Behind McDonald’s Japan's turnaround: success comes with a curse and the name of it is complacency

Mcdonald’s Japan hit a high in the decade following the turn of the millennium but in 2010 saw a 30% fall, resulting in a 26 billion yen loss.

The reason for this, according to McDonald’s Japan CEO Sarah Casanova, was complacency and this spurred the company into a raft of major changes and a return to customer-focused business decisions.

Speaking at Advertising Week Asia in Tokyo, Casanova said: “Success comes with a curse and the name of it is complacency.”

She cited the definition of complacency, adding that it means “self-satisfaction, especially when a company is unaware of dangers or deficiencies. The more profitable and the higher you are, the more susceptible you are to this infliction that creeps into corporate culture. If your business gets to number one and stays like that for a decade or so, you’ll have no immunity.”

She said that this disruption happens faster now because of the speed of innovation in technology and faster shifts in demographic change.

“In the old days those at the top of the totem pole rarely got knocked down but today we live in as era of change that is unprecedented in speed and scope due to demographics, globalisation and technology.

“Look around and what do you see? Entire global businesses sand sectors disrupted by competitors that came out of nowhere. Amazon and Rakuten are disrupting anything that can be shipped in a box. Tesla has a higher market cap than General Motors. Even Toyota is nervously looking at Google. Whether disruptors are directly impacting or not, they have the lock on customers eyeballs,” she said.

The company in 2010 started a process of change with a refreshed leadership who then took on the task of writing a plan. The plan covered four parts; customer-focused initiatives, investing and upgrading the restaurant portfolio, localised business structure and major cost and resource efficiency.

In terms of cutting costs, the business closed 130 loss-making stores and trimmed the business down in areas that weren’t customer facing. To localise the business it turned the Japan head office into a ‘restaurant support centre’ which gave decision making back to the stores.

A core part of the downfall was around how tired the stores had gotten, according to Casanova. She said the company had focused on expansion instead of investing better into its existing stores, and so a key part of the turnaround was upgrading the look and feel of the restaurants.

The final part was customer-focused initiatives, which included changing the menu, regaining trust around food safety and quality and communicating such changes.

The quality of the food and perception had hit an all-time low, according to Casanova, so a key strategy was to create a trusted space online where all the food’s nutrition and ingredient information could be found. The packaging had a QR code added that linked to the information and social media was used to link to the website.

“Food safety and quality is where trust had been broken,” said Casanova, “Once we’d improved it, we needed to communicate this. One thing I learnt from my time with mums was that they wanted more information.”

“With all the fake news on the internet these days, the constant barrage of weird rumours about McDonald’s food. We’ve all heard them. We are starting to put those rumours to bed by being more transparent than ever about our food,” she added.

Once the foundations were in place the company then looked to communicating the fun aspect of visiting McDonald’s again and the new foods and promotions it was launching. Creating interactive elements and allowing people to vote and be more of a part of the advertising supercharged the awareness, she said.

According to McDonald’s it’s set to make a 15 billion yen profit this year and if there’s one thing that really helped this happen, Casanova says it’s listening to customers and empowering frontline staff to make it happen.

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