Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
McDonalds Pakistan:
Food and Fun Together
Raza Kamal, Mohammad Zulfiqar Ashraf and Adnan Ali
raza@pafkiet.edu.pk
Abstract
McDonalds is a leading fast food chain that revolutionized the food industry in the world.
In 1980s, many companies expanded into international operations through franchise mode
of business. Though these companies wanted to stick to their original knitting, they had to
attune themselves to regional preferences. McDonalds’ operations in Pakistan are no different
to this theory, but they negated the traditional marketing philosophy of “rule of cumulative
attraction “by locating their outlets where their customer segment is in dense concentration.
McDonalds defied the “rule of cumulative attraction” and “affluent segment being the
trend-setters” by initially locating their outlets in Gulberg, Lahore and Nazimabad, Karachi
instead of “Boating basin” where most restaurants were located. Middle class and working
classes in Pakistan mostly live in Gulburge and Nazimabad. Fast-food industry thrives on footfall of customers and high volume sales at low prices instead of premium pricing strategies.
The very spirit of McDonalds would have been distorted if the general perception amongst
the target market had been that “McDonalds is for the rich”. In 1998, Boating basin a seaside
locality near Clifton, Karachi had turned into a food street and all eating outlets opened within this vicinity being more averse risk project, Pizza Hut launched its outlet in Boating basin,
Karachi in 1993.
Though McDonalds is popular, yet there are many challenges before them. In spite of their
popularity, the different chains are not able to bring much change in their product range and
service conditions. Environmental changes like healthier food preferences, depressive income
levels and variety seeking cuisine requirements dictate that innovative and nutritional value
added products should replace the traditional products.
Keywords: McDonalds Pakistan, Lakson Group of Company, Mission, Fast food Restaurant,
Franchise, Burger market.
The above case was presented and discussed by the main author at AJMC 2013- International Case Conference at Lahore University of Management Sciences, (LUMS), Graduate School of Business Administration in Jan 2013.
The main author is Associate Professor at PAF-KIET and the co-authors are students of MBA program.
Case Study
59
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
Introduction
nationally. (Shamsie, 2005, pp. 692-698).
McDonalds ranks highest on the apex
of fast food industry. For decades, it has remained amongst the top hundred companies
of Fortune 500. Their operations, all over the
world generated revenues to the tune of $ 24
billion in the year 2011. Business consultants
acknowledge the Company for its excellence
on operational practices, strategic insight and
consistent practices. The “golden arches”
span in more than 120 countries with over
30000 locations. This success is not attributed only to luck but also to exacting priorities,
steadfast direction and visionary leadership.
Ray Kroc perfected the McDonald brother’s
first burger stand in San Bernardino in 1954
and set up a fast-food service legendary chain
called McDonalds. He is remembered as visionary who totally revolutionized the cuisine
industry to meet the faster-paced lifestyle of
1960s. He fulfilled the customer’s need of desiring quick nourishing meal, clean environmental conditions and friendly service. The
instant popularity of this format was attributed to environmental conditions prevalent in
United States in 1960s when expanding workforce began opting for “eating out”, increase
in single-home families and combining food
with fun. Later, Ray Kroc perfected the franchise mode of business in States and expanded internationally (Love, 1987, pp.38-52). In
the 1990s, the performance of McDonalds
was not at its best. Other healthier formats
were catching up and customers desired variety. Another concern was the accusation on
fast-food consumption leading to obesity. In
these times, the corporate strategy adopted
was market development by expanding inter60
Franchising
Franchise is the common mode of international expansion for all industries. Firstly, this
forward integration spreads the risk and investment among many stakeholders. It is said
that a franchise opens every eight mins in US
(William, 2002, pp.100-103). McDonalds has
been successful in their international operations. Monitoring the franchisee to maintain similar standards remains a problem but
good companies apply extensive rules and
regulations, training opportunities and stringent quality control measures (Thompson et
al., 1998, p. 313). Every activity is prescribed
by the franchisor and systematic monitoring
is executed to ensure no let-ups. Some entrepreneurial consultants ascribe this methodology as an imitation where tested procesi are
implemented with no room for creativity or
entrepreneurial experiment (William, 2002,
pp. 100-103).
Autonomy in Operations. McDonalds
gives autonomy to the franchisees to design
their own respective ambience and décor.
