Episode 2 The Bottom Line

Now it is time for The Bottom Line. We have burgers and fries on the

menu today as we ask how well McDonalds is managing to revive its

famous fast food formula. We will discuss technology. Apart from

fancy gadgets, are we running out of things to invent? Each week,

influential business leaders gather for this radio programme. Now you

can see it as well as hear it. Firstly, let's meet the guests.

Let's start with Greg Lucier, chief executive of Life Technologies, a

biotechnology company in San Diego on the American West Coast. Can you

tell us what you do? We are a life sciences company that provides

technologies and systems software to researchers around the world

that are probing and trying to figure out how disease works, how

to identify people in terms of DNA and forensics, to increasingly

doing genetic scans for patients if they walk into a hospital. We will

talk more about the technology later. Can you tell us your

experience with genetically profiling yourself? About two years

ago, there had only been about eight or ten people who had been

completely genetically sequenced. All of their DNA from beginning to

end. We make the technology that does that. I thought I had better

try it on myself. One afternoon, I sat down with a genetic councillor

and they told me what they saw. Surprisingly for me, it was a

connection between my mother and my daughter. It turned out I had a

mutation for Parkinson's disease. It is not absolute that I will get

it but it is probable. It turns out that my mother also has the same

genetic mutation. The other connection to the next generation

is my daughter. It turns out I had the mutations for breast cancer.

There is no breast cancer in my line of the family but we probably

have to get my wife sequenced to see if our daughter has inherited

both of these mutations from each of us. In which case she would have

to take some early action to be able to stay on top of potentially

getting it. I think you're better off not knowing a lot of this!

think it is better to know. You have the potential to do something.

My daughter has the opportunity to take action and live a more vibrant

life. Thank you. Rita Clifton is with us, the chairwoman of

Interbrand, a brand consultancy firm. You recently rebranded

Airmiles to Avios. It has been interesting, the coverage of Avios.

I let out a little groan sometimes. Very often, there is a good reason

as to why a name needs to be changed. When you're dealing with

different nationalities and are bringing together things for a new

feature, you have to do something. What was the reason? Even though

Airmiles was a good brand and had a strong heritage, people did not

know what it was about. It was a descriptive name. From a legal

perspective, sometimes you have to do something new. Maybe I am

thinking of it in rather parochial terms. We have a saying, it is the

easiest thing in the world to approach a new name with an open

mouth. That might be the case here. I have been firmly put in my place

and I accept gracefully what you have told us! My third guest is

Jill Mcdonald, chief executive of the fast food chain McDonalds. No

relation to anyone in McDonalds? I am not! There's a concept called

nominative determinism, which states that there is often a

relationship between people's names and their occupations. A

disproportionate number of people named Dennis become dentists for

example! Is there any relation deep down? I did first try McDonalds

when I was 10 or 11 years old and was profoundly impacted so maybe

there is a connection. We will talk about McDonalds for a few minutes.

Give us some basic facts. How big is it? We operate in virtually

every country in the world. We employ over one million people

around the world. We serve a lot of Big Macs and fries. We are one of

the biggest employers of young people around the world and one of

the biggest brands in the world. the UK, what sort of scale are we

talking about? We have 85,000 employees in the UK alone. 1200

restaurants. Let's talk about it more generally. It is a company, a

global brand. It seems to divide people quite a bit. It is a love-

hate thing. But it does seem to have enjoyed something of a

turnaround in recent years. If we go back to the middle of the last

decade, would you agree that when you joined, it was just about the

lowest point, around 2006? I think in 2005, it was the time in the UK

when we realised something had to change quite dramatically. If we

were to regain our place in the nation's heart. Steve Easterbrook

was promoted from within and brought in a number of people to

help with that change programme. I was one of them. There was a very

deliberate strategy and chronology of what we had to do to get back to

a brand that customers wanted to eat and be seen to eat. We focused

firstly on fixing some fundamentals. We franchised more restaurants.

were majority company owned back then rather than franchise owned.

We also fixed the basics, such as new kitchen equipment. Once we had

done that and could feel more confident about service that we

could offer, we look at making more disruptive moves. The new look and

feel restaurants on the high street for example. We introduced things

like deli sandwiches, more wraps, more chicken, better Happy Meals, a

number of changes to ensure we were more modern and progressive, more

confident. I don't know when you last ate at MacDonald Rita, but how

successfully as it revived itself? I was always being asked, is this

the end of McDonalds? Is this the death roll? It was doom and gloom.

