18 Jan 2018
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The Lessons of All-Day Breakfast

McDonald’s SVP Kristy Cunningham, who helped lead the company’s wildly successful all-day breakfast initiative, talks about what the global icon learned from the experience—and what it taught her about herself

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Dan Morrell: When Kristy Cunningham (MBA 1998) arrived at McDonald’s in 2014 as vice president of strategy and insights, she asked her team about the most common requests they were hearing from US consumers. The response was unanimous: All-day breakfast. In the end, all-day breakfast rolled out nationwide in October 2015, less than a year after Cunningham arrived. In this episode of Skydeck, I talked to Cunningham about how she managed rapid organizational change at such a massive scale.

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Morrell: The idea had been bouncing around for 10 years prior to implementation. What were the barriers? Was it operational challenges that had prevented or was it political-- what had stopped this from happening before?

Cunningham: It was definitely an idea that consumers had been asking for, for a very long time. And the biggest barrier, quite honestly, was operations. Which is actually one of McDonnell strengths, but running two day parts at the same time through our kitchens was a good challenge-- just the real estate challenge on our grills and being able to have an Egg McMuffin being served at the same time as a Big Mac. To overcome that, we put together a task force led by a fantastic owner-operator out of Arizona and she said, let's see, let's see how we do this. What would it take, what would we have to change in terms of our procedures, our equipment? And they came up with some really fantastic solutions. And that's, I think, what gave folks confidence that it could be done in their own restaurants.

Morrell: As you're putting together strategy for this, what was the hardest challenge that you had to sort of work through?

Cunningham: Well, so, we knew consumers wanted it. The insight was all-around-- particularly millennials, they want what they want, when they want it, not when we want to sell it to them. It's very easy to say, very hard to kind of change our approach. Part of it is we like to think, well, where McDonald's, we can tell people what they need. This was really a mind shift to have us think externally and really put aside some of the operational pieces.

And because it scored so well in all of our concept work, it scored well across all demographics, it gave people at least a reason to believe. But the proof was actually in getting it into market. And it really demonstrated exactly what we thought it would. It came with high incrementality, which means a lot of folks who hadn't been visiting us in the past, or at least the recent past, came in. It came with a high average check and it drove trade up from some of our value offerings. And because our breakfast sandwiches tend to have a really nice quality perception, it also helped improve our overall quality scores. So, it really was the trifecta in terms of overall performance.

Morrell: So this pilot process begins in the San Diego market. Did you go on site or were you just looking closely at these reports as they came in?

Cunningham: I was not on site, but certainly a lot of folks on the team were. We really closely monitored the results and we look at results across three different dimensions. We always look at the consumer dimension, so what are customers telling us? We do different kinds of surveys, we look at our voice data, which is our receipt-based data.

The second area is around operations, so we look very closely at service times, labor, and really just trying to understand the implications of changing our operations. And then the third, and maybe most important for our operators, is we look at the financial results. So the sales, the guest counts, and the gross margin cash flow implications. And in all cases, this was really a very positive impact. The business case was relatively straightforward.

Morrell: So you get this business case. The pilot works-- or perhaps exceeds your expectations-- and then how long does it take for you to decide that this is now going to roll out nationally?

Cunningham: Well, this is one where, again, I mentioned we're changing the culture and moving much faster. So we actually took on a fair bit of risk where we had not finalized the business case and had not voted on marketing this nationally, but we had to order equipment. So we were kind of getting ahead of ourselves.

But I think as this demonstrated to us, we actually had the ability to take on a bit more risk in order to be fast. Our mantra, at the time, was "the fast eat the slow." And after lackluster business performance for a number of years, we knew we needed to do things differently, we needed to take some bold action. So I'd say that was really the turning point from a cultural perspective, not just within the company, but with our owner-operators and our supply chain partners on getting more aggressive and moving faster.

Morrell: Yeah, as a leader in this organization, how do you think about change and pushing change?

Cunningham: Certainly, you want to paint the vision, and hopefully it's a pretty compelling vision, but you also need to connect the dots. And that's where the blueprints, or the plans, come into play. So folks can buy into the vision, but they also know the steps they need to take along the way. And that's something we've done as part of our Bigger Bolder Vision 2020 plans.

We just invited all of our owner-operators in over the past year to experience all the things that are coming from McDonald's as an experience of the future. So it wasn't just something we talked about, it wasn't just something we demonstrated in a PowerPoint presentation. But they came into a big warehouse where we had set up our restaurant of the future, where you can order from kiosks.

We had delivery set up so they could experience what delivery was all about. We had our mobile app and our mobile order and pay. Our new value programs are hot off the grill beef. So they could really experience it all and it makes it feel much more real than just talking about it. And so I think that's how we've been able to move the line with a lot of our operators.

Morrell: Was this a big lesson internally for McDonald's?

Cunningham: Yeah, I think it was. And it's allowed us to do other things since then that have, again, been able to drive results in a very short period of time. I'll give you another example-- delivery. We've announced we have launched delivery with UberEats. We started discussions with UberEats five weeks later. We had our first pilot restaurants up and running. And four weeks after that, we had 200 restaurants in Miami, Tampa, and Orlando running. Four months after that, we had 3,500 and by the end of the year, we'll have over 5,000 restaurants.

Morrell: Looking back at this entire process, everything from developing the strategy, implementation, and implications, what were the challenges to you personally? What were the hardest things that you had to do during these processes?

Cunningham: Well, for me, I was relatively new to the organization. And coming in from the outside, I didn't have the two, to three, to four decades worth of credibility that a lot of folks here have. That's where, for me, really trying to rely on some of the analytics, to take the emotion out of the decisions-- all day breakfast was a great example of relying on a very consumer-focused idea. But allowing the analytics and the pilot market, so the test versus control, to highlight the opportunity and trying to use that as a platform versus my years of experience at McDonald's.

The other piece was alignment. Alignment plays a really important role. And so the conversations, the side conversations, the helping people get more comfortable, being good at listening to their concerns and then trying to address those. I think those are all part of the whole change management process.

Morrell: You come into a new situation where you have a lot of veterans who've been there for decades and you are building on the skills, your listening skills and being able to react to people in general. I wonder what this process taught you about yourself and how you operate as a leader?

Cunningham: Well, I think it's a combination of a couple of things. So part of it has to do with finding the right people who do provide certain pieces of credibility along the way. I'll give you an example-- again, back on operations. Operations is a huge strength at McDonald's and yet we were using it as a barrier to why we couldn't launch this all day breakfast offering.

So being able to turn that around and say, wait a minute, let's use our strength in operations, let's find someone who can champion it-- an owner-operator who can champion it, in particular-- and really work it. Let's give ourselves a set time period and work really hard at how we change that. Now, that's not something I did, but being able to help identify the people who can help change public opinion, in this case, within the company was really important. And I think that was one of the real opportunities to kind of change folks' way of thinking.

Morrell: Were there moments where you felt nervous about the outcome at all?

Cunningham: This one I felt really good about, but I will tell you there are a number of big bets we're making. And that's really what we're trying to drive with our folks, is this thinking that incrementality isn't enough. It's not going to move the needle for us at McDonald's. We need the big, bold moves. And so, yeah, with the big, bold moves it does come some risk. Partly, I feel really good about the leadership team, about the company, and the operator side. Working closely together, we've got some great talent. I think that's what gives us confidence. But there are always moments you go, God, I hope this works.

Skydeck is produced by the External Relations department at Harvard Business School and edited by Craig McDonald. It is available at iTunes or wherever you get your favorite podcasts. For more information or to find archived episodes, visit alumni.hbs.edu/skydeck.

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