McDonald's: More Innovative Than Apple?

A statue of Ronald McDonald - Brent Lewin/Bloomberg
Brent Lewin/Bloomberg

Move over, Apple (AAPL): McDonald's (MCD) may now be one of the most innovative American companies today.

So says Jim Cramer, who recently compared and contrasted the two on CNBC's "Squawk on the Street": "There are two companies out there right now. There's a company that doesn't really innovate, that has no surprise factor ... and there's another company that is innovating the heck out of its business, coming up with all new menu items ... The first one is Apple and the second is McDonald's."

He's right: McDonald's has been busy turning conventional customer expectations on their head -- converting its eateries to hangouts that more closely resemble cozier quick-service restaurants and refashioning its menu to appeal to both health-conscious diners and late-night breakfast-food fans.
And over at Apple? Well, this past week at Apple's developer conference, the company unveiled its new iOS7 operating system, describing it as the biggest change since the introduction of the iPhone.


Aesthetically, the icons are flatter and more monochromatic, and there are some user-experience innovations that will make using the iPhone marginally more convenient. But is it innovative? Is it something that will substantially drive Apple's sales in the coming quarters? To a degree, but it's far from the level of disruption we are used to seeing from the company.

In fact, during and after Apple's developer conference, shares ticked down as part of a broader market decline.

It's Always Time for Breakfast

Meanwhile, over at McDonald's, the company experienced a healthy global 2.6 percent surge in same-store sales in May. And what new development was it that moved the needle? Late-night breakfast, according to McDonald's management.

The company has made a concerted effort to appeal to the growing population of health-conscious diners in order to get them to see the Golden Arches as a viable meal option when they're on the go. The new Egg White Delight McMuffin (with 17 percent fewer calories and 42 percent less fat than the original) is just part of the company's strategy. But McDonald's has taken the option one step further, allowing customers to request a yolkless egg on many of the other breakfast standards on the menu.

And the long-standing joke about trying to get to McDonald's before they stop serving breakfast? That's yet another standard business practice that the chain is changing. Customers can now get many of the breakfast items during different parts of the day. It's all part of McDonald's effort to steal away some of the late-night breakfast biz that companies like DineEquity's (DINE) IHOP and Denny's (DENN) have for so long dominated.

There's No Looking Back

It may sound strange to call a fast-food joint a more innovative company than what is largely considered to be the most innovative company of the last decade or more. But remember, when it comes to innovation, it's all about looking forward, not back.

Regardless of how iconic a product (or brand) once was or how innovative it has been, a company must keep moving forward in order to stay in the minds of its customers. We're talking about exciting developments that make us say, "Wow!"

"Wow!" is not what the world said this past week when Apple introduced iOS7 mobile, or even when it revealed that it was entering the streaming radio business.

But "Wow!" has been the market's reaction to what's happening at McDonald's.

And while McDonald's isn't likely to soar to the highs that Apple all-too-recently saw, it's showing that even a mature company can turn things upside down and create a new model for increasing its business. For McDonald's, the result is higher sales, new customers, and an improved corporate image. All three bode well for the stock in the foreseeable future.

So the next time you're searching for your all-star stock pick, don't restrict yourself to splashy technology firms. There are plenty of ways to innovate, and it's happening in every industry.


Motley Fool contributor Michael Lewis has no position in any stocks mentioned. The Motley Fool recommends Apple and McDonald's. The Motley Fool owns shares of Apple, McDonald's, and Microsoft. For The Motley Fool's take on Apple -- whether it remains a buy or if it's time to sell -- see the latest thinking from senior technology analyst and managing bureau chief, Eric Bleeker. Simply click here now.

Originally published