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The (actual) Museum of Failure
In 1996, McDonald's believed that the Arch Deluxe hamburger was the solution to their growth that had flatlined. The burger appealed to a new, older demographic. Extensive focus groups showed adults liked the burger, so the company invested a lot of money in rolling the burger out nationwide.
But the burger proved to be unsuccessful. It cost more than the Big Mac and Quarter Pounder and failed to lure more adults. Within a year, the company started phasing it out.
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Why the Arch Deluxe failed
According to economist John List, the focus groups that teed up McDonald's decision to spend a fortune on launching the burger were flawed. The people who participated were McDonald's diehards and not representative of customers at large.
Instead, the company should have vetted whether the burger would actually be popular with their adult demographic on a smaller scale.
The launch of the Arch Deluxe is a good example of scaling. Scaling is the process of rolling out something on a large scale.
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Five signs to look out for when scaling
There are five vital signs to consider when thinking about whether an idea, policy or product can scale.
- Watch out for false positives.
- Consider if you're misjudging the representativeness of the demographic.
- Understand the constraints you will have at scale before you scale it.
- Watch for unintended consequences.
- Consider the business side and costs of scaling.
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False positives
An idea may look promising at first, but when it is rigorously tested, the results may fail to replicate.
If you find a good result in one area, it doesn't mean you should roll it out everywhere. First replicate it in that area to ensure it's a true result, then try it out in other markets. It means you should constantly prod at your idea to ensure it's a valid result.
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Misjudging the representativeness
McDonald's erroneously used a focus group to convince themselves to roll out the Arch Deluxe.
It was indeed popular with a small group of loyal customers, but that was not the future target of the company.
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Unscalable ingredients
It is vital to evaluate if your initial success depends on unscalable ingredients.
For example, it would be a mistake to use ample resources to hire the best preschool teachers, then expect that their positive results would be replicated when the curricula they use was scaled nationwide.
Understand the constraints you're going to have at scale before you scale it.
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Spillovers and unintended consequences
When Uber attempted to raise the incomes of its drivers by increasing its base fares, it worked at first, but within six weeks, earnings fell back down to what they were.
The reason is that the opportunity of making more money on the app drew more people to drive for Uber, resulting in each driver getting fewer trips overall.
At scale, the well-intended policy didn't work as intended.
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The costs of scaling
Identify if your product has economies of scale.
When you scale your operation, does it get cheaper to produce it? For example, building a factory costs money up front, and the first couple of devices will reflect that. But, over time, it will become cheaper to produce because the cost of the building is spread out more.
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