Chick-Fil-A and The 6 Ps of Essential Innovation | Michael McCathren

Hey everyone, uh, welcome to the final installment of Future Foundry Live for, um, 2023. It's been a blast this year. Thanks so much for joining us for for the last episode. We are delighted to welcome Michael from Chick-fil-A, who's going to give us a deep dive into the story behind Chick-fil-A's growth and how the principles that he set out in his book, The 6 Ps of Essential Innovation, have helped to drive this. So please do, as we kind of have this conversation, feel free to drop your questions into the chat. We'll kind of save some time towards the end of this session to put those to Michael. So if you want to do that, just drop them in the chat and we'll see them there. But Michael, I'm thrilled to sit down with you. Chick-fil-A is my absolute favorite. Having some withdrawals. It's been 3 weeks since my last spicy chicken sandwich. For those that haven't experienced Chick-fil-A, it's not only the largest privately held restaurant company in the US, Also the only fast food chain to have won the American Customer Satisfaction Index for 7 years in a row. It's been in Fortune 100's Best Companies to Work For for 23 consecutive years. It's also coming to the UK in 2025, which I'm ecstatic about. But Michael, where do we find you today?

Yeah, Jacob, thank you for the invite. Thanks for the time. Looking forward to the conversation. Yeah. So we are based in Atlanta. It is, it has been here since its inception. 1967 was the first time it went into a mall. Back then we didn't have freestanders and it grew through the mall configuration where it was really before you had food courts in America. There were these anchor big cafeterias, but nothing like a food court. In fact, that was the biggest challenge of getting that first restaurant open in the mall. Was the the landlords didn't want trash around the mall. They didn't want it to smell like French fries or whatever. So you know, Andy gave it a go. The first operator was a female, which also was sort of a groundbreaking at that point, and she crushed it. She just nailed it, and it continued to grow one mall after the next after the next, and pretty soon. malls across America realized that, well, if I could have this high profit of rent, what if I could have 5 or 6 or 7 of those at the same time? And that's kind of what birthed the food court here in America. And then we started getting into, in the '80s, opened up our first freestander. And then in 2011 is when we introduced the double drive-through.

Wow.

lane. We had to figure that out because traffic was backing up back into the streets. And, you know, it's historic from there on. And I think the key for us is, as a franchisor, is that we're not your typical franchise configuration. It's a bit of a hybrid. We have operators and they are Versus a typical franchise model, you know, it takes a lot of capital. You have to have hundreds of thousands of dollars of cash if you're gonna open up a McDonald's. You have to have the ability to open 6 to 10 over a, you know, 3, 4-year period and you own all of the assets. You're paying royalties to use the brand, but it is purely an investment vehicle. Ours is a bit different because the operators don't own any of the assets. They don't have to come in with deep pockets. It costs about $20,000 for a franchise. The twist is you only get one. And I should— I shouldn't say it like you only get one because our sales are twice that of McDonald's and none of the other fast food chains come close to our average unit volumes. So the deal is pretty sweet, but it's hard, it's hard to get in. I mean, we had, we opened up 139 restaurants last year and we had 100, over 100,000 requests to be part of those restaurants. So it's hard. It's, the saying goes, it's easier to get in the CIA than it is CFA. But we've been fortunate and because of that model, these operators have taken on a, like a personal, like it is really their business, but they're not by themselves where they, they want to be the mayor, so to speak, of their community. They want to be able to, you know, have a positive impact on teenagers that come into their, uh, their business as employees, uh, and treat them better than anybody else has ever treated them, especially in the fast food industry. Because that could be, that could get kind of sketchy sometimes if you're an employee. And then being part of the community, they know better than we do as a franchisor how to connect at the community level. So we give them a lot of freedom, a lot of tools, a lot of support to have a personal relationship with folks in their restaurant. So it We want it to feel like kind of a family business, although the volume makes that difficult. But they know they have the freedom to do that if they want to. It's sort of a magic formula for us.

And Michael, you've seen a lot of change, I guess, at Chick-fil-A. I mean, you know, 14 years in kind of marketing before moving into an innovation role in 2016. 16. We kind of share a similar background in that sense. So I started my career in marketing and then pivoted into corporate innovation. What kind of drove that shift for you from marketing and sort of the externalities that kind of that gives to wanting to focus a lot on sort of customer experience product business model? Yeah.

