Management in Action Chapter 10 please answer application questions 3-6

5. Stal s e ecce Letween a pluuuci UVALIUI and a process innovation? 10. How can you increase the career competency of openness to change? Management in Action Chipotle Needs to Change never recovered as shares fell nearly 60 percent between Chipotle Mexican Grill started in 1993 with a single 2015 and 2018.156 Let's examine what led to the burrito restaurant and now operates in 2,400 locations, includ- maker's fall from grace. ing in Canada, England, France, and Germany. The fast-food chain had approximately 60,000 employees AS CHIPOTLE GREW, SO DID ITS PROBLEMS and revenues of $4 billion in 2017.153 Chipotle rose to greatness because customers were offered Steve Ells founded Chipotle and served as its CEO a straightforward set of options, food was prepared on site until 2018. Ells wanted to differentiate his brand from in an open kitchen, and diners felt they were eating that of other fast-food chains, so he focused on fresh, something healthy. The company had success with this high-quality raw ingredients free of antibiotics and pesti model early on, but the system started to crack as Chipotle cides. Meals were prepared using classic cooking meth grew. Inconsistent food preparation was the first stressor. ods and were served in choose your own style so diners The open kitchen proved a difficult model to scale, and could get the individual ingredients they preferred.'* poor food handling most likely led to the outbreak of food- Then the company's growth and profitability were borne illness. According to the Chicago Tribune, "Chipotle stunted by outbreaks of foodborne illnesses, Customers has been growing too quickly, and without a game plan." were sickened by E. coli, norovirus, and salmonella at The restaurant chain was plagued by inconsistency and dozens of Chipotle restaurants around the United inefficiency.17 Foodborne illnesses continued to haunt it States between 2015 and 2016.155 The restaurant's stock almost two years after the initial outbreak. In 2017, "The Organizational Change and Innovation CHAPTER 10 405 rate of food poisoning reports attributed to Chipotle con tinues to be multiples higher than peers," said Business Insider. These statistics are especially troubling for a brand that prides itself as providing "Food with Integrity." The restaurant's menu reflects another crack in its vision and strategies. Chipotle offers burritos, tacos, bur rito bowls, and salads. This simple menu attracted custom ers for over a decade but is now seen as "stale, according to an analyst with the Tribune. Ells began offering queso in September 2017 in an attempt to spice up Chipotle's menu. The results were not promising. Only 15 percent of orders included queso, compared to the 40 percent of orders that included guacamole. Business Insider reported that queso-related traffic died off after peaking the first week the new item was available. 160 These problems have created opportunities for other fast-casual restaurants such as Odoba and Moes, which are opening locations all over the United States. According to a URS analyst."... these concepts are exhibiting signifi cant growth rates while also increasing competition for attractive market/site selection." Chipotle's once unques tionable market leadership is on shaky ground. CHIPOTLE'S NEW CEO WAS SUCCESSFUL AT TACO BELL Chipotle named Brian Niccol CEO in 2018. Niccol had been Taco Bell's chief marketing officer from 2011 to 2015 before taking over as its CEO. He was hired at Chipotle because of the successful turnaround he had overseen at Taco Bell A disgruntled customer had filed a lawsuit in 2011 alleging Taco Bell's taco mixture was more filler than beef. The suit was later withdrawn, but it took a toll on Taco Bell's reputation and sales. Niccol's change efforts focused on repositioning the chain as a youthful lifestyle brand. He did this by welcoming ideas from restaurant employees and introduced new menu items, including breakfast." These changes produced impressive results. Taco Bell posted an average of 4 percent sales growth during Niccol's time as CEO. The fast-food chain also beat out Pizza Hut and KFC as the most successful res taurant in the Yum Brands portfolio 164 Bell's positive move to offer breakfast and Doritos Locos tacos.Ws Other analysts have concerns about the company venturing too far from its core offerings Those who are skeptical about changing the menu include Chipotle's founder and current executive chair, Steve Ells. Ells still yields significant power and is known as a hands-on leader and perfectionist, accord- ing to The Wall Streer Journal.167 He told The New York Times, "It's not like you can put a whole new thing up on the menu board and-like at a typical fast-food place." This view is supported by Ells's earlier strate- gic failure of adding queso to the menu. Niccol is likely to experience resistance to some of his ideas because Ells does not believe Chipotle is like Taco Bell Chipotle is more vulnerable to suppliers changes in the price of items such as avocados and chicken. Other fast-food brands can push increased costs to franchises-something Chipotle does not have. Ells also refuses to compromise on quality