This was around 10 years ago. I was @business School and had already made up my mind to become an entrepreneur, came across this very interesting insight which stayed with me ever since. In fact, it was such an important learning for me that even today as an entrepreneur, this remains one of the most important aspects of business we run.
The insight helped me approach our business in a very different way. Glad to share this thought on my blog today.
So here’s the story . (Have modified to bring in new aspects i wanted to share)
An entrepreneur had approached this elderly but sharp investor to fund his business idea – he had developed some concept about the product he wanted to launch. The investor patiently heard this enthusiastic entrepreneur share his business plan for a good 20 minutes.
Once the entrepreneur was done with his presentation, the investor quickly glanced through the notes prepared. The investor agreed that that the entrepreneur had a great product however he said that the business plan missed out on something very important without which he would fail soon and hence he declined to fund the business.
The entrepreneur was a bit dejected, as he felt he had a great product and had high hopes. The investor understood his state of mind and wanted to give him some nice advice before he left which could be of use to him. The investor, sipping the cup of coffee which had by now had gone cold, asked the entrepreneur , “Do you think you can make better burgers than the ones available at McDonald’s situated across this street”. Surprised at this unrelated question, the entrepreneur who was planning to exit soon after finishing his tea answered “Not me, but my mom makes much better burgers than McDonalds”. The investor probably knew his response, smiled and asked again. “Tell me, have you eaten better burgers than McDonalds in your neighborhood”. “Yes, of course. There are many places which serve better burgers than McDonalds. But why you asking this? ”
The investor then asked him, “Son, you know every entrepreneur tells me the same that he has tasted better burgers than McDonalds. So the question is, if burgers available at McDonalds aren’t really the best, then why is there no other company bigger than McDonalds? Forget bigger, not even close.”
The entrepreneur was a bit confused. He was yet to recover from being rejected for his plan and then these questions about McDonalds. But he could sense this had something to do with his pitch. He replied “Yes I agree. And why is that?”
“It’s because, simply McDonalds is not really about burgers. You get better burgers at your neighborhood . McDonalds is all about systems, process and consistent delivery of their products and customer experience world over. So you buy a McDonald anywhere in the world you find the same size, with the same ingredients and the same taste. They have managed to create a template for their offering better than any brand in the world. So customers expect the McDonalds experience and it’s consistently delivered every day anywhere at a McDonald’s outlet. Now that’s something which your mom or your local neighborhood bakery can never replicate.” The entrepreneur was completely engrossed in this amazing insight which was being shared. He wanted to know more. He knew this could help him better his business plan.
He went to add. “So your business plan has a great product, but does not have any processes or systems which ensure its scalability, it’s heavily dependent on you to execute. If you are to replicate your offering anywhere else it won’t be the same be it in terms of product experience or service delivery. Also its dependent on your physical presence, that’s the problem. Having great products is just one aspect for a great business but it should not be just about the product or service but more about the process and system which truly differentiates you. Try becoming a McDonalds for burgers.” The investor smiled and wished him good luck before leaving.
Coming from a business family, I could connect with the investor’s advice instantly. I had seen so many entrepreneurs develop fantastic products however they were limited in their reach. Some were content with what they have achieved, which was fine. But some just could not scale up even though they wanted to. And the reason for that had nothing to do with their product per se. It had to do with their business process or systems, rather the lack of it.
In business, if your product or service is great, that will not necessarily take you far, it’s all about the kind of process/ systems you can create to ensure the product and service is consistent across geographies and how it can remain ahead of competition. If one can successfully create these process and systems, over a long period they become difficult to replicate and in turn create entry barrier for others. Come to think of it, how many businesses can actually replicate the system which McDonalds has created and evolved over so many years? None i guess.
Once you realize the importance of creating a process/ system for your organization, the next step is to actually develop one….This is relevant for companies of any size, the sooner one develops these, the faster it can grow in a sustainable manner
As a start-up these are couple of vital questions relevant which can provide guidelines of the process/systems required
- If your product or service becomes commodity or if someone makes a better product than you what is the one thing you can offer that would attract new customers to you or make your current customers keep coming back to you?
- What process / system can you develop for your business that is difficult to replicate by others in a short span of time?
- As an entrepreneur, if you were to take a month long break from business and keep in touch only few minutes daily, can your business work the same way if not better as when you are around.
- If you were to start a branch office in another city, can you still provide the same product and service delivery like in your home market and without losing focus on the home market
These questions will prompt you to start looking for answers which are the process and the systems which needs to be developed to ensure you build a sustainable and differentiated market offering regardless of the product or service your provide.
Would love to hear your views on how developing small steps in creating process/systems in your organization has helped you develop a better institution.
So McDonalds is not really about the burgers was really a game changing insight for me and our business