So, yes, I've been in marketing, you know, almost all my career and in restaurants, in restaurant industry. I think when we developed our 5-step innovation process back in 2010, I finally had a framework for how I felt like I was thinking anyway. So I could do that more with more organization and more effectively, but I was still in marketing. And then at one point I was asked to lead a team on how to grow the breakfast day part. And rather than put together this 15-page marketing brief, I thought, I wonder if I could approach it from, you know, applying this 5-step innovation process to a marketing challenge. And it was 3 pages. It was, it was really concise and it made a lot of sense. And it was accepted by leadership. And I thought, man, this is the way, this is the way I wanna work. It has that, the process has always worked for me. When it didn't work, it wasn't because of the process, it was because the process was mismanaged. And I thought, I, I wanna be part of, you know, developing that muscle inside of Chick-fil-A so that we can all be innovators at Chick-fil-A. And that's, that's, That's fortunately what I've had the opportunity to do, and it's been a fantastic ride and to create an army of everyday innovators and equip them with the, the, the, the tools and the systems and the processes and, and walk them through how to apply it, partner with project teams and help them get through that innovation process as fast and efficiently as possible. My team is like an in-house consulting group. We don't necessarily own any of these projects that customers ultimately see, but we help the teams that are responsible for it get through there, hopefully to market faster and get to better solutions more quickly.

And what does that 5-step process look like, Michael, at a high level?

Yeah. Well, you know, and we've stole everything here. We, you know, there's this human-centered design that's eternally true. So it's just, we put our own twist on it. It begins with understand and then you move into imagine and then you go to prototype and then we separate out validate, you know, from what I see in most companies, validate is pushed up under prototype anyway and then launch. So those are our 5 steps.

And so you were, yeah, kind of thinking in this way, beginning to work in this way when you were in that in that sort of marketing role. And what do you think are, I guess, for other folk who are kind of in marketing or have been in marketing and are wanting to sort of pivot into, you know, developing new experiences, new products, new, new business models, what have been the big sort of transferable skills? I mean, the obvious that kind of stands out is, you know, customer focus, customer obsession in marketing and innovation kind of remains the same. But what are the other big sort of transferables, Michael, that you see between those two? 2 worlds.

Yeah, man. Okay. So I'm gonna, I'm gonna give you some context on, on how I'm gonna get to this answer. So during COVID uh, obviously everything shut down and I thought, well, I, how might I use the hours a day I could commute more productively? So I, I decided to get a master's in innovation from Northeastern University up in Boston. And I had the opportunity to really dive into really rich business cases of companies that did innovation well and some that didn't do innovation well and the various types of innovation and blah, blah, blah. So, you know, one thing that stood out though was that, you know, there was always this challenge within any organization about having a culture that was ready for innovation. We talked a lot about capabilities, but it was always that tension about, but the around the culture, is it innovative or is it an innovation culture or not? So then after my master's, had the chance to teach a professional MBA course at one of the universities here. And for 3 years, I got like a front row seat for over 50 companies worldwide, again around innovation management. And I saw this common thread show up again and again and again. And it was that the capabilities, the processes, that's the easy part. What the challenging part was, these students who were professionals, I mean, they've, they've skinned their knees on their own projects and have their own stories to tell, got down to, well, but the culture wasn't ready to accept it. And I think that is, that's my learning and takeaway from all this is that Man, it, I almost want to tell people to stop trying to be innovative. Instead, try to lead with an innovation mindset right where you are with however team, however far down in the, in the organization you might be. If you have a team, there are certain behaviors, there's certain innovation skills that you can model to begin to create a culture of innovation right where you are. For those of you, for those that you lead. And out of that then becomes, man, it, it, there's one that has to do with questioning and networking and observation and experimentation and freedom within a framework to explore new ideas and a safe space to share those ideas. All those things that we know we've heard can really come to fruition with some specific behaviors. And that's what I would encourage you to do as marketers. It's like, okay, rather than lead with a capability that I think I need to be innovative, I'm going to lead with a mindset that I'm going to lead myself first. How to be— how to lead with an innovation mindset first, model those behaviors, create a team behind me who also can do those things, and the innovations will happen.

That is such an incredible answer. I feel like the most asked question that I get. So we focus a lot on capability and process, but I think the most asked question that we get is, how do we build a culture that's ready to accept that now? It's obviously really difficult to make an organization want to change, want to try, want to test, want to build, want to learn. But I think that's a really practical answer to that question. I guess, what is the kind of biggest in your journey at Chick-fil-A? What has been the biggest sort of learning curve, I guess, in terms of sort of trying to build? Do you think that culture has always been inside the organization or Do you think, Mike, that you've spent a lot of time intentionally sort of building that culture and level of acceptance?