as part of any change. "I don't think you're going to see a situa- tion where someone says, "To hell with food with integ. rity. We're going to buy cheap commodity meat now and really turn this thing around," he told the Times, Chipotle's second challenge is increased competi- tion, and the biggest threat here is Panera. Panerais outside Chipotle's cuisine niche, but it is competing with its promise of fresh, additive-free ingredients. It also has an exhaustive menu that rotates seasonally. Chipotle customers who are tired of its "big-four menu will easily find a Panera nearby: Business Insider reports that 87 percent of Chipotles compete with a Panera Bread within a 10-minute drive.10 Niccol will have to do more than change Chipotle's menu if he wants to compete with Panera. He needs to address his third challenge, which is stopping people from getting foodborne illnesses at his restaurants. The new CEO might accomplish this by slowing the chain's growth and focusing on safer operations. For example, each of Chipotle's approximately 2.400 locations does its own prep work, such as washing lettuce and chop- ping tomatoes. Although this practice is part of Chipotle's operational vision, an analyst from the Tribune suggested that "Chipotle managers have to keep to their core values...but need to find a way to be more consistent and efficient." The analyst recom- mended that Chipotle wash and prep food in a central location and send it out to nearby stores. 172 Such a food preparation change will significantly alter Chipotle's restaurant structure. Customers may no longer walk into a restaurant and see employees grilling meat and chopping vegetables behind the food line. This setup has been part of the chain's vision and heritage and repre- sents something Ells holds near and dear. "Niccol will likely face an uphill battle in uprooting some of that heri- tage, as he's stepping into a role occupied by a founder for the past 25 years," said an analyst to Business Insider. Can Niccol inspire change and save Chipotle! NICCOL'S CHALLENGE AT CHIPOTLE Niccol faces three challenges at Chipotle. The first is the menu and potential resistance to changing it from the company's senior leadership. The second is increased competition taking advantage of the company's past prob lems, and the third relates to Chipotle's food preparation practices and their contribution to foodborne illness. Niccol first needs to address Chipotle's menu prob- lem. According to a CNNMoney analyst, "They need something that gets people talking about the brand again." The analyst says that Chipotle should consider adding new menu items such as nachos or frozen margaritas, Niccol may be positively disposed to this suggestion because he was also the architect of Taco PART 4 Organizing 406 FOR DISCUSSION Problem-Solving Perspective 1. What is the underlying problem in this case from CEO Brian Niccol's perspective? 2. What are some of the causes of this problem? Application of Chapter Content 1. What type of change does Niccol need to inspire- reactive or proactive? Explain. 2. Using Figure 10.1, describe what forces for change exist both inside and outside Chipotle. 3. Does Chipotle need adaptive, innovative or radically innovative change? Explain. 4. Utilize Lewin's model of change (Figure 10.2) as a blueprint and describe how Niccol can inspire change at Chipotle. 5. Think about the outbreak of food-borne illness at Chi- potle and utilize the organizational development pro cess (Figure 10.4) to remedy the issue. 6. Does Niccol need to bring product or process innova- tion to Chipotle? Explain. Legal/Ethical Challenge, linntinne hit "a review by an outside organization rate of food poisoning reports attributed to Chipotle con tinues to be multiples higher than peers," said Business Insider. These statistics are especially troubling for a brand that prides itself as providing "Food with Integrity." The restaurant's menu reflects another crack in its vision and strategies. Chipotle offers burritos, tacos, bur rito bowls, and salads. This simple menu attracted custom ers for over a decade but is now seen as "stale, according to an analyst with the Tribune. Ells began offering queso in September 2017 in an attempt to spice up Chipotle's menu. The results were not promising. Only 15 percent of orders included queso, compared to the 40 percent of orders that included guacamole. Business Insider reported that queso-related traffic died off after peaking the first week the new item was available. 160 These problems have created opportunities for other fast-casual restaurants such as Odoba and Moes, which are opening locations all over the United States. According to a URS analyst."