It had the perfect storm of the libel case, and that awful film.

Morgan Spurlock's film? Super Size Me. It was an awful time. But

millions of people were still going to McDonalds every day. It was

still in the top ten most valuable brands. That was back then. Now, it

has been one of the most impressive transformations. Because they have

absolutely followed the brand's need to organise everything. They

have not only changed products but people's behaviour, the outlets. It

has changed the substance beneath and not just twiddled with the

advertising campaign. McDonalds and Interbrand have worked together in

the past. I have not personally but Interbrand has. Jill, you had a

campaign with Justin Timberlake which did not seem to work. What

was the message of that? Was that because the advertising had been

done without the product being changed? There is an element of

truth that did need to change. Another was the danger of global

advertising and slapping celebrity all of the advertising and thinking

this would solve a more fundamental problem. One of the things that

McDonalds around the world now tries to focus on is being very

clear on who your local customers are. Making sure that the

advertising of products is directed to your local market. We can

observe in the UK that upmarket burger joints are coming in. Far

more care over the ingredients, organic burgers, natural burgers.

Was McDonalds too downmarket for an increasingly affluent population?

We are a very large brand and we forget who our core customers are

at our peril. We serve 80% of the British population every year. We

are a mass brand. It is a fine line between upgrading the experience

for customers but not trying to be something that you are not. Not

trying to be so posh that regular people feel it is not for them. I'm

thinking of brands like Zahra that bring things off the catwalk to the

high street very quickly and suddenly make accessible designs

that were not accessible to the general public before. I wonder

whether the science work can make McDonalds food healthier? At the

transformation is a great example of us becoming very focused on what

we are putting in our bodies. One of the fastest growing areas is

Food Research. We are putting a lot of things into our bodies and we

don't really know what they do. I'm absolutely convinced that in ten

years' time, we will have engineered food for our own body

that totally optimise our own behaviour and thoughts. I do not

think listeners will think that sounds at all attractive. Why don't

we just eat lovely Italian food which has not been put through and

laboratory, which is fresh and grown in a field with a caring

farmer looking after it? As we should. We should keep doing that.

But if you are a Performance Athlete, you want to make sure that

you are tuning up your capability to be competitive. One last

question on this subject. Is it fair to say that it was moral and

political pressure which motivated McDonalds to try and upgrade itself

and introduce fruit and more salad? Or was it commercial pressure?

There seems to be a bit of stigma attached to McDonalds. I think

there was a stigma attached. But the tipping 0.4 McDonalds was about

listening to customers more. We were slow in terms of responding to

what customers want. Customers were saying they love burgers and fries

but they like eating healthier as Ed Miliband was talking earlier

this week about infusing a great deal of moral behaviour into

business. Businesses that do not do the right thing get punished in the

end by their customers. Market pressures force people to behave

well. When it comes to things like Private Equity, the sort of Doctor

evil, sometimes that is caricatured and it does bring real sustainable

value often to organisations and even if they might take costs down

in the early stages, the numbers would suggest that a few years on

from a private equity take over, a company is doing better than it

would have done otherwise. Sometimes when large businesses to

transform, they forced other people to improve as well. And it

infuriates me sometimes when we have this ridiculous caricature of

business because it puts people off and creates the impression that

business is something to be controlled whereas if we do not

have successful businesses, we do not have what we need to pay for

the civil society. And yet there was moral pressure on McDonald's

and that ultimately forced McDonald's to look again at what

they were doing. You could argue that the political pressure, the

moral pressure, the application of those values and the stigma got

something better out of it. I would say that there is pressure from a

number of different stakeholders but it was all to let the customer

pressure. When we could see that less customers were visiting, that

was what the two. There were so many different stakeholders who had

a different opinions on what is good and their behaviour. If you

listen to the Neri and of non- customers, you can get yourself

into a right pickle. -- and period. You can visit our website for more

information. Amazon's Kindle Fire tablet

launched this week. The iPhone 5 will also launch soon. Fans will

marvel at the innovation embedded within it, I am sure. But deep down,

I wonder whether the new iPhone. Just be a slightly better version

of the old one. -- might just be. Some have argued that innovation in

the US has slowed down. We are no longer seeing innovation of the

sort that have changed lives. The refrigerator, the washing machine,

the electric light poll, radios, television... Have we ran out of

inventions? You are in a technology business. What area do you work in?

