Importance of Innovation in McDonald's: Analysis and Explanation

This report analyzes the importance of innovation in McDonald's, including the differences between innovation and invention, the 4P's of innovation, and the use of frugal innovation. It also explains the role of vision, leadership, culture, and team in sharing innovation and commercialization.

Entrepreneurship and small business management
Importance of Innovation:
Innovation is important for a business due to various reason. It helps company to earn market and
also expand their market. It provides opportunity to business to capture more and more market.
Importance of innovation in context of McDonald's business are as follows:
Create new market: Innovation helps to create new market for products and service of a company
(Heger and Hussinger, 2017). McDonald's is an organisation which is only providing their products
to customers who loves fast food but with fusion of fast food and healthy food, company can create
new market which wants to eat healthy food.
Improve quality of existing market: Innovation helps to improve existing products of an
organisation which create opportunity for them to increase their profit in market. McDonald's with
innovation can improve quality of their food by adding healthy fusion with them.
Expands product range: McDonald's is earlier only providing fast food like burger, French fries to
their customers but with innovation they are also offering fusion of healthy food in their fast food
which helps them to expand product range of company.
Ensures survival of company: McDonald's is an organisation is facing loss in market due to
increase competition (Kim, Kim and Kim, 2016). With this innovation, company can differentiate
their products in market which helps them to ensure long term survival of their business.
INTRODUCTION
Innovation refers to process of implementation of new ideas in market and also improve existing
products. Innovation provide various opportunity to company as helps them to ensure long term
survival of business and also helps to introduce new products in market (Aranguren, Karlsen and
Larrea, 2016). This project report includes analysis of McDonald’s which is adopting innovation
in order to overcome of losses. This innovation is related to fusion of healthy food with fast food
which is new concept in market. This project report includes explanation of innovation and
determination of differences between innovation and invention. It also includes explanation of
different types of innovation in an organisation.
TASK 1
Explanation of innovation and determine its importance for organisation in comparison of
invention
Innovation: Innovation refers to practical implication of ideas which results in introduction of
new goods and service in market or improvement in existing products and service (Canning and
Szmigin, 2016). It is a transformation process through which new ideas in introduced in an
organisation and helps them to generate profit.
Invention: Invention refers to unique process which helps in product development process that
has never been developed before. Invention is a key for business to get competitive advantage in
market and expand market of products and service of company.

Difference between innovation and invention:
Invention Innovation
It is process of establishment of new
device, idea, product or output which is
completely new.
It is process of introducing of ideas for products and
service first time.
Invention is development of new product. Innovation is adding values to an existing product.
It requires various scientific skills in a
person.
It includes skills of marketing technical and strategic
skills.
It is limited to research and development
department of a company.
It is spread across whole organisation
Explanation of vision, leadership, culture and team that share innovation and
commercialisation
Commercialisation refers to process of introducing new products and service at marketplace (Kirby
and El Hadidi, 2019). This process includes production, marketing, sales, distribution, customer
support and many more which helps them to attain success in market.
Commercialisation process is different from innovation as innovation is improvement of existing
products whereas commercialisation is introduction of completely new product.
Vision: Vision of McDonald’s is to move business towards profitability and growth and to serve
delicious food which enhance health of customers every day. This vision helps company to think
about future and also attain goals of business.
Leadership: Leadership refers to ability of influencing behaviour of others in order to attain goals
of organisation. Leaders encourage people which helps them to attain goals of company and also
provide them direction. There are different types of leadership which can be adopted by different
people. These leadership style includes autocratic, democratic, participative, delegation and many
more. Managers of McDonald's are adopting participative leadership style which helps them to
introduce innovation and contributing employees efficiently for attainment of goals of company.
Culture: Culture refer to characteristics and knowledge of group of people which encompass
language, cuisine, religion, social habits, arts and music (Marozau and Guerrero, 2016). Culture
is an important term for an organisation which helps to reflect ways in which people think and
work. McDonald's has maintained positive culture in their organisation which motivate people
to work effectively. Culture of business helps to share innovation and commercialism of
company.
Team: Team refers to group of people which are working together for attainment of common
goals. McDonald's is an organisation who has efficient team which are working in order to
introducing innovation in their organisation. These team helps to get success of company in
market place and also helps to coordinate with each other.
TASK 2
Explanation of 4P's of innovation and use of innovation funnel in order to examine
innovative ideas
4P's of Innovation: The 4p's of innovation provides the key areas for innovation it includes
product innovation, process innovation, position innovation and paradigm innovation. 4P's is
termed as the feature which provides a basis for innovation to business organisation. The 4P's of
innovation of McDonald’s are as follows:
 Product innovation is process of innovation of existing product and services.
McDonald's is using product innovation which is done after serious market analyzation.
 Process innovation means change the way of making of product. Process innovation of
McDonald's is done because, sometimes the process used in development of product is
not suitable for product quality.
 Position innovation means change in the context or image of the product and services in
minds of consumer. Under position innovation of McDonald's, new product is
introduced in place of existing product but the work will be the same.
 Paradigm innovation means change in mental thinking about the product development.
Under paradigm innovation of McDonald's, only the mindset of the individual changes
in context to thinking about the product.

Use of innovation funnel
Innovation funnel refers to mechanism which continuous stream innovative ideas as well as
prototypes that can be screened for purpose of viability. These approaches help company like
McDonald’s to identify which ideas are more realistic and which are not. It also helps company to
develop strategies and action plans.
Explanation of development of frugal innovation and example of how it is used in context of
organisation
Frugal Innovation: Frugal innovation refers to process of reducing complexity as well as cost of
goods and its production. It includes removal of non-required features from various durable
products like phone, car and other things which helps to sell it in developing countries (Nyemba,
Mbohwa, and Carter, 2021). Frugal innovation is ability of generating social and business values
with reducing use of scarce resources. This process helps to reduce complexity and problems of
introduce innovation in market.
Use of frugal innovation: Frugal innovation helps company to reduce problems in introduction of
innovation process and also reduce non necessary features in products which helps to saves cost of
company. This innovation is used for various reason in McDonald’s which are as follows:
 Frugal innovation helps to get growth of company and also helps in cutting funds in order
to reduce debt in various developed countries. It helps to increase demand of frugal
products and service and also helps in frugal innovation process. Frugal innovation is used
for developing new ways in products design and also for development (Xu and Maas,
2019).
 It helps company to add necessary features in their products and also helps to reduce
unnecessary features from products which helps to saves cost of company. It is also used
for increase values to people through their products with reduced cost. It is beneficial for
an organization as they can get benefits

Example of frugal innovation:
 McDonald's can use local resources in order to generate new products that is fusion of
healthy and fast food. It helps them to decrease cost of company and also helps to
ensure availability of products at low prices.
 Management of company is developing different ideas related to fusion of healthy and
fast food which helps them to distinguish their products from those of competitors.
 Tata Motors has adopted successful innovation which is Indian company and has made
world's cheapest company. Company can attain this with use of new technology and
developed Nano which is small and budget friendly car.
CONCLUSION
From above mentioned project report, it can be concluded that innovation is introduction of new
idea, products, service in market in order to generate more profit or improvement of existing
products. This innovation create opportunity for firm to earn more profit and also capture more
market share. There are 4P's of innovation which helps company to understand innovation and
these includes product, process, position and paradigm. Business also adopt frugal innovation
which helps to introduce innovation by improving it and reducing cost as it helps company to
increase values of their products for customers.
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