... these concepts are exhibiting signifi cant growth rates while also increasing competition for attractive market/site selection." Chipotle's once unques tionable market leadership is on shaky ground. CHIPOTLE'S NEW CEO WAS SUCCESSFUL AT TACO BELL Chipotle named Brian Niccol CEO in 2018. Niccol had been Taco Bell's chief marketing officer from 2011 to 2015 before taking over as its CEO. He was hired at Chipotle because of the successful turnaround he had overseen at Taco Bell A disgruntled customer had filed a lawsuit in 2011 alleging Taco Bell's taco mixture was more filler than beef. The suit was later withdrawn, but it took a toll on Taco Bell's reputation and sales. Niccol's change efforts focused on repositioning the chain as a youthful lifestyle brand. He did this by welcoming ideas from restaurant employees and introduced new menu items, including breakfast." These changes produced impressive results. Taco Bell posted an average of 4 percent sales growth during Niccol's time as CEO. The fast-food chain also beat out Pizza Hut and KFC as the most successful res taurant in the Yum Brands portfolio 164 Bell's positive move to offer breakfast and Doritos Locos tacos.Ws Other analysts have concerns about the company venturing too far from its core offerings Those who are skeptical about changing the menu include Chipotle's founder and current executive chair, Steve Ells. Ells still yields significant power and is known as a hands-on leader and perfectionist, accord- ing to The Wall Streer Journal.167 He told The New York Times, "It's not like you can put a whole new thing up on the menu board and-like at a typical fast-food place." This view is supported by Ells's earlier strate- gic failure of adding queso to the menu. Niccol is likely to experience resistance to some of his ideas because Ells does not believe Chipotle is like Taco Bell Chipotle is more vulnerable to suppliers changes in the price of items such as avocados and chicken. Other fast-food brands can push increased costs to franchises-something Chipotle does not have. Ells also refuses to compromise on quality as part of any change. "I don't think you're going to see a situa- tion where someone says, "To hell with food with integ. rity. We're going to buy cheap commodity meat now and really turn this thing around," he told the Times, Chipotle's second challenge is increased competi- tion, and the biggest threat here is Panera. Panerais outside Chipotle's cuisine niche, but it is competing with its promise of fresh, additive-free ingredients. It also has an exhaustive menu that rotates seasonally. Chipotle customers who are tired of its "big-four menu will easily find a Panera nearby: Business Insider reports that 87 percent of Chipotles compete with a Panera Bread within a 10-minute drive.10 Niccol will have to do more than change Chipotle's menu if he wants to compete with Panera. He needs to address his third challenge, which is stopping people from getting foodborne illnesses at his restaurants. The new CEO might accomplish this by slowing the chain's growth and focusing on safer operations. For example, each of Chipotle's approximately 2.400 locations does its own prep work, such as washing lettuce and chop- ping tomatoes. Although this practice is part of Chipotle's operational vision, an analyst from the Tribune suggested that "Chipotle managers have to keep to their core values...but need to find a way to be more consistent and efficient." The analyst recom- mended that Chipotle wash and prep food in a central location and send it out to nearby stores. 172 Such a food preparation change will significantly alter Chipotle's restaurant structure. Customers may no longer walk into a restaurant and see employees grilling meat and chopping vegetables behind the food line. This setup has been part of the chain's vision and heritage and repre- sents something Ells holds near and dear. "Niccol will likely face an uphill battle in uprooting some of that heri- tage, as he's stepping into a role occupied by a founder for the past 25 years," said an analyst to Business Insider. Can Niccol inspire change and save Chipotle! NICCOL'S CHALLENGE AT CHIPOTLE Niccol faces three challenges at Chipotle. The first is the menu and potential resistance to changing it from the company's senior leadership. The second is increased competition taking advantage of the company's past prob lems, and the third relates to Chipotle's food preparation practices and their contribution to foodborne illness. Niccol first needs to address Chipotle's menu prob- lem. According to a CNNMoney analyst, "They need something that gets people talking about the brand again." The analyst says that Chipotle should consider adding new menu items such as nachos or frozen margaritas, Niccol may be positively disposed to this suggestion because he was also the architect of Taco PART 4 Organizing 406 FOR DISCUSSION Problem-Solving Perspective 1. What is the underlying problem in this case from CEO Brian Niccol's perspective? 2. What are some of the causes of this problem? Application of Chapter Content 1. What type of change does Niccol need to inspire- reactive or proactive? Explain. 2. Using Figure 10.1, describe what forces for change exist both inside and outside Chipotle. 3. Does Chipotle need adaptive, innovative or radically innovative change? Explain. 4. Utilize Lewin's model of change (Figure 10.2) as a blueprint and describe how Niccol can inspire change at Chipotle. 5. Think about the outbreak of food-borne illness at Chi- potle and utilize the organizational development pro cess (Figure 10.4) to remedy the issue. 6. Does Niccol need to bring product or process innova- tion to Chipotle? Explain. Legal/Ethical Challenge, linntinne hit "a review by an outside organization