Saturday, February 8, 2014

Has CrossFit found the Blue Ocean?

If you're not familiar with CrossFit, it's the new kid on the block in the world of exercise.  Generally speaking it's primarily repackaged calisthenics, sometimes with the addition of weights supplementing the user's own body weight.  This video provides a more action packed explanation.  Costing upwards of $200 a month for access to a few classes a week places CrossFit on the high end of the price scale.  Conversely these classes do not provide access to the latest in technology, nor an individualized workout, which would take time and effort to develop. There are neither treadmills nor a pool to maintain.  Instead there's a tractor tire, a kettlebell, and a pull-up bar, all of which last forever. For this reason the start-up costs of a CrossFit gym are often 100 times less than a traditional gym. (Not surprisingly lowering this traditional barrier to entry has caused increased competition, with the number of CrossFit gyms quadrupling in the past four years.)

So how has CrossFit been able to charge a premium price while maintaining such low costs? One possibility is their customer inclusive culture, which is valued by the customer, without increasing cost.  Bolman and Terrence state there are several tenets of developing a culture that are broadly applicable to groups and teams:

  1. Specialized Language: CrossFit has developed a specialized language.  For example the gym is called "The Box," and "WOD" is "workout of the day." An incomplete list can be found here
  2. Rite of Passage: Many gyms require a preliminary workout to ensure you are able to take part in CrossFit without injury. 
  3. Stories and Group Identity: CrossFit passes down stories, such as Rhabdo the Clown who provides warnings about the dangers of rhabdomyolysis.
  4. Ritual and Ceremony:  Nearly every gym has a group photo after the workout, which is posted to various social media sites.  

Has CrossFit has been able to capitalize on the value added to the consumer through CrossFit culture and   allow for a premium price? Or is CrossFit really just a watered down personal trainer?
Either way the benefits of developing a culture inclusive of the customer should not be overlooked.   

Saturday, February 1, 2014

Has McDonalds become irrelevant?

Its a scary thing when the CEO of a fortune 500 company uses the word "relevance," 20 times during their quarterly conference call with investors.  It begs the question whether McDonalds remains relevant in the eyes of the consumer.  Speaking from personal experience, I never "set out" to go to McDonalds, instead I "give up" and go to McDonalds.  With new competitors such as Chipotle, Five Guys Burgers and Qdoba providing equally fast, higher quality food, at a similar price point, we must ask what value is McDonalds providing to its adult customers.

From the Happy Meal, to the playgrounds, to Ronald himself, McDonalds has always found success with children.  However, has the need for growth driven McDonalds to target market segments which run contrary to its business strategy?  Has McDonalds found itself trying to be all things to all people?  Are they still focused on children with menu options such as the Hot and Spicy Sandwich & Salads? Or the price conscious consumer, as the Dollar Menu now contains items costing five dollars? With over 140 items on the menu (up from 80 in 2007), has offering such a variety of menu choices increased restaurant complexity and removed the "fast" from "fast food?"  In fact a recent study found the average customer waits 188 seconds at McDonalds to be served, but only 106 seconds at Chipotle.  Can we even guess who McDonalds sees as their target market?

It appears as if investors have become wise to the troubles McDonalds is facing. Over the past two years, McDonalds' stock has remained flat. Even as the S&P rose nearly 40%.

Donald Thompson, McDonalds' CEO has only had his job for about 18 months. For the sake of his investors I hope he can ensure McDonalds' relevancy in to the future.