Want Fries With Your Disillusionment?

I watched The Founder while on a long flight recently. It’s about Ray Kroc, who turned McDonald’s from a local burger joint into the global powerhouse that it became, while cheating the McDonald brothers out of the business that they started. Pretty good movie that does a good job of showing the ethical lines that are often confronted, and sometimes crossed, in an entrepreneur’s journey. Michael Keaton does a great job portraying the complexity of the character.

One of the more memorable points in the film (spoiler alert!) was a scene where Kroc, having unscrupulously secured all rights to the company for himself, explained to the McDonald brothers how he had immediately known that he could turn it into a huge success. The brothers thought that it had to do with the assembly line system they had invented for cranking out burgers quickly and efficiently. He shook his head and said no, that wasn’t worth anything to him — the technique was easy to replicate, and in fact others had done so but not been able to scale the concept.

So what was it, they asked. What was so special about McDonald’s?

Turns out, what Kroc found so attractive was, wait for it… the name “McDonald’s”, and the wholesome, family friendly image that it invoked. Yes, that’s it, the name.

While I’m pretty sure the filmmakers’ main goal was not to stimulate in-depth debates about the pros and cons of different forms of intellectual property, this scene surely struck a chord with many viewers who, like myself, deal with IP matters in their business lives.

Of course this was a Hollywood treatment of reality, and it may be apocryphal, an alternate version of the truth invented by a big corporation’s PR flacks who were tasked with coming up with an interesting historical account of what was otherwise a pretty nasty story. But still, even if only partially true, it must be a bit disillusioning to people who devote their lives to finding better ways to do things… McDonald’s, the poster child for everything good and bad about fast food, became a behemoth not due to new ways of preparing food, or brilliant supply chain planning, or ingenious real estate strategy… no, it was simply the result of a name that resonated with people, and those iconic golden arches? SMH.

True or not, this story is largely consistent with what many experts claim, and it matches the empirical evidence I’ve observed from a couple decades in business. Successful brands are almost always driven by emotional connection with customers, and rarely by a superior product or service. In other words, marketing wins over technology, nearly every time.

Don’t get me wrong. I’m a huge believer in the power of technological progress to improve the world. There have been some truly incredible breakthroughs in my lifetime that we now take for granted, and I’m optimistic that the indomitable human spirit will eventually solve the biggest problems of our time. Whoever invents a vaccine for cancer, or a way to generate endless energy from abundant sources, or a peaceful means of solving international conflicts, can and should be the world’s first trillionaire. There’s no doubt that some ideas have enormous inherent value, and I’m a strong believer in giving credit where credit is due, which is what patent systems are ostensibly designed for (patent trolls are a whole other topic that I won’t go into here).

But let’s be honest. Most “breakthroughs” are actually the result of the toil of many, many contributors, making incremental improvements over years or decades, most of whom saw no reward in the end. The idea of the lone inventor having the proverbial “aha” moment, then going on to change the world with their idea, is largely a myth. Much more common is a shrewd businessman who sees a market opportunity to capitalize on an emerging trend. Sure, he may file some derivative patents to gain legal claim to the idea. But in the end, it’s about his power to sell the concept that generates real value. The McDonald’s story may seem like ancient history, but there are countless examples from today. Who invented the social network? In 50 years the answer will likely be Mark Zuckerberg. The truth is something different. Nothing against Zuck, but he didn’t “invent” anything, he was just smart enough to sell the vision of mass market social networking to the right people, at the right time.

I have quite a few colleagues who have developed patents. Only in a small percentage of these cases were the ideas successfully brought to market in a way that created economic value. On the other hand, the most successful entrepreneurs I know are not inventors per se, but creative adapters of existing technology or concepts. They know that what really matters, in terms of building something with enduring value, is capturing the hearts and minds of the people who will pay for their product or service. In many cases, this was the result of crafting a compelling story around a brand, coupled with a great trademarked name, and/or copyrighted creative material.

Disney. Amazon. Nestlé. Tesla. Lululemon. Netflix. Adidas. All of these companies have rich portfolios of patents and continue to invest heavily in R&D, but did any of them get where they are based on a single innovation? No. So where did their immense value come from? Strategy and timing, for sure. Brilliant leaders who know how to execute, check. Being customer driven, you bet. But the real value, I would argue, is in… not the name exactly (Lululemon, really?), but the story and image that have been built around it. The graveyard is full of companies who had amazing products, but were outperformed by competitors who focused on the fundamental challenge of any business: convincing people that they want or need whatever you have to offer.

It’s pretty easy to come up with counterexamples of companies that have made it big based on proprietary IP: Lego, Bose, and Red Bull, to name a few — and it’s heartening to know that great ideas can create great value. But I doubt that these firms would have reached the same heights with less catchy names (would your kids get excited about “Plastic Sticky Bricks”?), or less effort put into brand building.

So if you’ve got an amazing idea, by all means work on it and patent it if you can. Be sure to put quality and customer satisfaction above all else. But if you really want to hit the big time, trademark a name that makes people feel good, and hire a person like Ray Kroc — ideally one who will not rob you blind — to help take the idea to market. Then maybe one day a movie will be made about you!

Thank you for reading this.