McInnovation: How a fast food giant sees the world

CHICAGO — For years in America, McDonald’s was seen as a kind of whipping boy: a purveyor of unhealthy junk food consumed by the masses at ever greater numbers. The emphasis was on quantity, not quality.

It was also mostly tone deaf when it came to entering foreign markets, choosing to simply transplant its stateside menu abroad instead of attuning to local tastes.

That’s all changed over the last decade or so: The $23 billion company has become an innovation beacon and a good model for how to customize the consumer experience at the local level. It now sells items that better touch on current culinary trends and that have a kind of anthropological understanding of native eating habits.

The company’s innovation office, which is not far from its headquarters in suburban Chicago, is responsible for cooking up ideas that appeal to global palates and for streamling the company’s vaunted production and cooking-line efficiencies.

It’s also done everything from creating new recipes for things like smoothies and salads to advocating for more state-of-the-art architecure of its various stores: Once humdrum, Golden-Arch oriented restaurants all looked the same. Now they emphasize modern touches and bolder colors, all with a stronger emphasis on design and user experience.

It’s also helped the company run better, creating better engineered kitchens and client contact points (think cash registers that allow attendents to input order faster and more seamlessly).

But some of the biggest innovations have happened overseas.

According to a recent wide-ranging profile in Fast Company, from 1974 to 2003, McDonald's went from just 13 locations internationally to more than 30,000 in 100-plus countries. Ambitious, yes. But the growth more closely resembled an overstretched waistline than a keen understanding of foreign consumers. Many of the stores were underperforming.

But the company has gradually gotten it’s game face on abroad and has seen great successes.

Some of the boom can be attributed to techniques springing out of the innovation center. But it’s also the entrepreneurs and franchises in local markets who help make sure that the company is catering to the masses.

As a case study in how it has innovated in foreign markets, a good place to start is India.

"The decision to go in wasn't complicated. The complicated part was what to sell,” James Skinner, McDonald's CEO, has said. Skinner helped oversee market-entry into the country earlier in his career.

The initial foray was plagued with bad ideas. The company tried to simply transplant its American menu to the subcontinent, replacing beef with mutton for their burgers, since many Indians don’t eat beef (they believe cows are sacred.)

But the mutton burger just didn’t hit with consumers: The company couldn’t figure out an optimal way to cook it and the product — known as the Mutton Maharaja — ended up being too dry.

Then one of the entrepreneurs that McDonald’s teamed with on a joint venture hit upon an idea. Since many vegetarians in India are also very price sensitive, they created a veggie pattie made from potatoes and called it the McAloo Tikki, named after “aloo tikki,” a cheap potato cake hawked by roadside vendors.

This move to work with native palettes and joint-venture owner-operators has paid dividends.

Now, a look around globally at McDonald’s shows a company that’s very attuned to the ways and appetites of locals.

Germans love their sausages, right? Behold the bratwurst sandwich known as the Nurnburger. According to Burger Business magazine, the bratwurst comes from Howe, a top German sausage maker, and the sandwich name is a play on Nuremberg, a German city and popular sausage style.

But in some places, the fast food giant doesn’t quite go native because people aren’t necessarily wanting that. Quite the opposite: In some places, it actually tries to sell its American-ness to markets that hunger for it. In Hong Kong, for instance, it sells a sandwich called the Chicken Bacon Deluxe as an authentic nod to U.S. taste buds.

As for the look and feel of its restaurants, the company has plans to spiff up 1,600 restaurants overseas. Already it says its newly designed restaurants are paying off in sales in places Europe and in the Asia-Pacific regions.

As it continues to take a bit out of global markets, that local knowledge abroad — and continued push innovation and quality design at home — have made for a happy meal any corporate suit and hungry shareholder can enjoy.