While “golden arches” is always present as
the logo, yet the interior is diverse across
the globe keeping in mind the local architecture and community feelings. At Salen, Sweden, on the slopes of Lindvallen Ski resort
the building is different and built in a typical mountain style where skiers can virtually
glide to the counter without taking off their
skies. On the other hand, in Beijing, China,
restaurants is a place to “hang out”. They are
part of the community, serving young, old
families and couples lingering on while re-
Case Study
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
laxing or chatting (Zeithaml et al, 2004, pp.
300-301). In Pakistan, firstly, people consume
three meals a day; resultantly more usage opportunity exists. Secondly, family rooms are
located on the second floor so that conservative families could find privacy with comfort.
Similarly, children play areas are towards the
corner of the building so that their usual din
does not become point of annoyance for other customers.
This empowerment to franchisees is not
only restricted to infrastructure but also in
the product innovations. It is interesting to
note that many of the new products added
to McDonalds’ menu over the decades were
developed by franchisees, e.g. “Big Mac” was
developed in 1968 and “Flurry” in 1999 (franchisedirect, 2012). Similarly in India a new
product called “ McEgg” has been introduced
since most customers are vegetarian. (McDonalds India, 2011)
Conditions of Franchising. McDonalds
evaluate a potential franchisee on his/her
good credit history, business experience,
managerial skills and financial soundness.
McDonalds grant this mode of business in
three categories. Traditional restaurants include restaurants in shopping areas and foodcourts, which are granted a lease of 20 years.
Satellite locations includes retail stores, airports, universities and hospitals are granted
lease for shorter durations while STD and
STR format is applicable to smaller towns.
A service fee of 4% of monthly gross sales
is charged from the franchisees. McDonalds
do not provide any financial assistance to the
franchisee. However, training facility is open
to employees to master the specific skill sets
and McDonalds’ operating systems. A Franchise Disclosure Document (FDD) is drawn
between the two parties to cover all the related formalities.
Franchises Network. McDonalds has presence in more than 120 countries and their
revenues from these countries range upto
20% of total revenues; the growth rate in
Middle East/Africa is 6%. (McDonalds annualreports, 2011) In India, McDonalds’ outlets
are over 108 and further expansion is underway(Anand, 2007). In 2012, the revenues
have touched $ 6.3 billion (McDonalds India).
McDonalds donot have representation in
BanglaDesh.
Critical Service Factors
The imprints of success are linked to the
strategy a firm creates for itself. In mid 1960s,
the founding CEO of McDonald laid the purpose and objectives for the organization; to
emerge as the “best quick service restaurant
in the world; provide outstanding quality
service, cleanliness and value, so that every
customer smiles” (Hunger et al,. 1996, p.30).
This became the vision for the organization
where the purpose of the organization goes
beyond the narrow financial objectives and
strives to win the minds and hearts of customers by providing them elated satisfaction
besides it compels the employees to overstretch their service. The vision is translated
into a mission statement that is, “to be our
customers’ favorite place and way to eat with
inspired people who delight each customer
with unmatched quality, service, cleanliness
and value (QSC&V)”. These critical service
factors (CSF) are the core values, which have
Case Study
61
62
Case Study
June 2014
College of Management Sciences
desire of consumers deter customers from
remaining brand loyal. The traditional food
range is wide and people who relish condiments eat at such joints. The Chinese food
restaurants are mostly popular with families
who desire light meals and more formality
in ambience. The western food restaurants
comprising of fast-food cafes and diners are
visited to satisfy desire of change of taste.
Price, variety seeking desire and quality differentiates each of these categories (Ahmed
s. F., 2010). [Figure-1].
