The Chemistry of Strategy tm Newsletter January 29, 2014

Critical mass -- a trigger for growth

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In 1966, following a successful initial public offering in 1965, the McDonald's fast-food restaurant chain introduced their first local TV commercials. Up until then, they had relied exclusively on radio and print advertising.

By the end of 1966, McDonald's recognized that they had enough restaurants in sufficient markets across the U.S. to benefit from national TV advertising, a very expensive investment for a company as small as they were back then. (At the time of their IPO, they had 710 stores in 44 states, generating $171 million in sales.) Unfortunately, most of the available prime-time advertising slots were already sold by the time McDonald's was ready to buy.

With the new year looming and a limited marketing budget, their best, and perhaps only, opportunity to test the national advertising strategy was a brand-new, unproven sporting event scheduled for January 1967. There was still time available for this untested event, at the affordable price of $37,500 per 30-second commercial.

McDonald's didn't feel great about the deal, and got CBS to throw in a few Saturday morning kid's TV spots. But they went ahead with it.

The McDonald's advertising purchases totaled $175,000, which at the time was the company's largest marketing expenditure ever. When 60 million people watched that very first Super Bowl, it put McDonald's on an entirely new growth trajectory. By the end of 1967, they had invested $2.3 million (about 1 percent of sales) in national advertising. 

There are two strategic lessons in this story.

Growth is an essential element of company strategy. Why? Not because growth by itself is important, but because of what strategic growth can enable. Growth provides your company with the resources to invest in more expensive, more productive ways to create and deliver your product. This is essential for survival In a market where competitors are steadily raising the bar. "A laurel rested upon quickly wilts," as McDonald's founder Ray Kroc was found of saying.     

Critical mass is the "strategic law" that accelerates growth. A focus on growth that achieves a critical mass threshold is strategic. McDonald's geographic growth crossed a threshold that made national TV advertising useful in 1967. Their revenue and profit growth crossed the threshold that enabled tapping into the IPO market for capital in 1965.     

What are the thresholds your strategy is focused on reaching? How are you going to achieve the critical mass that enables you to accelerate to the next level?

Create a strategic plan with your team

"Destiny is not a matter of chance, it is a matter of choice;
it is not a thing to be waited for, it is a thing to be achieved."
William Jennings Bryan

A well facilitated strategic planning process is a proven way to create a focus that best utilizes strategic laws like critical mass.

How long have you been saying that you are going to develop your strategic plan, but you haven't yet done so? Why? Perhaps it remains on your to-do list because it feels like a huge, laborious process and you haven't the time to spare to do it. Peak-performing companies have a clearly defined strategic plan…and it doesn't have to take long to create an effective one.

Your executive team costs you over a million dollars a year. Are you fully utilizing them? It's a waste of time and money to create a plan that they don't own and implement.

John W. Myrna

is co-founder of
Myrna Associates Inc


Create and Communicate Your Strategic Plan

Coming in April

The Chemistry of Strategy
by John W. Myrna

I read business books about Fortune 500 companies for the same reason I read National Geographic: They both show me things I'm unlikely to experience myself.

The Chemistry of Strategy is for the not-yet- Fortune 500-sized companies and divisions, with practical growth advice based on real experience.

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The Four Reasons Your Employees Don’t Execute Your Company’s Strategy
published by The Conference Board
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Danya International

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