HOW MCDONALD'S AUSTRALIA REDISCOVERED ITS INNOVATIVE SPIRIT

MCDONALD'S is such a ubiquitous part of the Australian landscape today that it is easy to forget how it changed the game for fast food when it arrived in this country 45 years ago.

The first restaurant, at Yagoona in south west Sydney, was non-descript compared to today's standards, but it was one of the first steps towards what is now a thriving quick service restaurant industry in Australia.

It is a big company now, with 955 restaurants Australia wide and $5 billion sales, and is the dominant player in quick service restaurants in the country.

McDonald's Australia managing director and CEO Andrew Gregory (pictured) told a Gold Coast Central Chamber of Commerce breakfast event recently that despite the size of the company, it is still at its best when it is innovating.

This is the company that brought drive throughs and 'extra value meals' to the Australian consciousness. It invented McCafe and took it to the world.

So after a period of stagnating growth, the business has returned to its innovative roots through initiatives such as barista made coffee in all drive throughs and make-your-own burger touchscreen computers.

These initiatives have ensured McDonald's Australia has outperformed the rest of the international business in recent years.

But how does such a large organisation manage innovation? Here are some insights that Gregory shared with the audience at Bond University last week.

Consumers reward leading companies

To find the secret behind the company's strongest periods of growth in Australia, Gregory and his team looked back through its history and found strong growth correlated with innovation and leadership.

"The simple consistent thing that we did was disrupt the market or lead the market, we didn't follow," says Gregory.

"We did things that were new for our customers, we listened to our customer and we did them as one McDonald's system. It is an incredibly powerful part of our business when 955 restaurants move as one."

Know your market

McDonald's is a global corporation, but it allows the leadership team in each country to tailor the restaurants' offerings based on local tastes.

The Australian business had enjoyed success when it invented the McCafe in the early 1990s, as it tapped into the nation's love of coffee.

But Gregory says drip coffee and brewed coffee is not relevant to Australian customers.

"For us, to sell drip coffee or brewed coffee, we weren't meeting Australian customers' needs or expectations in our business," he says.

"Every coffee you order at McDonald's is now hand crafted, custom-made coffee."

Progress, not perfection - free your business from innovation blocks

The upshot of the decision to serve only barista-made coffee was that service was going to slow down - a big call for a quick service restaurant chain.

Also, innovating in a business with 955 restaurants was daunting for those in head office.

However, Gregory says a mindset change freed the company to pursue change.

"When we tried something new, the first thing we thought was, 'how are we going to do this across 955 restaurants around Australia?'"

"We were already trying to figure that out, and putting barriers in our own way, because we needed to work out the 900-restaurant solution before we did the one-restaurant solution.

"So we have flipped that around now and we don't consider scale whatsoever until we find something that works in one or two restaurants, then we find boffins who can come in and work out the 900-restaurant solution.

"It is a really important mindset change and a really good part of the success and how we have moved faster than we have in the past."

Now, 99 per cent of the coffee served in McDonald's Australia restaurants is manually ground coffee produced with an espresso machine and manually steamed milk.

"This is something that, over the past two years, has doubled the amount of coffee we sell in McDonald's in Australia. Now, we are by far the largest coffee seller in the market."

Drive through service times are also back to what they were when drip coffee was served.

Don't forget the customer

"In a franchisee business, I can guarantee you that when you have a franchisee who makes money on profit and loss, while we make money on the top line and suppliers make money on their own accounts, there are some tensions within the organisation," says Gregory.

"That means that sometimes the customer gets lost.

"We have had experiences when we haven't grown the business and when we look back at why we haven't grown - it is because we haven't had the customer at the table figuratively when we made business decisions.

"We have been caught up worrying about how much of the share of the pie we are all going to get versus actually growing the pie in the first place.

"When we talk about customers in a franchise organisation it is crucial that we put them in the centre of the table versus worrying about my interest as a corporation, or about the franchisees or the suppliers."

Think long term and short term decisions fall into place

Relevance and modernity are crucial to the company's success, says Gregory, but customers were telling him that McDonald's wasn't keeping up with the times.

"Australians want companies to be successful, they want them to change and want them to be relevant," he says.

McDonald's Australia has a 2020 vision plan in place that Gregory says refocused the group.

"We were caught up a couple of years ago looking at the near end, the next week and the next month," he says.

"We forgot about how the short term tactical decisions are so much less important than the long-term strategy and having a vision for success into the future.

"Simply having something called The Way Forward 2020 in a franchise system was crucial to get some of the difficult and important short term decisions made with our franchisees.