I think that is complete bunk. If you look at the last decade, from

the very first time we sequenced the first human from then to ten

years later, we have gone four times faster than Moore's Law,

which governs electronics and computing power. That is the law

that you double the power of a processing chip every two years.

That is correct. It is much cheaper now to do someone's genome. And it

opens up incredible new horizons for science and innovation. If the

20th century was all about electronics and the power of that,

the 21st century is all about the power of science and harnessing

molecules. Whether it is for Health, biofuel, we are just at the

beginning of what will be an incredible innovation. If that is

an important statement. It might be that commentators simply do not

know what is to come in this century. Give us an example of the

things in your area that are going to be ground-breaking over the next

100 years. Cancer is a tizzy of the DNA and 99.9 % of patients today

never get their DNA went to see what type of therapy is they should

get to leave and survive. We will correct that over the next few

years as genetics finds its way into how we treat cancer. Just on

that, that means tailoring treatment much more closely to a

particular tumour. If personalised medicine. Another example is in

fuel. Everything we see in the world organically was derived

randomly by Mother Nature. At some point, we can engineer biofuel.

That is another size that will change the world. How far are we

away from doing that? Less than ten years. Seriously? It might just be

there you happen to be in the business that is generating

innovation at the moment but pharmaceutical companies have found

research and development to be diminishing slightly. That is the

feeling I get. The number of new drugs licensed every year from the

mid-nineties to today has dropped sharply and there is not a huge

queue of new Glock book does -- blockbusters coming onto the

horizon. That is true but make no mistake. We will actually see an

explosion of new drugs coming as we are now able to handle the

complexity of handling this biology. A good example is caff there again.

As we read and understand DNA, we will develop treatments for the

particular mutation that the individual has been their DNA. It

will not be a blockbuster but it will be very important to that

individual and also a very economical. Even this week, we have

seen a large global commission reporting on the cost of cancer

treatment, saying that it is getting completely out of control.

People are over describing things that only give days of extra life

to people. It is not cost-effective. Or effective just in general.

are clearly in an area where there are lots of impressive gadgets. Do

you think we are running out of inventions? I do not think so. The

gentleman you are quoting is an economist and occasionally,

economists get things wrong. I suppose history is littered with a

bad predictions but what is interesting is that technology and

breakthroughs are one thing but it is how they apply to humans is what

is interesting. If you look at Apple, they have humanise what

technology can do, making it useful, attractive and magnetic. But so

many technology companies do technology for the sake of it.

Apple is a good case, isn't it? It is very nicely packaged and it is a

good user interface, isn't it? It is a telephone, basically. But the

jump from land line to mobile phones was huge, everyone would

agree. But jumping from the first generation mobile phone to the

second generation mobile is nothing like as large as the creation of

the mobile phone itself and then jumping to a third-generation

smartphone... I think that when people in 100 years' time look back,

we are right in the middle of customers really understanding and

finding different ways to innovate within the technology advances. My

two young children, we get the latest Wii and they instinctively

know how to play with these games. I am still reading the instruction

manual. Something is going on, I believe, in the brains of children.

If you go to the average household and look at it, it is more

affluence now than it was 50 years ago. It probably has air

conditioning in the US and it probably has central heating in the

UK. But fringes, telephones, television... It is all there. It

was all there, wasn't it? It has not changed that much? We are not

eating saw the cloves and eating astronaut food. But if you are a

working mother being able to shop online and have your groceries

delivered by whichever supermarket does that is huge. That is as

revolutionary for me as a washing machine because it is adapting to

the needs that I have. It does come back to human means. We all want

things faster, easier, quicker and technology is helping us to do that.

When I worked in the airline industry, there was concern that

video conferencing would remove the need for air travel. Guess what? It

certainly did not! People still want to meet face to face and

connect. Advances that help you actually connect more to people I

think have still got a way to go. We might be in for an era of

stagnation if we ran out of technology to drive economic growth

and efficiency and improvement. We should all be deeply encouraged by

your comments. We have got to leave it there.

Thank you to my guests today. I will be back with more next week.