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Thursday, October 23, 2014

How Product Diversity and Cost-Cutting is Killing MacDonald's, and Possibly Your Business

Wow, I'm falling further and further behind on my wood-related blog posts every week, as I scramble to cover too many bases, and more and more of you send me great ideas to cover. Keep the suggestions coming in, I'll get caught up sooner or later.

But today, I'm going to divert off wood specifically to talk about the weird trends in our economy, and how I believe the signals are being misread by so many. In the news yesterday was McDonald's quarterly report revealing that their profits are off by 30% from the same time last year, on a 3% drop in sales. Watch the whole video below, the reporters' comments tell a lot about the companies issues.




As they mention, increasing raw material (food) and labor costs are hurting...but the meat of the story (sorry) is in the comment..."Is their food real?"

Sad to say, Mickey D's management hasn't realized their food quality problem, as they've been busy expanding their menu and tearing down old kid-friendly restaurants and building new, trendier hangouts that look more like Starbucks and Panera. It is a classical case of newly-minted executive MBA management not liking "the horse that brung 'em."

I noticed the same thing with Wendy's a few years ago when good old Dave passed away. You remember friendly old Dave, he was always on TV telling you how the quality of their food was the first principle of the business. And Wendy's undoubtedly sold some of the freshest food you could get in a fast-food chain. But within a month of Dave's passing, I noticed an odd thing in Wendy's burgers...the bun's started tasting like cardboard, the burgers no longer had crunchy lettuce and onions on them, and the fries were different. In fact, the new management, under the leadership of Dave's daughter as I recall, was taking them in a new direction, toward a more diverse menu. But in the process, the old reliable burgers and fries suffered.  And they are still that way today. I quit going to Wendy's.

Just this afternoon, I decided to test McDonald's once again, in order to make sure this post was spot on. As I pulled up to the drive-through window, I noticed how big the menu was. For years (decades!), up until a couple of years ago, I had simply ordered the Quarter-Pounder with Cheese Meal, super-sized the fries and drink, and added an apple pie if I was hungry. But today, I noticed myself weighing the options...would it be a salad, or a "Southern-style" (yeah, right) chicken sandwich, a McWrap, or something else? In all, their were sixteen "value meals" along with three other full boards of menu items, so many that I didn't even have time to scan them all. I decided to give the old stand-by a try.

Now before I go any further, let me digress a little. For years, when I spoke at short-courses and industry meetings on quality control, I usually included a little anecdote about McDonald's versus Burger King burgers. I actually like the taste of a well-prepared Whopper better than a Quarter-Pounder, but I had found out based on 10,000 or so personal test points that Whoppers are more variable...and the likelihood of getting a really dry or crappy Whoppper was fairly high, and depended on the attitude of the cooks that day. In contrast, McDonald's has always excelled in quality control...a Quarter-Pounder in California tastes exactly like a Quarter-Pounder in Pennsylvania, every day of the year. So, when I get ready to pull over, I have to make a mental decision...do I want a Quarter-Pounder that I can rely on, or take a chance that the Burger King isn't suffering from a hangover? Usually, I pulled into Mickey D's. A great tale on the value of quality control.

So, as to my lunch...well, to use the common vernacular, it sucked. The bun was dry and the texture of the meat was somewhat like...well, it was like nothing else that I can recall eating. I understand why folks are questioning whether the food is real, or not.

But the nub of this story is, that the declining quality of the Quarter-Pounders, Whoppers, and Wendy's Singles is not the price of great alternatives on their menus...rather, it is symptomatic of companies losing focus on what they do best, to try to do more, with the result being mediocre at it all.  Want to know why sales are down at these chains? It's not because they offer too little variety, or too few personal options as most commentators are suggesting...but it is because everything they offer in their new product strategies is mediocre.

One company that hasn't yet fallen for this siren call is Chick-Fil-A. Sure, they've added a couple of salads for those grazers who have to sit with their chicken-sandwich-loving friends and relatives. But the Chick-Fil-A menu is still basically...chicken. And it's good. And that fact is related in the company's profits. Look at the last column of the chart below, and notice how much higher the sales-per-store figure is for Chick-Fil-A than their competitors.
Source: http://www.qsrmagazine.com/reports/qsr50-2013-top-50-chart


Chick-Fil-A's success is the result of focus on what their company does best. And they generate those numbers in six-days-a-week, instead of their competitor's seven. A pretty good business model.