Subway), pizza chain (Dominos, Pizza Hut),
family restaurant (Café Flo, Copper Kettle),
grill chains (BBQ tonite, Arizona Grill), dinner
houses (Red Lobster,), chicken chains (KFC,
Nandos) and non-dinner concepts (Dunkin
Donuts, Starbuck). When mapped on the
depth of product line offered and price, all
firms have similarities as well as differences. Similarities are narrow product line and
speedy service while they differentiate on variety, price and perceived values. McDonalds
has a narrow product line offered at moder-
FIGURE-1
RESTUARANT CHAINS IN KARACHI
FIGURE-2
FAST FOOD INDUSTRY
DINER
HOUSES
High
GRILL
CHAINS
Bundoo
Khan
CHICKEN NON
DINNER PANERA
BREAD
Price
served as the beacon of guidance for McDon- ers” or trendsetters in eating habits therefore
alds for all times.
opening an outlet in proximity to this locality
was a natural choice. Marketers consider social classes and status can play a decisive role
McDonalds in Pakistan
McDonalds granted the franchise license in “influencing” the buying behavior patterns
to Lakson Group of Companies for operations of target markets. These early adopters act
in Pakistan in 1998. Lakson Group is a con- as a catalyst in molding the opinions of other
glomerate whose business portfolio includes strata of market (Kotler, et al., 2006, pp. 141Tobacco, Insurance and consumer goods. Mc- 147).
Mission as the Guiding Principle. In this
Donalds’ long-term strategy is executed consistently in Pakistan though it did tailor the moment of ordeal, the mission statement
format to the consumer preferences as per served as the beacon of guidance for McDonthe culture of the country, which is covered alds Pakistan. McDonalds wanted to project
itself as an outlet for the middle-class workin subsequent part of this case study.
Location. McDonalds Pakistan’s first di- ing families where it had been successful and
lemma was; should it open the initial outlet did not want to distort this image. The first
in Karachi or Lahore? Karachi is a trendsetter outlet was launched in Lahore in Sept. 1998
city while Lahore is more of a city associated and a week later in Karachi in the area of Nawith cuisine taste. Should the outlet be locat- zimabad defying previous strategies adopted
ed in the posh localities of Clifton (Karachi) or by other chains. Lahore-outlet was located
Gulberg (Lahore) to act as “influencers” for at Gulberg inhabitants known for their livelithe rest of the country market? These were ness, vigor, penchant for quality foods. On the
double- edged questions confronting the de- other hand, Nazimabad is densely populated
part of the city; where colleges, offices and
cision-makers.
SWOT. In contrast to manufacturing firms residential colonies are located with majority
who choose the most economical location of middle-class and working class as opposed
from production or convenience of distribu- to Defence or Clifton, which is the abode of
tion; a service firm will consider a trade-off affluent part of society. Nazimabad is located
between accessibility to target market, im- in the center of metropolis nearly 30 kilomeage impact factor and cost; and could ascribe ters from Boating basin. The local populace
more preference to any one factor. In 1998, accepted the openings with gusto and soon it
Boating basin a seaside locality near Clifton, turned out to be a booming business.
Karachi had turned into a food street and all
eating outlets opened within the vicinity of Fast Food Industry in Pakistan
this locality. This locality was more risk averse;
Restaurant Industry. Traditional, eastern
Pizza Hut launched its outlet in Boating basin and western food segments the restaurant
in 1993. The affluent residing in Clifton and industry in Pakistan. Each category has a large
Defence area, Karachi, are also the “adopt- customer backing, however variety-seeking
Vol. IX, No. 1
Market Forces
p
June 2014
College of Management Sciences
Sco e
Vol. IX, No. 1
Market Forces
Cooper
Ketel, BBQ
PIZZA
Student
Biryani, KayBee
Local
Low
Chatkharey,
Gazebo
Price / Quality
SANDWITCH
CHAINS
Deli,
Low
Limited
High
Classification within Fast Food. International chains have been quite successful
in the fast food industry. The newer format
of western food is perceived as imitation
of western cultural tastes (point of fascination), quicker service and moderate price. It
gained popularity amongst all segments of
society especially the middle-class families.
The variety of servings differentiates the fast
food industry in seven categories. These are
sandwich chains (McDonalds, Hardees, and
Breadth of Product
Full Range
ate price. [Figure-2]
Market Share. The market share of fast
food industry in Pakistan is around 13 percent. Today the main three players, KFC,
Pizza Hut and McDonalds have varying presence with equal perceived image. KFC has
43 outlets; Pizza Hut has 47 outlets whereas McDonalds has only 23 outlets. However,
McDonalds has 43% market share in fastfood industry. McDonalds is quite choosy in
selecting their locations. The main two me-
Case Study
63
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
tropolises, Karachi and Lahore have eight
outlets each, while in the remaining five cities there is one outlet each. Approximately
50% market share of McDonald reveals, that
in spite of reduced presence as compared to
its competitors the Chain commands the lion
share reflecting more customer acceptability
(Ahmed s. F., McDonalds, 2010). McDonalds
has been picking their outlets with adroitness
always maintaining the purpose, “food with
Fun”; launching outlets at Jinnah International Airport, Karachi or Drive-in outlet at Clifton
beach, Karachi attracts fun seekers automatically. The latest launch at Atrium Mall, Sadder
Karachi helped them become a beneficiary to
the public rush at this recreational spot.
