Due to their widespread success, McDonald‘s occasionally makes it simple to ignore their mistakes. One of the major ones was its attempt to be creative while sacrificing efficiency and dependability, two of its best-known traits. Due to the uniformity of every burger and batch of fries, the restaurant’s cuisine is quick, dependable, and affordable.
Where did McDonald’s make a mistake?
Failure to Balance Process Efficiency With Innovation at McDonald’s
The root of McDonald’s $1 billion blunder was a lack of comprehension of the principles of flexible leadership. Simply said, the best leaders are able to manage several competing priorities while maintaining balance. They are able to evaluate each decision’s potential outcomes and effects on other organizational departments in a timely manner.
To keep a business moving forward, leaders must strike a balance between paying attention to people, procedures, and innovation. This is illustrated by the Flexible Leadership Model. In the instance of McDonald’s, the management placed so much focus on innovation that it failed to see how making big changes to the way food is prepared would slow down operations and raise prices.
A concept named « Made for You » was introduced by the CEO of the fast food chain’s US division after he believed that customers needed more personalised meals.
The program offered freshly toasted buns and burgers that were prepared to request. As a result, it necessitated costly equipment improvements and, of course, considerably slowed down wait times. Customers found themselves having to wait up to three times as long to receive items that they had previously been able to pick up in just a few minutes. However, the management of McDonald’s persisted on making an effort to make it work. But in the end, « Made for You » was a failure and vanished into obscurity. It was a costly error that had a negative impact on the stock price of the firm.
Prior to launching the concept, McDonald’s leadership would have had a better understanding of what customers truly wanted if it had taken some time to gather input and test the idea extensively.
Blockbuster: Process Effectiveness Without regard for innovation
A company’s operations might be hampered by too much or too little focus on innovation, and vice versa. Even though the most popular films are still referred to as « blockbusters, » the corporation is now one of the most well-known instances of a corporate disaster.
When Netflix was a nimble start-up in 2004, Blockbuster was raking in $6 billion in revenue. In just six years, Blockbuster had filed for bankruptcy while Netflix had grown to a $2.2 billion business. Today, Netflix is valued at over $28 billion, and Blockbuster is a thing of the past.
What happened? The management at Blockbuster was unable to foresee how swiftly disruption would change the video rental sector.
A few years ago, the CEO of Netflix, Reed Hastings, really suggested that the two businesses collaborate, with Blockbuster marketing Netflix in its physical locations and Netflix managing the Blockbuster brand online. Blockbuster rejected it. It concentrated on upholding the status quo, doubling down on physical stores and inventory, rather than adopting Netflix’s model and accepting change in how consumers wanted to watch movies—by streaming them from the comfort of their living rooms instead of renting—instead. It was already too late when they finally caught up.
Innovation is always necessary for preserving a competitive edge, but it becomes much more crucial when emerging technology is revolutionizing the industry or your rivals provide novel approaches to a problem. Even the most prosperous businesses can fail if they lack creative executives.
U.S. Postal Service: it struggles to Maintain a Balance Between Process and People Efficiency
Keeping your staff satisfied while maintaining effective, cost-effective operations may be challenging to reconcile. High pay and good benefits can undoubtedly aid in keeping workers, but overspending in this area can result in a firm being bloated and ineffective. In recent years, this has been particularly difficult for government bodies and labor unions.
It proved impossible for the Big Three automakers to maintain long-standing pay and benefits during the 2008 economic recession, and two of the three inevitably had to file for bankruptcy. Additionally, the U.S. Postal Service has had a difficult time balancing staffing levels and pay that have outpaced demand, which has resulted in serious monetary losses over the past ten years.
The Postal Service had to eliminate positions, reduce pay, and shut down processing facilities in order to address issues that had been draining its finances for years. Although it reduced its workforce by 25% by laying off over 200,000 workers, 80 percent of its operational expenses are related to people. The American Postal Workers Union has issued a warning as the bleeding deepens that these cuts would harm productivity and customer service and result in longer waits. The removal of more seasoned employees hasn’t helped ease the strained atmosphere among the post office’s employees, which has existed for decades. The Postal Service’s totalitarian mentality is largely blamed for the failure. Often at the cost of the employees, managers impose stringent restrictions designed to increase workplace productivity. In charge positions have been given to less qualified staff members. Grievances have increased dramatically.
It is obvious that for staff morale and interpersonal relationships to improve, leadership must make major adjustments. Otherwise, these issues will continue.
Adaptable and Agile Leadership: The Critical Role
These firms’ problems serve as a reminder of how challenging it can be for leaders to strike a balance between the importance of people, procedures, and innovation. Though it could be important to make big improvements in one of these areas, doing so could have a detrimental effect in other areas. The secret is to identify the priority that is most pressing at the moment based on the strategic objectives of your firm and give the other areas extra attention to reduce the impact.
