Chapter 8: Case Study
Strategic alignment is an evolving field that is as much about theory as it is about practice. In this section, we're highlighting some of the companies that we think are excelling at alignment, as well as providing our analysis based on our extensive research into the field.
We hope you can use this section to find inspiration and ideas to take back to your company.
McDonald's is a worldwide quick service restaurant (QSR) that pioneered assembly-line style food preparation. While they've been in business since 1955, the company has recently started heavily investing in automation that has allowed to halve their workforce in 6 years (440K in 2013 to 205K in 2019).
From an alignment perspective, McDonald's is an interesting case study of an organization that employs a large workforce of service workers (as opposed to knowledge workers). For this case study, we'll focus on the retail operation that McDonald's runs, rather than their corporate division. As such, McDonald's is representative of a highly stable, highly autonomous organization.
McDonald's is also representative of what many companies think of when they hear strategic alignment: predictability, economies of scale, and well-honed processes. We've included McDonald's because of its similarity to many manufacturing and industrial businesses in other sectors (including consumer packaged goods, automotive, and electronics manufacturing).
McDonald's is engaged in a rapid transformation of its nearly 38K stores across the world. One area of immediate change is replacing cashiers with a self-service ordering kiosk, which works like a digital vending machine. Another area of change is toward greater automation of critical processes in the restaurant, like the cooking of hamburgers and French fries (they've long had a system for cooking their hot food the same way every single time).
The increased automation in McDonald's restaurants is possible because the restaurant offers only standardized products. Every location sells the same options. Each employee follows an exact process for producing meals. Customers can customize their orders through bundling (e.g., creating a meal) or omitting items, like toppings and condiments on their order.
Another area that McDonald's controls is its entire supply chain. Unlike traditional restaurants, McDonald's owns the whole supply chain — from the farm that grows potatoes, wheat, or raises cattle, to the factories that make buns to the trucks that move inventory from farm to restaurant. Many of the farmers who produce for McDonald's work exclusively for the restaurant. McDonald's does not rely on third-party suppliers, such as Sysco or Performance Food Group, to provide their ingredients.
Managers also go through a standardized training program. Before starting their role as a store manager, McDonald's sends its staff to Hamburger University in Chicago, IL. During this intensive multi-day training program, managers are not only educated on customer service and processes, but they're taught how to manage a staff of employees. This standard process of training and regular audits from Corporate on individual stores ensures the experience customers get is the same whether they go to a McDonald's in Manhattan, NY or Manhattan, KS.
McDonald's today is now as much a restaurant franchise as it is a technology company. They've built a significant competitive advantage by leveraging technology and standardized processes to allow them to achieve a high level of scale. This has allowed them to maximize the economies of scale while also delivering the same experience at every location.
From an alignment perspective, McDonald's is a stable and autonomous organization. They align people toward a common goal through extensive training, standardization of the work employees perform, and comprehensive process management. Their excellent alignment is created by the relatively limited scope of decisions their crew members make. There is little variation in the work that is done from customer to customer.
The consistent nature of McDonald's processes has also allowed them to perfect specific processes. For example, McDonald's has used Six Sigma as a tool for improving quality and consistency in their operations. It has also allowed each location to operate relatively autonomously, without much (if any) individualized direction from corporate. The downside is that all strategic decisions are made by corporate, and none happen at the store.
The extreme specialization and rigidity of functions mean that McDonald's is a highly siloed organization. Teams are given little opportunity to work together, except in a highly controlled manner. Spontaneous collaboration is not supported by the culture. In a highly stable environment, these silos actually afford a greater level of efficiency because individuals are singularly focused on their job. All big picture thinking happens in Corporate.
Despite McDonald's excellence operationally, the company has struggled to align around changing customer behaviors. The inability to rapidly address the market (and stay ahead of it) is a crucial pitfall of stable organizations that are highly siloed. Gaps in the quick-service restaurant market have led McDonald's to lose market share (and perhaps more importantly, mindshare) with the American public.
Competitors like Chick-fil-A and fast-casual restaurants like Chipotle and Sweetgreen have taken away from McDonald's total market share. And despite McDonald's strong ability to operate, Chick-fil-A locations outperform McDonald's by a factor of nearly 1.5:1 (the average Chick-fil-A produces $4.09M in revenue per year, as opposed to the average McDonald's making only $2.67M). Chick-fil-A is also one of the fastest-growing quick-service restaurants in the US.
Nevertheless, no alignment strategy is infallible. Highly stable and quality-centric businesses often focus on optimizing for consistency and efficient execution. Companies tend to stick with what works, so the need for change is often ignored until it becomes too late. While McDonald's is no failure story (they're still extremely popular), the success it has had with being a hamburger joint prevents it from innovating and expanding to new categories.