Examine the extract. 1)Critically discuss the problem. 2)Why does the author call it 'Productive Failure?' 3)What can we strategically learn from this case?

360 Chapter 11 Sustaining Change versus Initiative Decay Productive Failure at McDonald's In 2001, McDonald's opened two four-star Golden brand simply didn't work when applied to a fourArch hotels in Switzerland. They were distinctive, star hotel. with a 24-hour McDonald's restaurant attached and However, international marketing professor rooms with a patented curved wall, arch-shaped Stefan Michel (2007) argues that the decision by headboards, and a cylindrical, see-through shower McDonald's to pilot this initiative was not as bizarre (that was partially in the bedroom). The idea had as it seemed. For example: (1) diversifying into been proposed by the McDonald's Switzerland hotels gave McDonald's a chance to test the multichairman, Urs Hammer, in response to a push from billion-dollar restaurant industry; (2) it required the parent company for diversification and new what was a relatively small investment for McDonideas. ald's; (3) the damage to the McDonald's brand was The hotels were not a financial success. There limited through the use of the name Golden Arches were problems with the interior design (lack of pri- and restricting the experiment to Switzerland; and vacy in the shower), and the phrase "golden (4) the losses on real estate and operations were arches" is not associated with McDonald's in insignificant in relation to the overall McDonald's German-speaking countries (it also didn't help that business. Most significantly, the venture was a "arch," when pronounced by German speakers, statement of support for entrepreneurial ideas sounded like a vulgar German word for posterior). within the company, and the outcome was treated Also, and more importantly, although the restau- as an important, and relatively inexpensive, learnrant venture made use of many of the company's ing experience. core competencies in areas such as franchising and real estate management, the McDonald's Based on Michel (2007)