Oh Burger where art thou?In a major about turn, global fast food giant McDonald's recently abandoned its diversification into healthier eating and redirected its attention to its traditional core product - burgers.
After sustained, high profile pressure from health campaigners and the media, the company changed its menus to promote healthier salads and sandwiches. But customers didn't appreciate the healthier menus. Salads and sandwiches account for only 10% of overall sales, which have been flat since 2002.
The company had tried to change its core business too quickly. It had neither the right image or reputation, nor the right systems in place to sell the new products as effectively as burgers. Its rapid switch of focus alienated existing customers and confused new ones. Those who went to McDonald's generally wanted burgers, not salad. Those who wanted salad didn't consider McDonald's, and the company annouced its first losses in fifty years of growth.
Putting burgers first again has paid off. Since changing back to burgers sales have jumped 30%.
But is McDonald's return to its old ways sustainable? Healthy eating and concerns over obesity are not fading, they are growing. Profits and share prices are up, but for how long? After all, it was the focus on burgers and fries that left them open to attack in the first place.
Diversification isn't easy. It may be the most difficult management challenge of all, and often its essential to continue growing. But, change too fast and you risk getting too far ahead of your customers. McDonald's lost its way because it abandoned its customers, not because its customers abandoned McDonald's. It lost sight of what the brand stood for, who its core customers were, and how fast they could, or would, change. Nor did it work out - or perhaps even consider - how it would attract and serve both exisiting and new customers in the same business format.
Many window companies are diversifying into new home improvement products. Some are diversifying to make good the drop in core replacement casement windows or simply taking advantage of a new growth opportunity. Roofline, vertical sliders, retail composite doors, flat roofing, kitchens, garage doors or hard landscaping, it's a long list. But many are repeating McDonald's error.
When window companies began to offer conservatories, many tried to run before they could walk, and tried to sell conservatories as if they were windows. They used the same sales people, surveyors and installers for both.
It didn't work because each market is different and they didn't think it through. Those who took the trouble to learn and specialised in conservatories did well, and showed slower learners a clean pair of heels.
When markets change we have to adapt to survive. But forgetting who you are, who your customers are and why they buy from you is the path to ruin. The key to success lies in attracting new customers while retaining the old. But can you change without destroying what you value, or do you need to specialise in seperate developments, one dedicated to the existing business and one to the new?