Business Strategy. Since the product line
cannot be expanded, McDonalds imposes a
strategic limitation on itself therefore; has
formulated a strong low-cost leadership as
its business strategy. In the earlier stage of
its operation, they had perfected high level
of process engineering skills, quality control,
cleanliness and friendly customer service
that became the core values of the organization. However, low-cost operation is also dependent upon the intensity of footfalls within
the premises; another imperative for locating
the restaurant in densely populated localities. The prices have to be kept low, service
faster and ambience simple but attractive to
pull the customers.
Food and Fun. The company pursued a
policy of differentiation and distanced itself
from its competitors, KFC, which stood for
chicken, and Pizza Hut, which stands for richness of food. Instead, McDonalds projected
itself as a place for variety and fun-seekers.
McDonalds has been successful to emerge,
64
as a family restaurant since in Pakistan eating
out, is not a luxury, but a recreation. Play section is invariably a part of each outlet where
children enjoy food with fun. This is a point
of differentiation as compared to its competitor like Pizza Hut or KFC. Adults desire change
more often; while, children remain more
loyal and in Pakistan play an important role
in influencing parents to choose McDonalds
outlets. The local management exploits this
psychographic characteristic well. Giveaways
usually accompany orders that have a special attraction for children. For the first time,
McDonalds collaborated with children movie distributors and sponsored movies, Shrek
and Madagascar 2. According to statistics
gathered McDonalds has a 95 percent success rate for their product and promotional
launches (www.McDonalds.com.pk, 2012).
The fries packages and big-Macs are designed attractively to attract children. Lately
the company entered into collaboration with
a music band, “Kal” as the brand ambassador
to attract the teenagers towards their products. McDonalds has a strong market research
department to scan the environmental conditions to bring changes in their products as per
the needs of the changing customer profile.
(McDonalds restaurants, 2011)
Pricing Strategies. Although Taco Bell
came up with the concept of “Value pricing”
in 1998 meaning, “giving more for less”, McDonalds adopted it more readily (Zeithaml et
al., 2004, p.498). Price war as found in the
beverage market equally applies to the burger market. In spite of solid reputation, the
Company does not practice prestige pricing.
Premium pricing cannot be charged in Pakistan due low disposable income of target
Case Study
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
market. It rather relies on volume of orders to
give true value with right prices for products.
Student discount and improving usage rate
amongst non-users is its consistent policy.
McDonalds restricts itself to chicken and beef
offerings but has now also included sea related items. Customers’ preference for healthier
food has made them respond by adding salads and other lighter options to their menu.
Functional Strategies
Marketing Problems. In little over a decade, the operations in Pakistan have not
been all smooth sailing. The first threat faced
by the company was to convince the public
that “halal” meat or chicken is used for preparation of products. Soon after the launch, in
2005, the bird flu had to be combated followed by,” mad cow” fear. These epidemics
effected sales but did not deter the company
to lose heart. Rising raw material cost is difficult to cope up without increasing the prices
but had to be kept compatible with the disposable incomes of the average customers.
There is intense competition from newer formatted chains like Subway, coffee shops and
grilled outlets, which are perceived healthier.
McDonalds also ventures into alliances and
collaboration with local enterprises to gain
impetus to co-branding. Pakistan International Airlines (PIA), Ufone and Coca Cola were
some leading organizations who have varying
degree of partnerships with the company.