Oh man, great question because our founder, he's often been referred to as, well, you know, he was the original innovator for Chick-fil-A. He was Chick-fil-A's founder and he was an innovator. And the more I began to learn about innovation practically and what that looks like. I'm like, you know what? He was not an innovator. He was an experimenter. And he had a layman's curiosity and a drive that allowed him to— and because he was a business owner himself, he had all the tools. They were his tools. He had the people. They were his people to experiment in a lot of different things. And if I think about, if he went about growth in the way he did back in 1967, in today's world, he'd be eaten alive. There would be no way he would be successful because of how fast the markets move, how diverse technology is, consumerism, globalism, all these pressures and the speed at which business happens today. They'd eat him alive. And so it has evolved over time to this idea of, hey, you know what, we can have experimentation, but it needs to be part of a larger, more disciplined process. And that's kind of what has paved the way for more and more innovations is that we've tried to, you know, continue to ignite that idea of curiosity. There was a hiccup there. I think it was in the late '80s, early '90s, something like that. Where it was said that, and I think the founder said this, but he's been quoted as saying, when it came to work and deliverables and performance, he said, perfection is expected, excellence will be tolerated.

And I thought, oh my gosh.

Well, if that's the expectation, What happened to innovation then in the years that followed that? And it was more aspirational. I think it wasn't like everybody took it literally, but yet you hear your boss say that and you're like, maybe he does. Maybe there's a little bit of, you know, really realism in that. So innovation started tanking like this because nobody wanted to take a risk. We've retooled that. We've, you know, adjusted the narrative over the years and even Going as far as, hey, y'all, there's no failure in innovation. And everybody stops and goes like, well, but there has to be. I mean, what happened to the idea of fail fast, fail often? And we explain that, well, look, that was great if you're Mark Zuckerberg in the early days of 2007. It's great if you're in the Tech Village down in Palo Alto and you just need to ship stuff fast. Great, because you can, you know, update it with a fix if it's broken. I said, if you apply that generally across all business industries, it doesn't play out. There are shareholders that have become smarter and smarter over time to think of, hey, look, if I— the expense line in your R&D versus the ROI of products to market isn't working out, the pencil doesn't work. So why are you guys spending so much in this random experimentation in this, you know, under the spirit of— Hey, let's fail faster. And it, so that breaks down. So then we thought, well, let's also, because we've read it in books and articles, celebrate failures. Let's highlight those things. It's okay to fail. And as I started diving into the psychology of it, celebrating failure actually makes it worse. It makes experimentation worse. It makes risk-taking even more weighty. Nobody wants to. I mean, since kids, failure is failure. Not succeeding is failure. Not failure is success. So we can't rewire that. So we're trying to change the narrative. And what I work with other companies too is like, you, the only fail in innovation ought to be as an acronym, forgetting about the importance of learning. F-A-I-L, right? Well, then what do you call this other piece of it? And we're trying to change the narrative from failure to unexpected outcomes where I'm trying in one camp, I'm trying to avoid failure. In the new camp, I want, I'm seeking out through a process more and more unexpected opportunity, unexpected outcomes because it's those nuggets that will help me then refine the ultimate solution and I should be celebrated for how many unexpected outcomes I was able to reach and surface because it influenced a richer idea in the end. And that's what we've done.

That is so interesting. I was at the Museum of Failure a few weeks ago. It was in Georgetown in DC. I took some clients to it. And when you walk into the building, it says innovation needs failure. And then you look at some of the products in the Museum of Failure, Colgate lasagna, Sony Betamax, the DeLorean, and it's like, well, I'm not entirely sure that that's true, and I'm not entirely sure that the mantra of fail fast, fail often is kind of right. Fail cheaply and quickly, right? Not often. But you've kind of taken it like a like a step further. I guess thinking about the opposite of failure, so thinking about kind of succeeding. I mean, you've been in your role in innovation at Chick-fil-A for a long time, so kind of 7 years in kind of corporate innovation at Chick-fil-A. That is a much longer tenure, I guess, than we usually see in kind of corporate innovation roles. What is it Do you think has kind of contributed to that sort of prolonged success that you've had in that role? You know what?

I have been in organizations that are not in a growth mode. I mean, we've had year after year positive sales increases for decades straight and sometimes double-digit growth when our competitors are down to 3% and 4%. We're at double digits. It's phenomenal. So being part of a growth organization, you would think, hey, great, then you've got lots of cash and you've got lots of time and everything's peachy and there's no really challenges that are gonna bring anything down and everything's positive. But in our situation, that growth has created tremendous challenges with capacity constraints. These restaurants were designed and built for some of them $3 and $4 million that are doing $8 and $9 million. The complexity of the business when we had, you know, 10 menu items and now we've got more menu items that are more complex to make because consumers want a little bit more personalization and customization options. And those have created so many challenges that projects have been created that are urgent projects, like we've got to take care of these things. How do we do this? Because this is all new territory for us. Then that is like ripe for some innovation practice, and that's where we come in. So that keeps us busy. At the same time, internal processes and systems that were designed to support a $10 billion company now are being asked to support a $20 billion company, and those are breaking, and those are reaching capacity limits. So we're having to think, You know, how can AI then, how can bots play a role in financial processes to make that faster? And that lends itself to more innovation type projects. You hire 600 people in the last 2 years. There's constraints, there's stresses on internal people and talent systems and career pathing and journeys, and that even creates more unknown territories. How do we do this well? Because we need to do it right away kind of a thing. So there's a sense of urgency, complexity, the amount of effort that it takes, the, the alignment in all of this, because all of these departments are, all have their own R&D ideas, and they can't all be done with excellence at the same time. So how do we work together? All of this creates conversations and a lot of work for our team Because of the continuous demand internally for more innovative solutions just to support the growth.