So, what has this got to do with the wood industry? I suspect you're way ahead of me by this point, but let's click it off one point at a time.


  1. The necessity economy.  While the government data-crunchers continue to tell us of the solid growth in the economy, they mean that sectors supported by public spending are doing well. Businesses selling real goods know that practically every other sector is soft. And companies that are selling to the middle class, the engine of our economy, are finding that costs are swelling much faster than customers' appetites for new floors, cabinets, or furniture. Fast food chains and Wal-Mart are struggling not because people want more selection, and only marginally because the internet is offering that selection, but because generally, people are getting used to a family budgeting paradigm of less spending on prepared food, clothes, and furniture. Utilities, insurance, higher mortgages and rents, and taxes are taking much larger shares of everyone's wallets these days, so demand for non-essentials is soft with no real surge in sight.
  2. Customer focus on quality. With that reduced budget for non-essentials, people are being more selective with their purchasing decisions. Here in the western world, we have so much stuff that we've reached the point that we don't need more of the same old same old...but we will buy better. Kitchens will be upgraded, but the upgrades will provide value for the dollar spent. Homes will be built, but quality features will be the selling point over generic size. Furniture buyers are looking for that unique piece to complement their room, not a full suite of new, mass-produced sameness. Customers have the tools at their disposal to comparison-shop like never before...and they will find and purchase value. Slick salesmanship of extra inventory won't work nearly as well as it used to.
  3. Producer focus on what the company does best. The companies that prosper in the coming tough years will be those that understand what their best product is, and shift more resources to that product line. More sales, marketing, purchasing expertise, and manufacturing technology will be committed to becoming the best in the world at making that product, instead of diluting those resources over a too-broad product line. Focus on improving that line, and the options it is offered in, but don't try to offer so many different lines that customers get distracted from their purchasing intent. Nowadays, when people walk into a showroom, they are looking for a specific product, and they are looking for the best they can get. If you make it, they will buy from you...but if your competition makes a better one, they'll figure it out and buy from them. You're better off not to make a mediocre product, and lose their business, than to make it, and lose it anyway.
  4. Continuous improvement in the face of competition. No market ever stands still, and companies must be committed to continuous improvement of their products, services, and processes to deliver them. Managers must be fully committed to hiring and keeping only the best employees, and investing time and money into them. Ideas must be encouraged, and implementation of great ideas must be fanatical. Have you ever had a great idea, only to see a competitor come out with it while your company is still talking about it? Don't let that happen again.
  5. Avoid the "all things to all people" syndrome. It doesn't work.
Which brings me back to McDonald's. Their sales are declining even as they rebuild chic new restaurants and serve tofu burgers and organic mocha latte.  Why? Because those people, the folks who frequent Starbuck's and Panera, were never their biggest fans, and never will be. Management of McDonald's may like those hipsters better than the moms and dads with carloads of noisy, messy three-year-olds, and good-old-boys in pickups with a hankering for a heavy dose of carbs, protein, and sugar, but those are the folks that made McDonald's what it is, and they will stay away from the new, toned-down, quiet shrines of mediocre food. They want Ronald, and climbing structures, and inexpensive, good food. If management of McDonald's wants to really be successful, they'll re-focus on that model and figure out how to deliver it in a clean, healthy, bright, format. And the business will come flooding back.

And please, bring back those fried apple pies! The baked ones taste like the cardboard they come in. I Go Wood in almost everything, but I draw the line at chewing cellulose in my dessert.





Thursday, October 16, 2014

Great Designs in Wood (60) - "Harmonie Hall"

Here's a well-named building in Kobe, Japan, that demonstrates another fundamental truth about building with wood...that wood makes every other building material look better through association.

