Wow has this post generated some attention! I think all of us in Section G have a sweet tooth that this post must be appealing to…
I wanted to answer the question about Dunkin Donuts’s distribution model. DD makes their doughnuts in a central bakery facility, then ships those out to the franchise stores within the local area. The DD employees actually add the icing and colorful toppings to the doughnuts at the store in the morning before opening. (I know this because my family frequents the DD in our neighborhood and we are friends with the manager there!) So, the distribution model is not necessarily what is different between KK and DD, as both use a single facility to make doughnuts for multiple stores. What is different is that KK makes that production of fresh doughnuts a central part of their appeal, while DD (in spite of its name) really does not compete on doughnuts but on coffee. So while DD will sell you doughnuts that are 12-hours old, they will pour out 1-hour old coffee to re-brew and serve a fresh cup. To me this difference between KK and DD demonstrates how two companies selling the same product will differ in their treatment of it because of differences in their business model: at KK, it’s selling the best abd freshest doughnuts, while at DD, it’s selling the best and freshest coffee.
Great post, Matt, and great observation, Armand. I agree that, at first blush, it’s hard to imagine why Zappos would be able to compete against the likes of a behemoth like Amazon, which offers much the same type of service. And although competing on customer service is valuable, I wonder how many customers actually interact with an employee of Zappos (and thereby experience their superior customer service), versus just interacting with their website in a click-and-buy type scenario. If it is the case that most customers actually do not interact with Zappos employees in a typical transaction, then I think what Zappos is actually competing on first of all is their reputation as trusted curator of quality and fashionable shoes and clothing. This differs from Amazon, which is generally seen as simply playing a middle-man role in facilitating online shopping transactions. So the value added by Zappos is that they are offering a curated selection that enables customers to know that they’re buying a good product, because Zappos approves it. In my view, the operating model that Matt described serves both to offer great customer service but also to enable Zappos to inhabit that position of trusted curator.
Great post, Cynthia. You’re right that there are a lot of challenges for firms like McKinsey, and clients seem to be asking for help in implementing solutions and not only in identifying them. Being a quintessential service industry, McKinsey seeks to respond to clients’ needs by adjusting their operating model to ensure that the business model continues to attract clients. One way that the operating model is being altered is that teams now may include “implementation coaches” and other more narrowly focused experts, a definite change from the traditional McKinsey model of teams that are solely composed of “generalists.” I think you’re right that high-level strategy consulting will always be a service demanded by business leaders who seek to inform their thinking, get an outside perspective, or simply validate their assumptions, and that McKinsey’s traditional business model still holds great appeal. Help in thinking through business problems is only becoming more needful as economies continue to globalize, technologize, and generally move toward greater complexity.