Do you know what's so interesting about that is that we often talk to organizations who are at like different ends of like a, or different sides of a bell curve, right? So we talk to some organizations and they say, well, we don't really need to think about innovation because we're growing. Right? There's nothing too— we're growing in spite of developing anything new in terms of ventures, products, services. And then on the other opposite side of that bell curve, we also talk to organizations who say, well, the end is nigh, right? And we know that this is an industry that is kind of trending to zero. And so we don't have the free cash flow available to invest in innovation. And so you kind of end up thinking, well, who's in the sweet spot, right? Of either just kind of coming up to that sort of precipice or just kind of falling off the precipice. So I think it's really interesting, your point of view around how important innovation has been to Chick-fil-A in its growth journey. I think that's incredibly interesting.

And we We, you know, we're trying to remind leaders and in our strategic planning, particularly, that this, the sigmoid curve, right now we're riding it as it grows, but at one point inevitably, it's going to hit an inflection point where growth happens. The rate of growth is decreasing at an increasing rate. And what we try to do is just push that inflection point as far off into the future as possible. And what happens in between there is innovation for us. And it's not like it's all groundbreaking breakthrough innovation. It's, we would say it, 80, 85% of what we do is routine incremental type of innovation, but it has to be done in order to support the machine that's growing at such a crazy rate.

Yeah, that's so interesting. That's so interesting. So, in terms of, you know, having 7 years in this corporate innovation role and thinking about sort of the year ahead, at the end of 2023 now, looking ahead to sort of 2024, how do you think that corporate innovation roles in 2024 are likely to change? I guess I'm thinking about sort of broader discourse around corporate innovation, probably thinking about the economic sort of landscape that we find ourselves in, and also thinking about, you know, you mentioned kind of AI, but, you know, as a copilot, like, what do you think the short-term future for corporate innovators looks like, and how are you planning to respond to that, Michael?

I think if an organization is basing its innovation work on a few people that have the capabilities to do that, I think they run the risk of seeing the chopping block if the uncertainty of the world's economic situation, the socioeconomic, the governmental, all those that are, all the situations that are influencing the world and commerce and our marketplaces that we do business in, that's gonna hit the chopping block. I feel like because they look at it as a cost center, as a, like I said, a capability that they can lop off. Reduce the amount of costs, get their footing so that they feel like from a profitability standpoint, they can weather this storm. However, if you're in an organization where it's the culture itself has already taken shape, where innovation is not something that each employee feels like they have to carve off time I get, I get 10 minutes or 10 hours a week or 10 hours a month to think innovatively, like it's white space over here. Then, but, but rather you have a culture where it's like, no, it's not something separate you do. Innovation is how you think about what you're already doing to get to better solutions faster. Open collaboration happens, open idea sharing, open innovation happens more freely without a lot of friction. Then then there's really nothing to lop off. It's more of like, hey, I need to continue investing in this stuff. In fact, when they when I think it was Deloitte, I have it in my book. I should know this. In the introduction, I cite a research study that they did with CXOs around the globe at the end of 2020. So this was you know after the initial onset. and sort of freak out that everybody experienced with COVID what are companies looking at? What are CXOs, how are they viewing this thing? And they said that, hey, to be like they, and they tracked the results. Like some companies were able to weather 2020 much better than others. What was it about those companies that were, that they allowed them to weather at least 2020. And the, the, the most common response was this idea of resilience. And resilience, you know, had to do with collaboration, had to do with communication, flexibility. And I thought, I started thinking about those are the variables that an innovation culture creates just naturally. So rather than trying to do something innovative that is seen as a cost and a risk, why don't we become something that's innovative so that it becomes of who we are, not just what we do? If that is the perspective that you go into 2024 and 2025 with, I think you stand a much greater chance of seeing some really amazing growth. regardless of where you are, because now you're thinking about growth in terms of, if I approach this from an innovation leader standpoint, how I serve others, it starts there. It's not how I might, you know, coordinate the work of my team to reach my goals as a leader, because that's what gets recognized. That's my career journey. I'll get recognized for that stuff and promoted and blah, blah, blah. But I'll create an environment where I am, my role as a leader is to serve the people that I lead. That's contagious. They serve the people that they lead, ultimately serving the customers and what we call audiences. And if you really understand what audiences are your first most important ones in 2024, understanding deeply what their needs and pains and obstacles are and the root causes behind all those, and then get the right people around the table, which may not be your team, and leaders need to know that. to be able to come up with expansive thinking solutions, narrow it down, filter to the, you know, 2 or 3 you think might work and then quickly prototype them. That's 2024 in a nutshell right there for success.