HR Problems. Finding the right human resource compatible with the values of McDonald was another issue that required adroit
handling. The workforce in fast food the
world over is composed of college students
of both genders. In Pakistan, this was not so;
but in a short span of time this perception
was corrected. Today most staff comprises of
young well-groomed boys and girls who perfectly emulate a typical McDonald’s employee. In 1990s, waitresses were unheard of in
a local restaurant but the McDonald culture
prevailed and educated girls ventured into
this profession without inhibitions. McDonalds requires employees to be always smiling
while interacting with customers. Such a requirement strikes many employees as artificial. The Company has learnt to encourage
managers to probe employees and assign
troubled workers to be in kitchen rather than
to the order counters (Murphy, 1994, pp. A1,
A18). Today McDonalds Pakistan has 1200
employees performing different functions.
With stringent measures on Q.S.C&V and
training, McDonalds Pakistan meets the corporate standards and extends service to customers with fewer employees as compared
to its competitors.
Training. Most outlets serve time is 90
seconds after receiving orders and 30 mins for
home delivery anywhere in Karachi. This is due
to result-oriented training. It may have been
difficult to emulate the same “ketch up in the
veins of employees”, due to lower literacy rate
and different set of attitudes. The training at
McDonalds focuses on three areas, cognitive,
knowledge learning and behavior modeling.
Two creative methodologies are used for training; Assertive training (AT) where employees
inculcate this important trait in life style and
secondly Andragogy learning method based
on a verified system of adult learning. The
most important aspect of training is displaying
friendly and a caring attitude towards customers (Ahmed et al., 2010).
Case Study
65
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
Corporate Social Responsibility. The initial philosophy of social corporate responsibility, “if you are going to take money out of
a community, give something back” coined
by Ray Kroc is practiced in McDonalds Pakistan (Reingold, 1992, p.67). The organization
provides material support and encouragement to the people who needs it most. Usually they support educational, sporting and
charity programs. The firm maintains Green
Park since 2006, in Islamabad in line with the
“Green Wave” trend supported by the McDonalds Environmental Defense Fund (www.
McDonalds.com.pk, 2012). The company also
supports the Thalassemia Society in Pakistan.
Considering the public swing towards healthier food, McDonalds regularly publishes nutrition content values of their products on
their web site to educate their customers on
how to choose their menu intelligently. The
company recommends a 2000-calorie diet
to remain healthy. (www.McDonalds.com.
pk, 2012). There has been a paradigm shift to
“Better not bigger” strategy in view of health
conscious customers. (Meirselles, 2009). The
Company imports most food related raw
material, as no Pakistani company is able to
meet their stringent standards. The Company
won three international awards in 2009 for
food quality, safety, people hygienic commitment and restaurant cleanliness (Ahmed s. F.,
McDonalds, 2010). McDonalds has invested
Rs. 30 billion in the country and pays Rs. 10
billion towards taxes as compared to Rs. 4 billion by KFC in 2010. (Ahmed S. F., 2010)
Conclusion
“Good to Great” companies do not treat
the mission as an exercise in rhetoric but as a
66
declaration of attitude and outlook. The nine
components of mission necessarily may not
be included in the mission statement as in
the case of McDonald, but is specific as far
as the target market is concerned. Similarly,
profit maximization is not the objective of
the company as is evident from the number
of outlets as compared to its competitors but
overkills on the quality decision. Ray Kroc
once commented, “If I had a brick for every
time I have repeated the phrase Q.S.C & V, I
think I would probably be able to bridge the
Atlantic Ocean with them” (Peters et al, 1987,
p.285). Low profit margin is a characteristic of
fast food industry and therefore McDonalds
competes on service standards, lively ambience and cleanliness.
The vision is transformed into firm’s mission statement. It is binding on the company
to devise their operational strategy to remain
aligned to the mission statement always and
every-time. A firm should not digress from
its mission statement irrespective of odds reflected by regional trends and customer preferences. Marketing undergoes changes according to the needs of customers however,
the “Good to Great” companies changes the
incorrect perceptions of the customers and
brings them closer to reality.
A company also needs to align itself with
the changing realities. What was once accepted, as a newer concept may no longer
be relevant? Perpetuity in lifeline is assured
by change in strategy. Recent trends towards
healthier food formats, competition from
eastern cuisine and building in local preferences are some of the challenges that McDonalds will face tomorrow.
Case Study
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
ISSUES
bience is necessary in McDonalds’ strategy to cater for local tastes, preferences
1. What beliefs and values emerge from
and cultural habits for the franchisee
the vision and mission statements of
outlets?
