Before McDonalds, it was impossible to know what to expect when ordering a meal at a roadside restaurant. There were no review sites to check or online menus to browse before picking a place to eat. You just had to take your chances and hope for a decent meal.
As a traveling salesman, Ray Kroc was no stranger to disappointment, both with his sales calls and with his meals on the road. Then Ray Kroc visited the McDonald’s restaurant in San Bernardino, CA and he saw magic.
“When I saw it working that day in 1954, I felt like some latter-day Newton who’d just had an Idaho potato caromed off his skull. That night in my motel room I did a lot of heavy thinking about what I’d seen during the day. Visions of McDonald’s restaurants dotting crossroads all over the country paraded through my brain.” — Ray Kroc
One year later, Kroc founded the McDonald’s System. In an age of unsurprisingly subpar meals, Kroc put the hamburger on the assembly line to give people what they craved: consistency. And it worked. By 1958 McDonald’s had sold 100M hamburgers. Six years after starting, Kroc bought the naming rights to McDonald’s in 1960, and McDonald’s Corporation as we know it was born.
Consistency is King
Eventually, Kroc made his vision a reality and McDonald’s became a staple of most towns and a pinnacle of standardization. Consistency wasn’t just for hamburgers. First and foremost, Kroc advocated adherence to a systems approach.
Franchisees of the McDonald’s operating system were required to follow the core McDonald’s principles of quality, service, cleanliness and value. Everything was meticulously planned and enforced by the corporation.
If there was ever a king of consistency crowned, Ray Kroc would probably be it.
Something Smells Fishy
In 1959, a McDonald’s franchise owner named Lou Groen was struggling to keep his restaurant afloat. The stakes were high for him too — He cashed out all his savings to buy the franchise and had twins at home.
One of Groen’s big issues is that he lived in Cincinnati, a predominantly Catholic city at the time. That meant on Fridays during March, the majority of his customers wouldn’t buy hamburgers because they abstained from eating meat during Lent.
What Lou couldn’t figure out was why the other restaurants in town that served similar menu items, like Big Boy burger, were doing just fine, even on Fridays. Eventually he decided to do some recon by visiting his competitor. What he found the juicy truth, but it wasn’t a hamburger. In addition to selling beef, the other restaurants also offered a fish sandwich that Catholics could eat during Lent.
Armed with this intel, Groen went back to his restaurant and invented a new fish sandwich for the McDonald’s menu. Excited, he called Kroc with the idea, who bluntly replied:
“Hell no! I don’t care if the Pope himself comes to Cincinnati. He can eat hamburgers like everybody else. We are not going to stink up our restaurants with any of your damned old fish!”
In most companies, this is the point when an employee with a good idea gives up: but not Lou Groen.
Let the Customers Decide
With his restaurant and his entire savings on the line, Groen persisted. He convinced a few other executives, who then convinced Kroc, that the only choice was either to sell fish or let the store sink.
Eventually, Kroc relented, with a catch. In the spirit of competition, Kroc offered a challenge to Groen. They’d each sell their own sandwich idea head-to-head on the same Friday in a select location. Whichever item had the most sales by the end of the day would be added to Groen’s menu permanently.
To compete, Kroc introduced his own personal invention: the Hula Burger. His surefire winner consisted of a piece of grilled pineapple between two slices of cheese on a bun. Lou Groen went with his fish sandwich: the Filet-O-Fish.
The final score?
Filet-O-Fish: 350
Hula Burger: 6
Groen won, and was able to sell the Filet-O-Fish on his menu. In the first month on the menu, they sold 2,324 Filet-O-Fish sandwiches.
“The company has benefited from the ingenuity of its small businessmen”
This story probably sounds all too familiar. In organizations everywhere, executives make decisions about what products to make and sell. Just like Ray Kroc and the Hula Burger, they think they have better ideas than the rest of the org chart. Who better to make decisions than the people at the top?
The problem is that executives are often the farthest away from customers. They have the least amount of real interactions with customers, and therefore have the least amount of context about what customers actually want. Of course Lou Groen knew more about his Catholic customers in Cincinnati — he lived there and talked with them everyday.
As the founder and CEO of the entire corporation, Ray Kroc could have easily pulled rank and shut the idea down. The good news for McDonald’s is that Ray Kroc didn’t do that, and even eventually realized good ideas come from everywhere.
“The success of additions such as the Filet-o-Fish, the Big Mac, Hot Apple Pie and Egg McMuffin…each evolved from an idea of one of our operators. So the company has benefited from the ingenuity of its small businessmen.” — Ray Kroc
McDonald’s permanently added the Filet-O-Fish to the menu in 1965. It was the first and only non-hamburger item on the sandwich menu. Even to this day, every March Filet-O-Fish sales spike.
So what happened Kroc’s Hula Burger? Well, as he put it:
“It was a giant flop when we tried it in our stores. One customer said, ‘I like the hula, but where’s the burger?’”
How do you support your entrepreneurially-minded employees?
Lou Groen succeeded in getting his idea up the org chart by sheer force of will. His livelihood was on the line, which gave him the perseverance to make it happen. But most employees don’t have that kind of motivation.
Like McDonald’s in the 1950’s, organizations today still don’t have proper systems that empower their most valuable asset: their people.
The people closest to customers can’t share ideas, they can’t plan experiments, and they can’t work together to validate products through gauging actual demand from customers. Instead, decisions are passed top down by the executives and good ideas are often popped before they bubble up through the org chart.
Good ideas can come from anywhere in the org
What are you doing to get good ideas from your team? How do you empower them to test and validate them through real, customer demand?
If you don’t have an established system for sharing knowledge across the organization, chances are you’re going to make the wrong decisions about good ideas, just like Ray Kroc. More realistically, you’re not going to hear those ideas at all.
We built our product Tettra to help you empower the entrepreneurs at your company to execute on great new ideas. It works by making it quick and easy to share knowledge transparently across your entire organization which creates a “collective consciousness”.
That collective consciousness is what empowers your employees to make better decisions without having to get approval from someone higher up the org chart. It facilitates alignment across your cross-functional teams to make sure everyone is working together towards the same goals.
Sound like something you need at your organization? Try out Tettra today by starting a free trial.