Jim Skinner Says Smart Stuff and Stuff that Smarts

In a recent Wall Street Journal article, current McDonald’s CEO, Jim Skinner, is being credited with spearheading “… one of the most successful streaks in McDonald’s 51-year history." Since Skinner took over as CEO of McDonald’s in 2004, the company’s stock price has increased 45%, year-over-sales have increased, and profits have risen.

All this has happened while the company was awash in negative publicity from books (Fast Food Nation), movies (Super Size Me), and society at-large (“Childhood Obesity”). Plus, Skinner and McDonald’s had to recover from losing two CEO predecessors—one to a heart attack the other to cancer.

Skinner’s winning strategy was named PLAN TO WIN and it focused McDonald’s on improving the service, the food, and the experience at existing locations. Previously, the company’s growth engine was fueled by opening new locations and not necessarily on improving the operations of existing locations.

When asked why McDonald’s choose to focus on being better and not bigger, Skinner had this super-smart reply ...

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”Because we proved that we were getting bigger but not better. And we have to be better. Your experience today at McDonald’s has to be a better experience than it was yesterday.”

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Cool. That’s the same smart thinking which drives Starbucks Coffee. In TRIBAL KNOWLEDGE, I called this business mindset, BE THE BEST, NOT THE BIGGEST.

Starbucks never sought to become the biggest coffee retailer. They did, however, seek to become the best coffee retailer. And this unrelenting desire to be the best at what they do has fueled Starbucks uncompromising growth. Starbucks’ steadfast drive to become the best coffee retailer has resulted in its being the best coffee retailer. It can often work out that way … but it never seems to work in reverse.

Once a company puts its needs—faster growth, increased market share, bigger profits—ahead of its customers, it loses its soul. It’s simple … an endearing and enduring company cannot be self-serving while professing to serve its customers. Dig?

In the same Wall Street Journal interview, Skinner also said something that smarts. Read the following and see if you feel a sharp pain in your stomach that smarts …

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WSJ: Has Starbucks changed the restaurant environment?

Mr. Skinner: ”I think that they certainly have brought to people's attention the great opportunity for coffee. But if you really look at the impact on the restaurant business, I don't know I could say they've had an impact.”

WSJ: Are they a company that you watch very closely?

Mr. Skinner: ”We watch all companies very closely. Starbucks is a company that we're watching because we could argue that it's a very successful company. They've done a lot of great things. But they've done a lot of the things that we did - took a great concept and replicated it.”

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Oh my … did the McDonald’s CEO just say he isn't sure if Starbucks has had an impact on the restaurant industry? Huh? If it weren’t for Starbucks helping to revolutionize the fast casual dining experience, Chipotle might not exist. (For those unaware, McDonald’s had controlling ownership of Chipotle from 1999 to 2006). PF Chang’s wouldn’t have launched Pei Wei. Pot Belly wouldn’t be opening locations far outside of Chicago. Cereality would never have entered our reality. Panera Bread wouldn’t be baking new locations. So yeah … I would say Starbucks has indeed changed the restaurant environment.

And, if I were a McDonald’s shareholder, I’d hope Skinner is watching Starbucks closely. Starbucks has solved the riddle of how to get customers to overcome aversions to higher prices but McDonald’s is solidly stuck in the low-price/low-margin game where new items on the dollar menu are the sales drivers. Low margins forces companies on cutting costs, not adding customer experiences. McDonald’s competes on low prices while Starbucks competes on priceless experiences. Big difference! — A difference that every fast food and fast casual restaurant should watch closely. Double Dig?

Comments

[Nancy]

Had the same exact reactions to this piece -- for a seemingly super smart strategist, Skinner's comments on SBX came off as disingenous. My guess is that Skinner certainly is watching Starbucks, and the business models like QSR that it helped spawn, quite closely.

[Lewis Green]

I don't suppose Jim's ego got in the way regarding Starbucks. However, as a PR/marketing communications guy, I like the way he replied, keeping McDonald's always at the top of his answers. "But they've done a lot of the things that we did - took a great concept and replicated it.” Very, very smart and the same advice I offered Starbucks executives when I was there.

[Stephen Denny]

Honestly, isn't it great to see a big brand like McD's (and I'm not a huge fan of essentially unhealthy food) see its stock jump 45% because (gasp) they went back to basics and just did a better job?

Really. Do you think Sony would be in better shape if it just did a better job of fundamentals? Gap? Ford?? Jeez, I need to do a post on this. Thanks for bringing it up!

[dannywizz]

"Cool. That’s the same smart thinking which drives Starbucks Coffee. In TRIBAL KNOWLEDGE, I called this business mindset, BE THE BEST, NOT THE BIGGEST."

Yeah, sure. When you are having starbucks 2 minutes away from you in any direction that's not better but bigger. Starbucks is not the best coffee company as we know, they are closing shop after shop.....
That's not the same strategy as mcdonalds.