McDonald? How has McDonalds Paki4. Choose a few of McDonalds’ outlets for
stan applied them?
service survey. Frame a survey question2. Customer’s preferences are shifting to
naire, conduct a customers’ survey, and
healthier food; do you agree that it dicrate each of the outlets on the degree of
tates that McDonalds carry out a paraservice provided by them. Analyze your
digm shift in its strategy?
findings.
3. What changes in product range and am-
References
(2012, Jan). Retrieved jan 25 jan, 2012, from www.McDonalds.com.pk.
(2012, Jan 25). Retrieved from www.McDonalds.com.pk.
(2012). Retrieved Jan 25, 2012, from www.McDonalds.com.pk.
Ahmed, F. e. (2010, may 25). Retrieved from www.slideshare.net.
Ahmed, F. e. (2010, may 25). Retrieved from www.slideshare.net.
Ahmed, F. e. (2010, May 25). Retrieved from www.slideshare.net.
Ahmed, F. e. (2010, may 25). Retrieved from www.slideshare.net.
Anand,R. (2007).” McDonalds in India”, Select Cases in Management, Allied Publishers, New Delhi, pp.468-472
Bovee, C. H. (1995). Marketing 2nd edition,. New York: McGraw-Hill.
franchisedirect. (2012, nov 07). Retrieved nov 07, 2012, from www.franchisedirect.com
G, W. (2002, Sept). Keep Thinking. Entrepreneur , pp. 100-103.
Hunger, C. a. (1996). Strategic management, 5th edition. New York: Addison Wesley.
Kotler, P. a. (2006). Principles of Marketing, 11th edition. New Delhi: Prentice-hall of India.
Love, J. F. (1987, feb). McDonald’s Behind the Arches. World Executive Digest , pp. 38-52.
Murphy, D. E. (1994, Nov 26). New Retailers told to put a Happy face. Los Angeles Times , pp. A1 , A18.
Peters, T. a. (1997). In Search of Excellence. Thorndike, Maine: G.K. Hall & Co.
Reingold, E. (Ahmed F. e., 2010) (1992, Jun 29). America’s Hamburger Helper. Time , p. 67.
Richard Wilson, C. G. (2005). Strategic marketing Management. New Delhi: Viva Books, New Delhi.
Shamsie, J. (2005). McDonalds, Strategic management: Text and Cases, 3e . New York: McGraw-Hill.
Thompson, A. a. (1998). Strategic management: concept and Cases, 10 edition. New York: McGraw-Hill.
William, G. (2002, Sept). Keep Thinking. Entrepreneur , pp. 100-103.
Zeithaml, V. a. (2004). Service Marketing, Integrating Customer Focus Across the firm. New Delhi: Tata McGraw-Hill.
Case Study
67
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
Gary Hamel:
The Future of Management
Azmat Ansari
azmatansari@gmail.com
The message is simple: innovate or die.
Companies who fail to innovate and carve
new paths for themselves are doomed to
wallow in mediocrity;theycannot be counted up as leaders of industry. They cannot
produce iconic products and if they do, the
comparable products of rival industrial units
who innovate still will have a cutting edge.
Gary Hamel, today’s leading management
consultant from London School of Business
cites examples of leading fortune 500 companies that have excelled due better management practices.
Toyota, which evolved and grew into a
dynamic leader in automobile industry, has
remained an enigma for its success. Planners and analysts after wrecking their brains
concluded that in Toyota the frontline worker is given importance. He is not just a cog
in the wheel. He is heard and suggestions
coming from him are given importance. The
supervisors have a paternalistic relation
with him. Relentless pursuit of capturing the
wisdom of every employee is what Toyota
has capitalized on. Much of its success rests
on the pursuit of efficiency and quality. For
more than 40 years, Toyota’s capacity for
continuous improvement has been powered
in the belief that ordinary employee, if empowered will solve complex problems. Toyota’s production system is referred to as the
thinking people’s system. In 2007, Toyota
received 540,000 improvement ideas from
its Japanese employees.The author envisages an end of orthodox management. In
decades ahead,expecting the present-day
managements to be nimble, restless and
fast within the existing hidebound organization and their rigid organizational cultures is
akin to expecting a dog to do a tango.
