McDonald’s has been in the news a lot lately. There is a hedge fund operator pushing the company to spin out its company owned stores. They just had to re-evaluate the fat content in their products, and discovered that "bad fat" is greater than previously reported. Then they had to report that there were other foodstuffs in their fries, which has led to lawsuits from allergy sufferers. And, while all this is happening, McDonald’s management is saying "hold the course, all is moving smoothly."
Welcome to the Swamp. "It’s always something" Roseann Rosanadana used to say on Saturday Night Live. And so it is in the Swamp. Even though management keeps saying things are fine, there is in fact a never ending litany of problems. Some appear small, and some appear large. But the fact is there are lots of unanticipated problems developing – and management seems to be forced to react from one problem to the next. Regularly on the defensive.
The Success Formula is in trouble. It’s no longer able to produce the desired results. Yet Lock-in is keeping the company implementing the same formula, seemingly unable to get ahead of problems. Because management is spending its time Defending and Extending the broken Success Formula, it’s not able to see that these problems will just keep coming and coming.
McDonald’s desperately needs to Disrupt its Lock-in and create a new Success Formula. That’s the only way to renew itself and get away from all these problems. It’s impossible to predict what the next problem will be, but it’s clear that from Mad Cow to bad fat they will simply keep coming. And for investors, the best thing is to steer clear of management trying to Defend and Extend what isn’t working.
