Ray Kroc (1902–1984) can rightfully be said to have changed the eating habits of our entire planet. For many years he successfully earned a living selling paper cups before moving on to peddle milkshake machines. At over 50 years of age he then decided on a bold career change. A sales trip in 1954 took him to a hamburger joint in San Bernadino, California, run by the McDonald brothers. Ray Kroc was surprised by the number of mixers Richard and Maurice McDonald had ordered for their restaurant. But he was even more surprised when he saw his machines set up in eight banks of five, enabling 40 milkshakes to be made simultaneously. And that was not all: the entire restaurant was organized along principles similar to those governing Henry Ford’s production lines. Everything was extremely efficient, so it took just 60 seconds to serve each customer. However, what probably bowled Kroc over the most was the presence of such a high number of customers.
Ray Kroc then did something remarkable. He recognized a future that had already happened. Kroc persuaded the McDonald brothers to sell him the license allowing him to use their name for a chain of franchised fast-food restaurants. In return the brothers would receive a certain percentage of the sales generated by each franchisee brought in by Ray Kroc. As early as 1955, he opened the first branch of McDonald’s in Des Plaines, Illinois. That restaurant was soon followed by many more, but in spite of the brand’s great success in penetrating the market, the company found itself in such dire financial straits during its start-up phase that it almost went bankrupt. That situation changed immediately when Kroc hit upon the idea of also buying the properties and then leasing them to franchisees, giving him control not only over the sites chosen for the chain’s restaurants, but also giving him greater influence over his profits.
Like a man obsessed, Kroc perfected every detail of the concept, whereby quality, service, hygiene, and low prices always topped his list of priorities, driving both innovation and a constant striving for standardization. In 1961, he succeeded in persuading the McDonald brothers to leave the company altogether in return for a payment of just $2.7 million dollars. In business terms, that was a very farsighted decision, for here too Kroc recognized something that eluded others—the tremendous potential of the concept when combined with effective marketing.
Kroc duly launched an extensive advertising campaign, which resulted in the creation of the clown Ronald McDonald as a promotional figure and a comprehensive market breakthrough. By 1963, Kroc was already able to open his five-hundredth restaurant, and in 1967 he started expanding outside the United States. Kroc’s pioneering fast-food restaurant concept changed the world. And it all began when he interpreted what was going on differently from all his peers. He recognized a future that was already happening.
So what can Kroc’s approach teach us about how to innovate effectively? When he entered that popular and highly efficient hamburger restaurant in 1954, he recognized how perfectly the concept fit the spirit of his age. Suburbs were springing up across the United States, people were being made increasingly reliant on their automobiles, and Americans throughout the country were becoming more mobile. Comfortable, quick-service restaurants serving inexpensive food perfectly matched people’s changing habits. Kroc did not try to predict the future, he observed the present, looking at what was going on right before his eyes. He then drew the correct conclusion, deciding that the behavior he was seeing, triggered by developments that had already taken place, was likely to continue.
One of a manager’s most important tasks is to recognize change that has already occurred. And the trick here is to spot it early enough to be in a position to exploit it as an opportunity. That was precisely what Ray Kroc did—and not only once, but repeatedly, just a few examples being his recognition of the concept’s potential, his establishment of the company’s franchise system, his perfection of its standardization, the substantial expansion of the brand’s marketing, and the group’s internationalization starting in 1967. Kroc would have been proud to see what the management of McDonald’s went on to achieve after him and would probably have been particularly happy about the innovation of the McDonald’s-owned coffee-house-style food and drink chain McCafé. The first McCafé was opened in Australia in 1993 and is a perfect example of recognizing a future that had already happened.
However, recognizing change must not be left to chance. Instead, organizations need to establish a method that will enable them to spot changes and act on them to their advantage. Indeed, all the aspects of management showcased in this part of the book (including questioning assumptions, spearheading change, innovating systematically, capitalizing on success, heeding the unexpected, practicing purposeful abandonment or creative destruction, and exploiting fresh know-how) are geared toward ensuring that one of managers’ most important tasks is to take innovation seriously and constantly seek ways of boosting an organization’s power to innovate. One common thread running through the biographies of successful entrepreneurs is that they all made innovation a high priority.
McDonald’s has undeniably been a momentous success, but it ought to be stressed that the company’s triumph was first and foremost the result of sheer hard work. Ray Kroc reiterated that when he said: “Luck is a dividend of sweat. The more you sweat, the luckier you get.”1 So it will probably come as no surprise that Kroc worked for McDonald’s right up until his death. In fact, even though he was wheelchair bound for the last years of his life, he traveled to his San Diego office almost every day to indulge his passion for business.
In which current trends, events, or clear breaks with past patterns or behavior in your sector or society as a whole can you recognize a future that has already happened? What exactly do you plan to do about it?
Seek out the future that has already happened.