Hamel defines innovation as,” anything
that substantially alters the way in which the
work of management is carried out or significantly modifies customary organizational
forms, and, by so doing, advances organizational goals.” General Electric is a case in
point. It has a matchless record of producing
leaders. G.E. has remained a market leader
not just because of its superior products but
also because of the superiority of its leaders. In spite of the overwhelming superiority
of innovative management, few companies
possess a well-honed system process for
The author is a journalist (3,000 published articles), playwright (50 plays with ‘Adventure Times’ as the Best Play of the Year), translator,
scriptwriter, narrator and producer of corporate videos.
68
Book Review
Vol. IX, No. 1
Market Forces
June 2014
College of Management Sciences
continuous management innovation. Today,
most managers do not see themselves as inventors.Companies have wrung out a lot of
slack in their operations to become efficient
and increased their profit; but in this wringing out the slack, they have paid a price. Innovation does not necessarily come in nine
to five jobs. It is not possible to create interesting and innovative things in a hurry.
Where is the incentive for people to dream
the future?A survey showed that less than
28 per cent of the employees were fully
engaged in innovating company products.
Imagine nearly 70% of the time they were
paid for being idle. In addition, the gaps did
not pay the companies the added advantage
of engaging their workers to innovative activity because of the simple fact that there
was no system for channelizing innovativeactivities’ leading to innovations.
pose----- to what purpose and to what end
are we working; the message will be more
effective especially if a measure of freedom
is also granted to the employees.
An inventive company takes a road less
travelled. Hamel points that Whole Food’s
commitment to organic products and sustainable agriculture is unmatched. Its stores
are laid out in such a way that it makes shopping less of a routine and more of an adventure. Today, Whole Food operates 294 stores
and generates nearly 600 billion dollars in
sales. Whole Food’s revenue per square foot
was 600 dollars in 2006; double that of other traditional rivals. Whole Food’s approach
to management revolves round democracy
with discipline, trust with accountability,
and community with fierce internal competition. Whole Food builds trust among its
employees in a variety of ways. Every associate (or worker) has access to the compenPassion can make people do stupid sation data for every other store employee.
things, but it is the secret sauce that turns This transparency makes it difficult for manintent into accomplishments. In many com- agers to play favorites or be idiosyncratic in
panies, employees are referred asassociates their compensation decision. Whole Food
and team members to disguise their power- describes itself as a “Community working
lessness; but mere change of name or termi- together to create value for others.” The disnology does not inculcate creativity. People tinctive principles of Whole Food today are
who work with passion and have a sense of love of community, autonomy and egalitaribelonging to a community produce more anism.
while they stay happy and motivated. Fellow
feeling is a key to success.
Bill Gore’s example is interesting. He
The author further deliberates that our dreamt of building a company where imagcorporations focus too much on exhortation ination and initiative would flourish, where
and too little on purpose. The effect of pep chronically curious engineers would be free
talks by CEOs that would make the workers to invent, invest and succeed. He had congive standing ovation is short lived. Nev- ducted a successful experiment in bold and
ertheless, if one focuses attention on pur- innovative management principles. He emBook Review
69
Market Forces
College of Management Sciences
Vol. IX, No. 1
June 2014
ploys more than 8,000 people in 45 plants
around the world.
Almost all of Google’s 10,000 employees work in teams with an average of three
or four engineers per team. G mail that is a
large project might employ 30 people broken into small teams. Every team works on
specific service enhancement dimension,
for instance, all teams have a loose leadership structure. Whatever leadership evolves
moves in rotation so that no one acquires a
rigid bureaucratic attitude.The breadth of
Google’s ambition and its inventions is an insurance policy that promises that Google will
not miss the future.Reinless thinking, fresh
principles and wisdom ---- these are the foundations of a systematic approach to reinvent
management.
70
Gary Hamel is a leading business thinker
whose contributions in the area of strategic
management, change management and present day challenges are not only noteworthy
but considered a paradigm shift in modern
management. The author says that the aim of
writing the book is not to predict the future
of management but to help you invent it. This
is your opportunity to build a 21st century
management model that truly elicits honors,
and cherishes human creativity and passion.
As for technical values, the book has a beautiful typeface, plenty of white spaces to make
reading easy on the eye. Not all headlines are
in black; most are in grey. The size, dimension
and weight of the book are such that when
you hold it in your hands, it appears that you
are really holding a book. This is not so with
every book.
Book Review