What do you think the— so thinking about AI sort of specifically because it's kind of impossible like not to have the conversation. I think that there's kind of 2 camps of innovators that that I'm speaking to as we head into next year, there are those who are determined to shoehorn artificial intelligence into absolutely every venture, every product, every service proposition that they're working on, which I'm not sure will be particularly successful because it's kind of the tail wagging the dog.

Mm-hmm.

There's another camp, I guess, who are rightly, I think, seeing artificial intelligence as a really useful copilot throughout, through their kind of processes. How do you envisage that AI might impact the way that you empathize with audiences, understand them, develop prototypes, run pilots? Have you done kind of a lot of thinking around that?

Yeah, we've begun to explore this, and there's departments that are doing it at various speeds and depths. Our IT department, our digital transformation team, they're exploring it. Supply chain is exploring it. Service and hospitality is exploring it in terms of, is there a way to leverage wearables and video in restaurants that will help ping team members who might be doing a task behind the counter? to go out into the dining room and make sure that certain guests and tables are clean and, and serviced well and so on. So it really does— it, it's, it's a use case specific thing. But I, I, I agree with you. I think it's a copilot. I think it's a, a source for potential directions or potential even solutions. But I think we— it, it's not going to replace anything. I think it's just simply going to enhance the work in the direction we're already going. I think it'll help us get there faster, wherever, wherever there is, which means it'll help us eliminate where, where we shouldn't be going because we can test and try things within that kind of environment. We have a— our innovation center we call Hatch. Things have to be chicken-oriented around Chick-fil-A. And it's, it's a 30,000-square-foot warehouse, basically. That we've converted part of it to a space where we can immerse teams in each of the innovation stages that we have so that we can facilitate sessions there. But we also have a sim, a live lab for simulations and prototypes where we do a lot of things in foam core boards and either at scale or true to scale, We've built restaurants out of foam core. We've had golf carts come in and run through the drive-throughs to test interface, order interfaces before. We can do anything there. Well, you know, I started thinking, well, but what if foam core could be enhanced by some sort of technology that takes in video that we might have captured from a study in the actual restaurants to surveys and customer data that we have and other sources, combine it together to come up with a design of a restaurant that we can test how profitable it will be, how efficient it will be, especially by lean standards before it even gets built. Because right now, we kind of have to build it. to see how it runs and then make the changes for our next design. But, you know, real estate's kind of like a 3-year cycle. You're building a restaurant for 3 or designing it for 2 and 3 years down the road. How might we be able to do that more efficiently through AI and video and things like that? So that's what we're currently exploring.

That is incredibly interesting. And you talked kind of a little bit about your book, and I'm keen for us to kind of spend some time on the book, Michael. So let's let's talk kind of the 6 Ps of Essential Innovation. So published last year, right?

It's 2 years. Yeah.

Okay. So a couple of years ago. For those that haven't read it, can you talk about, I guess, what you wanted to add to the discourse that you felt was missing? And can you kind of walk us through at a high level kind of what the 6 Ps Oh.

