drive-in, but it is not! Naturally, they are disappointed, they don’t understand: “Where is the carhop to get my order?”, “Why do I need to get off my car?!” “Why can’t I order a taco?”, etc.
Tough moment for the brothers and for the clients that feel underserved. They don’t have in mind the new “rules of the game” of fast-food restaurants. This is also characteristic of breakthrough innovations: your clients do not expect from you to completely change the model they are used to. Their reaction is usually not what you expected.
To prevent it from happening, the one option is to communicate on your concept as soon as possible. The idea is to educate your future clients on what’s in it for them, and let them time to assimilate the “new rules of the game”. It always takes time.
Act 4 – Richard & Maurice strike back
But the brothers do not let this discourage them. They identified that they lacked communication towards their new clients – families. Richard & Maurice strike back by setting up an event to re-inaugurate their fast-food: the idea was to bring families during the event and communicate on what’s in it for them. Educating them to what is the fast-food restaurant value proposition.
An ad promoting McDonald’s as the perfect place to dine with the family (constituted by a father, a mother and three kids)
And that’s a bingo!
A few days later, more and more families keep coming to their restaurant. On the road to success! Unfortunately for Richard & Maurice, not their success, but Ray Kroc’s success. (cf. the second half of the movie)
Several hints can help you identify a breakthrough innovation:
- The number and/or the depth of the changes compared to your closest alternative on the market is high
- Breakthrough innovations open new categories of objects. Thus we are not comfortable to call them the same as their closest alternative on the market is high (a tablet is not a computer, a fast-food is not a drive-in)
- People (clients, family, investors…) might think breakthrough innovation leader is mad because you are saying no to current cash cow business, for a usually riskier one
- The current clients do not expect you to change the model they are used to. When you do they can react hardly
Disclaimer: the analysis above is only based on “The Founder” movie, which is most likely to be highly romanticized. Still, what is presented in the movie is relevant to get the logic and illustrate key points to identify when dealing with a breakthrough innovation.
For further information on breakthrough innovation, download here our booklet “Breakthrough innovation, what is it ?”