I love this. Keep it simple. Give the people what they want and something they can rely on. I wonder how they are found though. Some know the route and will hold out for one of their locations as opposed to using a competitor, but to do that they have to be assured that a location is close-by. For more casual drivers, how do they know that they should hold out? I’m wondering if any part of their operating model involves consistently having locations in every major rest stop so people know they can expect one there, or, if not, how they go about picking some locations and not others.
Loved your Chipotle post. All of the measures you mention may seem common-sense, but in reality Chipotle is clearly setting themselves apart in terms of the end product and service they provide the customer so I loved reading your post about how there’s more to it.
1. Optimizing Throughput Rate
Throughput rate is the one metric I think people think about a lot when they think about Chipotle and a lot of people would probably attribute their success almost entirely to combining high throughput with high quality ingredients.
I used to think about throughput only in terms of Chipotle’s superior fast execution of order-taking, but you talk about how the average bill at Chipotle is $10 and that really made me think about how Chipotle’ high throughput rate is not only stemming from streamlined ordering, but also from a uniform pricing and the customers’ faster ordering and paying because they already know their bill will be around $10 and thus they don’t need to make judgement calls throughout the process as to what to include or not include in their order based on price. They are already bought into slight premium pricing for fast casual food when they enter the restaurant.
2. Staying True to their Signature Dining Experience
My favorite insight in your post was about external pressure to offer these “low risk high profit items” like coffee and sweets. It’s so interesting that, in general, people give credit to the aspects of a business they can see. Here, fast service combined with high-quality healthier food, is what is often viewed at Chipotle’s success criteria. But, as you point out so aptly, it’s also about what they are not doing that makes them successful. Being adamant about sticking to their identity and value proposition and not muddling that experience with extraneous (albeit potentially profitable) offerings.
Thank you for such a great post.
NMA! I loved this post. Thank you for writing it. You really articulated what it is about the operating model that makes Hermes’ business model so successful. I admire Hermes as a business and appreciate all the insight you brought to how they do what they do.
Within Hermes’ operating model you mention several categories of competitive advantage. Two I found especially interesting:
1. Supply Chain Management
You note complete vertical integration. It’s fascinating that Hermes has continued to do this when many extremely high luxury craftsmanship-focused companies have strayed from an original strategy of complete vertical integration (long before anyone even thought about it in terms of vertical integration).
2. Innovation Management
I was also struck by your mention of Hermes being ranked on the Forbes innovation list. I had read that before but I loved your analysis of why this is. I watched the video you highlight. The fact that Hermes has created this petit h group that is turning “already used” supplies and turning them into art and sellable items of beauty is really a great example of Hermes keeping a clientele that is highly sophisticated and fickle interested in Hermes and its products.