Yeah. Yeah. So it, it ha— it, it was a culmination of what I learned in through the innovation master's program, through teaching and having this, you know, exposure to how dozens of other companies do it. And then looking at our own practice inside Chick-fil-A, and I thought, man, I, I just feel like there's, there's something missing in, in literature as a resource for innovators about the importance of culture. But I didn't want to like, well, here's culture, here's the innovation culture, here's how to build it and leave off. Well, then now that you've built it, what are you gonna do with it? I also didn't wanna start with just capabilities because you could, you could Google innovation capabilities and processes. You don't need a book for that. And I thought, well, I, I also don't wanna write something That chapter after chapter leaves the reader with just like, okay, that was, that was interesting, but what am I gonna do with that tomorrow? So after, at, at the end of each chapter, I provide a your move section where I, you know, it's like, here's what you can do with this tomorrow. The, the 6 Ps are organized in such a way that the First 3 have to do with culture and the last 3 have to do with capabilities. There's also a chapter 7 that has to do with what it's called questioning authority. And that means I want to be an authority on asking great questions. And we talk about exercises that you can do. We talk about a question-to-statement ratio that was in the Innovator's DNA. book. The last chapter is about finding future growth, is that now that you've got this rich culture, you've got a capability that has proven results, how does that influence how you find future growth? So we talk about foresight capabilities and identifying trends and ecosystems and the nodes of ecosystems. What are we looking for when we're thinking about growth opportunities and alternative growth strategies? The first P is about perception. And, and I'm trying to apply the, the innovation process into this whole book. So perception is really important because how executives might perceive the organization in terms of how innovative it is might be very different from middle management, might be very different from frontline workers. And indeed, that's what we're finding is the executives have a higher interpretation of how innovative we are. But you get down to the people at the front lines, and it's so difficult to do anything innovative. And then that middle manager layer, that's the most difficult of, of all, because they're, they're having to play strategically, yet manage work tactically. And they're like, I don't have time for innovation. I do not have time for this. I've got to get this metric done by this date. Well, aren't your competitors doing the exact same thing? So what makes you different? It's a wash and rinse mentality. in middle management that we've got to try to break. So I have an assessment that you can take online that helps you identify, hey, where are you really strong, and where are you not so strong in components of the perception of different components of what innovation in an innovation culture is? The next P is about people. Because any, any culture is established and sustained by the, the behaviors the leaders model. So we talk about, okay, then what is that? What are those behaviors? And we talk about how trust and humility, when you lead with an innovation mindset, everybody knows what trust is as a leader. Everybody knows what humility is as a leader. Nothing new. But there's nuances that changes it. For example, in Under humility, I talk about that if I lead with an innovation mindset, humility to me now means that I'm gonna allow others to influence my thinking. Well, that, that sounds like a nice thing to do, but if you really get down to the heart of it, none of us are where we are in our career because it was somebody else's idea. We have to be the idea guy or girl. That's how we get noticed and promoted. And we have to break that. Leaders of the future are beginning to realize This is not about me being the idea girl. It's about me creating a culture where the team could bubble up. And then as part of that, I will be, you know, rewarded accordingly. It's just a little bit of a twist. Then we get into philosophy. So as the executive team begins to embrace what it is, what the investment looks like to create a culture of innovation, then language has to be common. agreements of collaboration, but not just collaboration, you have to have cooperation as well. How do we define things like failure? How are we going to reward this in terms of career pathing? Are we going to have it part of our annual performance review or not? If we are, I've given you some questions to ask and some things to look for that have— that can, you know, lead to those discussions. We talk about the process, obviously, we have to talk about that. We talk about place. Nothing to me speaks more loudly about an organization's commitment to innovation than the absence of a place that they can go to innovate that is conducive of sort of the maker or thinker space. When we were building our Hatch, we, we took a lot of trips to benchmark what other people are doing. And a lot of companies call their innovation center, or they call the space the innovation center or the innovation hub. And you walk in and it's really just a museum. It's kind of like, here's some of the cool things that we've done. I'm like, but where are the people who are doing this? Where do they do this stuff? And so, you know, you kind of have to like go through the halls to find the skunkwork labs that are just full of dust and debris and broken prototypes. I'm like, that's what I'm talking about. So that's kind of what our hatch is. It's a, it's a mess and it is not polished. It is not a showcase. And we want that. We designed it there that way on purpose. And then we talk also about permanence. How do you sustain this muscle of innovation? How do you sustain the culture when the people who were present and who created it disperse? They leave, they go to other places. What's left? How do we hold each other accountable to these said behaviors? How do we reward people? How do we train them and educate them and grow this community so that it's sustainable over time? So that's the 6 Ps in a nutshell.

And I guess for you, like, you know, writing that book, having that kind of widely read, you'd have had conversations with lots of other organizations, Lots of people working in innovation inside other companies, lots of people not working in innovation or wanting to kind of build not just the culture, but I guess also kind of the capability that you talk about. Of the 6, in your experience based on those conversations, where do people seem to kind of struggle the most?