Harmonie Hall, Kobe, Japan. Photographer:Tomoki Hahakura Source: http://www.dezeen.com/2013/06/24/harmonie-hall-by-takenaka-corporation/

"The Kobe International Junior High School and Senior High School Harmonie Hall was based on an idea of a clear and open axial plan utilising concrete and wood to respond to the campus' history while creating a new relationship with the natural landscape. Harmonie Hall is an ancillary facility that includes a teacher's room, storage, toilets, and a gymnasium that can be used as both a basketball court and an auditorium.
This building is designed to capture the most from the rich surrounding environment while inheriting the formal language of the campus as it exists today. Functionally, gyms tend to be enclosed spaces removed from their surrounding environment, but this time, by utilising a wood structural frame, the building is in concert with the vibrant local environment as much as possible.
The context for this project was a combined junior and high school located in the peaceful hills overlooking Suma with a view of the Akashi Straits and Awaji Island. This school was established in 1992 with aims to foster women with prolific knowledge and grace, and the campus has since been designed with the theme that the campus has made an impression on their memory." 
- http://www.dezeen.com/2013/06/24/harmonie-hall-by-takenaka-corporation/ 
Harmonie Hall, Kobe, Japan. Photographer:Tomoki Hahakura Source: http://www.dezeen.com/2013/06/24/harmonie-hall-by-takenaka-corporation/

 Go here for a great slide slow and write-up of the building...

Build a concrete building, and you've got a bunker. Build a glass building, and you've got a cold, inefficient gallery. But add wood, and you've got harmony of material...a warm, inviting habitat for humanity...and a great addition to the planet.

Friday, October 10, 2014

Great Designs in Wood (59) - "Treet"

Aasmund B. wrote from Norway yesterday to confirm that yes, they are indeed proud of the heritage evoked by their "stavkirkes". But he also wanted the world to know that the Norwegians are taking the lead in modern wood construction by building a 14-story wooden building, called "Treet", in Bergen.

Thanks again to the excellent efforts of folks at reThinkWood, we have a video that tells us about the Bergen project, including great design and project justification detail. Naturally, as this is a Scandinavian project, this is not for bragging rights...the project is all about function, efficiency, and stewardship of the earth. As it should be.




In an interesting twist of history, the Battle of Bergen in 1181, the time of  construction of the famous stavkirkes, helped establish Bergen as one of the major centers of trade in Northern Europe in the 13th century. This interesting battle was between a group called the "Birkebeiners" (meaning "birch leg-ers", or something like that...some of the Birkebeiner army were apparently poor people of the forest, and wore birch-bark leggings and shoes) and the "farmers army", who were apparently trying to foist a fake king on the land. During the ongoing civil war that carried on for decades after the battle, the brave Birkebeiner rescued the true king, a two-year old waif named Haakon Haakonsson, and trundled him away over the mountains in the dead of winter to safety.
...In 1202, when King Sverre died, he had managed to acquire most of Norway, but in Østerdalen, the Baglers were still very powerful. Sverre's death meant some decrease in the power of the Birkebeins. His successor, King Haakon Sverresson, died only two years later, leaving his son Haakon Haakonsson as the ultimate target for the Baglers to get rid of the Lord on his dark throne. In 1206, the Birkebeiners set off on a dangerous voyage through treacherous mountains and forests, taking the now two-year-old Haakon Haakonsson to safety in Trondheim. Norwegian history credits the Birkebeiners' bravery with preserving the life of the boy who later became King Haakon Haakonsson IV, ended the civil wars in 1240 and forever changed Northern Europe's history through his reign.
-source: Wikipedia 
Skiing Birchlegs Crossing the Mountain with the Royal Child, painted by Knud Bergslien. Painting located at The Ski Museum. Holmenkollen, Oslo, Norway. Source: Wikipedia.

This romantic event is still celebrated every year in Norway, and around the world where Norwegian descendants reside, with festivities...
Today, the historic event of the rescue of Haakon Haakonsson is honoured in Norway by three annual sporting events, a run, Birkebeinerløpet; a mountain bike race, Birkebeinerrittet; a cross-country ski race, Birkebeinerrennet and, beginning in 2012, Landeveisbirken, a road bicycle race. Common for the bike and ski events is the requirement of carrying a backpack weighing 3.5 kg as a remembrance of the child the Birkebeiners had to carry on their journey. The bike and ski events start in Rena and all three events finish at Lillehammer. There are also sister cross-country ski races held in Hayward Wisconsin (USA) (the American Birkebeiner), in Edmonton (Canada) and in Falls Creek (Australia).
Wooden churches, birch bark leggings, toddler kings, and now the tallest wooden building on Earth. Just a small part of Norway's rich contribution to a world Going Wood.

