Darden Restaurants’ Innovation Strategy

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Introduction

The concept of innovation has increasingly become very important to firms in the modern society. Market competition has become stiffer than it ever was, and firms are now under pressure to come up with ways of managing such competition. According to Lewis, the only way that firms can manage competition is by coming up with unique ways of productions and product delivery methods in the market which are superior to that of the competitors (43). This means that firms have to embrace innovation. Innovation is defined as coming up with alternative ways of addressing tasks that lowers the cost and improves efficiency. It involves going beyond the conventional methods to come up with new approaches that embrace emerging technologies to improve efficiency and effectiveness in service delivery.

Darden Restaurants is a leading American restaurant that has its headquarters in Orlando, Florida. It was founded in 1938 by William Darden under the name Green Frog. In 1968, he changed the name to Red Lobster Inn as it expanded to other towns within Florida. The name Darden Restaurant was adopted in 1995. According to Pasiuk, this firm has experienced a unique growth ever since it was founded (78). The company has grown to become one of the Fortune 500 firms, employing over 200,000 employees across the United States. It has slightly over 1,500 food outlets located in different parts of the country.

The restaurant offers a wide range of products to its clients. Despite this success, Darden Restaurant faces very stiff competition in the market. The industry has become flooded by new entrants, some of which target specific market segments, posing serious risks to established firms such as Darden Restaurants. These new entrants are relatively small and flexible in their operations, enabling them to pose serious competitive threat to large entities that may not be as dynamic as they are in managing environmental changes. In this paper, the researcher will critically analyze innovative performance of Darden Restaurant.

Innovation Strategy of the Firm

The restaurant industry in the United States is one of the most competitive industries dominated by large and medium-sized firms. Darden Restaurant has been forced to operate under such a competitive industry and based on its performance over the past decades, it is clear that this firm has been successful. According to Reid and Bojanic, achieving success in a highly competitive market requires an innovative strategy (45). It requires a strategy that other market rivals do not use. Being innovative means coming up with unique ways of undertaking normal tasks to achieve supernormal results (Smart 11). This is the exact effort that this firm has been putting in place in order to achieve the much desired success. In order to understand the innovative strategy that the firm has been using, it will be necessary to look at its core competencies, strategies, and its approach when responding to emerging threats and market opportunities.

Core competencies

It would be necessary to look at the core competencies of Darden Restaurants in order to understand what the firm is doing differently compared to its competitors that is enabling it to gain competitive edge in the market. According to Reid and Bojanic, core competencies focus on how a firm harmonizes a combination of skills and resources to achieve uniqueness in the market (38). Darden Restaurant’s core competencies can be looked at from three different perspectives.

The first perspective is the firm’s unique ability to access a wide market through delivery of a wide range of products. According to Enz, the stiff competition in the food industry has forced many firms to specialize in their product delivery (61). They believe that specialization enables them to deliver high quality products to a specific market segment, thus meeting their needs in a special way. Darden Restaurant uses a completely different strategy. The firm has established different units within its food outlets that specialize in different market segments. For instance, in each of the restaurants of this firm, there are units that specialize on foods popular among children, adults, and the aging population.

There are also units that target vegetarians and other people who are keen on healthy eating. Each unit is expected to understand the target market segment and to provide products that meet their specific needs. This way, all the clients who visit the restaurant will get what they need. This has made the restaurant with American families. These families know that individual needs of children, youths, and adults will be fully met at this food outlet. The ability of this firm to offer variety of products to its clients is unique. It has earned it a name in the market, strengthening its brand.

The management of Darden Restaurant has been keen to ensure that its end products meet the need of the clients in a unique way. According to Lewis, there has been a massive change in the production approach of companies from what it used to be in the past (74). Darden Restaurant was founded in 1938. At this time, competition in the market was very low. In fact, customers had to accept what was presented to them as long as it relatively met their needs because they had limited choices to make. In the food industry, specialization was something that was rare. Firms focused on providing foods that were popular among American families. However, this trend has changed as firms find themselves under pressure to manage market competition.