I think it has to do first with the philosophy and getting executive agreement that innovation is not about ideas. It's about competitive advantage. And how do you create it and sustain it depends a lot on the methods and processes you, and the permissions you give your staff. That takes executive agreement and some trade-off. Because there could be resource allocations that, that may favor one department in one season and not another for the sake of competitive advantage. It may expose the perceived value of a leader's ability to lead in that prototyping stage when, yeah, the, the unexpected outcomes are a lot. Some leaders take that as a personal reflection and assessment on their ability to lead. So, they're like, I don't want to go down this innovation culture process because it may surface what I perceived as my deficiencies as a leader. When we're trying to say, no, it says more about your leadership when you are willing to go there and expose where the areas of improvement can happen. for the benefit of the company, you'll eventually be rewarded for that. So that philosophy conversation at the highest levels is really make it or break it. We've been fortunate over the years, even to the extent a few years ago where we added to our core values as a company, we pursue what's next. Well, that gave now all of us not just a license and freedom to explore that thinking, but almost an obligation. That's part of who we are, and what we do is pursue what's next. Well, how do we do that? And that's what ushers in the capabilities. The last— the other part of that that's challenging for a lot of people I spoke with is the permanence piece, is just to keep it sustainable. A lot of times, you'll have an executive come in who is all about innovation. He or she is the champion. They've done it before. They've got a good track record. Everybody listens to them. They're influential. They put in this process. Five years later, they leave, and innovation leaves with them. So how do we avoid that? So we talk about how to avoid that and create communities within the organization that are rich with these kind of folks. For Chick-fil-A, we call it innovation ambassadors, and they they are sort of an elite group of people who have either raised their hand. Or their bosses tapped them on the shoulder and said, hey, we need an innovation champion, an expert, a master of this in our department. I have a small team of 3, so we can't do this to everybody or for everybody. So we've created this community of power users that represent the spirit of innovation and the process and the culture and all those things around in all of the departments. But those are the 2 biggest challenges.

On philosophy, how much of an advantage in innovation terms is being privately held as an organization, do you think? And the reason I say that is because, on philosophy and permanence, I guess we see reticence, but also innovation happening in fits and starts because The timeframes don't align with the tenure of the executive. They don't align with the reporting cycle of a publicly traded company. How much of an advantage do you think being privately held at Chick-fil-A has been in innovation terms? And what advice do you have for people maybe in publicly traded companies to help them to break that cycle of incentive-based tenures, reporting-based tenures?

That's a great question. I do think that private, being privately held has its advantages because we're not constrained to show that we're doing something cool every quarter. And I think that's what, you know, a lot of the pitfalls of publicly traded companies fall into. Not a pitfall, it's just, that's the way it works. I mean, you have to show your shareholders that you were doing something cool. They may forget about it 2 quarters from now, but the fact that they had good earnings reports and positive outlook on cool things we're inventing, that's good. You know, everybody gets bonused on that. Okay, that's great. But come reality, man, that's a slippery slope and the treadmill just never stops. Where privately held companies, you know, the difference is, well, if you're privately held and margins are slim, Then yeah, you can stretch that timeframe out to manipulate your margins so that you can trickle investment in innovation to, you know, stay ahead of the game. Or if you're privately held in Chick-fil-A's, you know, situation where profit is not necessarily an issue, where growth is not an issue, then you've got You know, much more liberty and time. Although what I'm noticing in recent seasons is that we, we put our— we put time constraints. It's like a self-inflicting wound that we believe that we have to deliver this in 6 months, when actually if we could deliver it in 10, it'd be a better product. Well, why don't we— who came up with 6 months? You know, it's like We we have the freedom privately held to do that, to argue why that's those other two or three months are important. Now the flip side of that is being family owned. You're led by a family member. Yes, they've got a board that they you know that help guide them and advise them, and also have an executive committee that keeps them in check. Ultimately, though, it's their call. So for example. If they don't want to diversify, then you're not going to diversify. If they want to diversify, but only in this narrow, you know, area over here, then you can't explore anything else outside of that. So we've, you know, that there's nuances of being family owned and privately held that on the surface may look like, oh man, that's great. You guys don't have to mess with this, this, or this. I'm like, Yeah, but we also have to mess with this and this and this. It's just a different kind of constraints that we have to work under. But I would much rather work for a privately held company than a publicly held company any day.

And how has the process of sort of writing, publishing the book influenced that? I guess I'm gonna do a pun, right? But Like chicken and egg. So is it the— how much has the book influenced the work that you're doing at Chick-fil-A versus how much of it were you already doing it and you've kind of captured sort of in the book? Did you learn anything new during the process of— arduous process of kind of writing and publishing that for you to apply at Chick-fil-A? Or was it all already there really and you've just kind of brought that together?

I intentionally did not write this about Chick-fil-A. This was a very— this was research, observation, conversations of a broad range of industries and innovation conversations because I didn't want it to be— we've had people in Chick-fil-A write about their Chick-fil-A experience. Because we've, we've just had the good fortune of doing a few things well, especially when it comes to branding and advertising. I mean, the cows, if you're familiar with that campaign, was game-changing in our industry. We also did some really interesting things with, with, uh, talent, with customer service that was new to our industry. And people have written about specifically that, and I didn't want to do that. I wanted to write a book Of more, there are examples that I might use, but it's not a Chick-fil-A book. There are some, there are some, a few things that we do use at Chick-fil-A that I introduced a few years ago that work. So I embedded it in here, but it's not a Chick-fil-A book. In fact, I'm not sure how many people at Chick-fil-A even read the book.