Thursday, October 9, 2014

Great Designs in Wood (58) - The Stavkirke

Another of the seemingly endless testimonies of wood as the greatest of building materials is the stavkirke, or stave church. These ancient buildings of worship were built centuries ago and stand today as testaments to the wisdom and skill of their builders.

The stavkirke in Urnes, Norway is the oldest, built in 1130...just about the time the Chinese were building the Sakyamuni Pagoda that we looked at in GDiW(11).



The largest is in Heddal, Norway, and was built about a hundred years after the smaller church in Urnes.



To those who think that "saving trees" by discouraging the use of wood in buildings and other products is the way to save the planet, consider how long the carbon in those church logs has been sequestered...centuries longer than all the other 12-century trees in that region, which have died and returned their carbon to the atmosphere.

And besides saving the planet, these old wooden churches probably helped saved a few souls as well. Not a bad return on investment for labor and lives well spent.

Friday, October 3, 2014

Great Designs in Wood (57) - The L'Aquila Earthquake Recovery Project

On April 6, 2009, a major earthquake rocked the ancient town of L'Aquila, Italy.
"The earthquake caused damage to between 3,000 and 11,000 buildings in the medieval city of L'Aquila. Several buildings also collapsed. Two hundred and ninety-seven people died in the earthquake, including six Macedonians, two Czechs, five Romanian citizens, two Palestinians, one Greek citizen, one French citizen, one Ukrainian citizen and one Israeli citizen, and approximately 1,500 people were injured. Twenty of the victims were children. Around 65,000 people were rendered homeless.
The main earthquake was preceded by two smaller earthquakes the previous day. The earthquake was felt as far away as Rome (92 kilometres (57 mi) away), in other parts of Lazio, as well as Marche, Molise, Umbria and Campania. Schools remained closed in the Abruzzo region. Most of the inhabitants of L'Aquila abandoned their homes and the city itself; in the city centre of L'Aquila, and the nearby village of Paganica which was also badly damaged, many streets were impassable due to fallen masonry. The hospital at L'Aquila, where many of the victims were brought, suffered damage in the 4.8 aftershock which followed the main earthquake an hour later. Powerful aftershocks, some only slightly weaker than the main shock, were felt throughout the following 2 days.
Many of L'Aquila's medieval buildings were damaged. The apse of the Basilica of Saint Bernardino of Siena, L'Aquila's largest Renaissance church, was seriously damaged, and its campanile collapsed. Almost the whole dome of the 18th-century church of Anime Sante in Piazza Duomo fell down. The 13th-century Basilica di Santa Maria di Collemaggio collapsed from the transept to the back of the church, and Porta Napoli, the oldest gate to the city, was destroyed. The third floor of Forte Spagnolo, the 16th-century castle housing the National Museum of Abruzzo, collapsed, as did the cupola of the 18th-century Baroque church of St Augustine, damaging L'Aquila's state archives. This church had been rebuilt after it was destroyed in the 1703 earthquake. The Cathedral of L'Aquila has lost part of its transept and maybe more with the effects of the aftershocks. Slight damage was also reported to the Baths of Caracalla in Rome, but other Roman monuments such as the Colosseum and Roman Forum were unharmed.
While most of l'Aquila's medieval structures suffered damage, many of its modern buildings suffered the greatest damage, for instance, a dormitory at the university of l'Aquila collapsed. Even some buildings that were believed to be "earthquake-proof" were damaged. L'Aquila Hospital's new wing, which opened in 2000 and was thought capable of resisting almost any earthquake, suffered extensive damage and had to be closed."
- Source: Wikipedia 
The devastation and shock of that day looked frightfully familiar...



The silver lining of this dreadful episode...new building codes have been implemented, codes that reflect the growing awareness that wood is man's best friend, at least when it comes to building. Especially hopeful is the last thirty seconds of the following video, in which the narrator acknowledges that man has always known the value of wood in construction, and points to some great examples of that knowledge.


By Going Wood again, Italians are rediscovering the wisdom of the ages. I only wish our American regulatory folks would wake up. More on that in the next post.