So. And looking forward to 2024, What are the key things, I guess, like if we were sitting down in 12 months' time with your fantastic Christmas tree, Michael, in the background again for Christmas 2024, what are the things that you and the team would like to achieve over the next 12 months for you to kind of look back on the year and say, yeah, like that's been a big success?

I think we've entered a season where conversations about alternative growth sources are beginning to happen. We've been talking about this, we as in like me and my team, for like 5 years. And the idea of alternative growth strategies and what it takes, the idea of a foresight capability and standing that up, Doing that well, to help inform strategic planning decisions, to help diversify this multigenerational family business. You know, if you look back at family businesses that were started 50 years ago, what they do today doesn't look like anything what they started out doing, rarely. So what is that? What will Chick-fil-A become over the next 20, 25 years? That's what I'm excited about beginning to explore. And I think we're gonna get there in 2024, just at least laying the groundwork about establishing a process for how to think about that, that I'm super excited about.

And just finally, Michael, kind of what's your big kind of bold prediction for the future of innovation, particularly in kind of the fast food industry? What kinds of sort of business models, products, services do you think we'll see a proliferation of over the next sort of 2 or 3, 2 or 3 years?

I think we're gonna find more and more delineation between dining room experiences and purely convenience-driven experiences. There are communities of Chick-fil-A customers that couldn't wait for our dining rooms to open up. There are communities within Chick-fil-A across the country that never intend to go back to a dining room again. You know, it's like their behaviors have changed. And I think not just with fast food, I think the definition of what a restaurant is will take greater shape and detail. And I don't think it's gonna be the same definition as it is this year. Convenience, customization, personalization, will continue to drive consumerism when it comes to food outside of the home. I'm not sure to what degree nutrition will play. I don't think it's going to trump convenience. Based on what I'm reading, convenience is going to be the driver and customization. Nutrition may be a part of that, but I do feel like it's convenience-driven.

Do you talk about drugs like Ozempic and the kind of impact that that might have on sort of people's dining habits in the future? Is that a conversation that you've had? I've heard from a volume perspective Walmart, Target, Publix have it on their radar. Absolutely is kind of a key force. Is the proliferation of these drugs and the availability of them something that you think will have a big impact, Michael?

I think we have to— that's the other thing is too, because it's like we I do think to be successful in the future and then like today, but more so in the future, the closed systems thinking, like, hey, Chick-fil-A, we have to own all our processes. We have to own all our IT. We have to own all our supply chain. I think companies that will be more successful in the future will begin to open up their ecosystems and partner with nodes of that ecosystem that will help them provide greater and greater value to their customers. And it may look different than what it does today.

And just a question from John in the audience as well. So he asked a question around whether we have a point of view on how much businesses should spend on innovation/R&D as like a percentage of sort of revenue or or profit? I mean, like Amazon famously spend around 11% of revenue on sort of R&D and innovation and famously don't do much in terms of profit, perhaps on purpose, but because of that to kind of fuel future growth. But do you have a point of view on that, Michael, or patterns that you've seen?

Yes. So I guess just a word of caution in that is if we say Hey, we, McDonald's is outpacing us in their innovation investments. And if we try to reach parity with what McDonald's spends, we can do that. But if they're spending it on poorly framed processes that reach poor solutions, then it could, you know, erroneously send us into spending more than what we need to because They're not spending what they're spending smartly. My advice is, and to Chick-fil-A as well, is rather than try to either achieve or govern a percent of sales that ought to be dedicated to innovation, to invest whatever is necessary to be great problem finders and opportunity finders. Forget the solution. But if I need $30,000 to do research to understand the root causes behind this particular audience challenge, then just give me $30,000. I don't need the $3 million that I think it might take to do a solution because I don't know what the solution is yet. Seek support for, yes, this is an audience we have to win. Seek support to, yes, this is a problem and we do understand its root cause and explain how we do that. Get agreement with executives on that. Then you can say, then I need a next— if we believe that's true, I need this much money to, to be able to prototype a solution. You've already agreed that it needs to be done. So that's— that helps eliminate the subjectivity of the discussions at the budgetary and planning levels of coming in with an idea, because everybody's an expert on ideas, right?

So.

I think it's an— I don't know if it's a zero-based budget, maybe project by project.

Kind of zero-based, but yeah, like absolutely, like a, you know, in the same way that you would raise from a VC once you've gathered evidence around problem solution, product market fit, you know, that's the way that you raise in that world. And that is kind of zero-based budgeting approach. Michael, it's been an absolute pleasure to have you along today. I wasn't feeling festive until I saw your background, and, um, now I'm absolutely all over it, determined to get the tree down tonight. I hope you have a wonderful holiday season with the, the family, and thanks again for joining us.

Thank you. Thanks for the invitation.

I enjoyed it. Thanks, Michael. See you later. Take care.

Bye-bye.

Thank you.