Clients now have numerous choices to make whenever they want to visit a food outlet. Darden Restaurant has mastered the art of meeting the needs of its clients in the most unique manner. The firm has invested heavily in research. Each of the units discussed above always have a budget for them to conduct research and understand the changing customer needs and preferences. This has enabled these units to understand the changing trends in the industry and how these trends can be managed. The firm has remained very responsive to the changing customer needs in the food industry. This is one of the major reasons why the firm has remained successful in an industry that has become very competitive.

According to Enz, for a firm to gain competitive edge in the market, it must always come up with strategies which cannot be easily imitated by the market rivals (55). This is another reason that has enabled Darden Restaurant to remains successful in the market. The firm has developed unique strategies that its rivals have not been able to imitate easily. For instance, at a time when many restaurants are specializing on specific products or market segments, this firm has come up with a unique business design that enables it to offer a wide variety of products in the most unique way possible. Other firms would avoid such strategies because of the financial implications involved and the need for specialized workforce. However, the strategy is working for Darden Restaurant.

Innovative strategy

The innovative strategy that Darden Restaurant uses is based on having individual specialized units within the restaurant to offer a wide variety of products in the most unique way possible. The specialization strategy has enabled the firm to continue offering products that target the entire market, but with specific focus on individual markets. The strategy has promoted development of each units based on the emerging market needs in each of the market segments. As Lewis notes, Darden Restaurant is one of the few outlets that one can be assured of getting a wide variety of food items that meet specific needs (84). Many other food outlets are now moving towards more specialized market segment as they try to strengthen their positions in the segments they believe they have the best capacity to deliver the needed products.

How the firm responded to historical threats and opportunities

The ability of a firm to respond to threats and opportunities in the market always dictate its success. Darden Restaurant has developed a unique approach of responding to market threats. For instance, the 2008 economic recession affected so many firms in the United States, but this firm developed a unique approach of dealing with this threat. In each of the units, the firm started offering low-priced products to attract clients who were suffering from the financial down-turn.

The variety of products that this firm offers in the market has also enabled it to deal with the threat of new entrants and substitute products. The strategy has enabled it to remain very competitive in this industry. The firm has also been effective in terms of responding to opportunities. This can be seen by analyzing its historical growth. This firm has been keen on acquiring struggling but strategically located firms. Long Horn Steakhouse, Bahama Breeze, Season 52, and The Capital Grille, are some of the firms that were acquired by Darden Restaurant as it expanded its operation within the United States’ market.

Sources of Innovation the Firm Has Used

Darden Restaurant has remained very innovative in the market, always keen to understand and meet the needs of its clients. One of the main sources of innovation at this firm is extensive research. The management of this firm has embraced regular market research as the only way of understanding the changing needs of customers. The firm has invested heavily in research over the past few years to understand the dynamism of the market and how it can be managed. The research has paid off because most of the successful innovative strategies used by the firm were informed by these researches.

The employees of this firm have also been a rich source of innovation. According to Pasiuk, employees are always in the best position to come up with new ways of doing what they do in a different way that can create a positive difference (112). The firm has created a good environment for all its employees to come up with innovative ideas of undertaking their tasks. From chefs to waiters and waitresses, the firm has been encouraging all the employees to be creative. The firm has a system that it uses to develop ideas into strategies that can be applied to bring positive change. Highly innovative employees are always rewarded for their extra effort, a move that has motivated many employees to be as creative as possible when undertaking their duties.

The firm has also been using benchmarking as a way of being innovative in its operations. According to Smart, it is important for a firm to compare its operations with that of other market rivals (56). Sometimes it may be necessary to borrow strategies used by the competitors if they are delivering better results than what the organization is getting. At Darden Restaurant, the management has been keen to borrow best practices from other firms in order to improve its operations in the market.

Processes used to scan, select, finance, and implement the ideas

Darden Restaurant has an idea incubator that is meant to develop ideas that employees come up with into projects or systems that can improve efficiency of the firm. The incubator uses eight steps to scan the ideas, select appropriate ones, and provide resources to develop and implement these ideas. The figure below summarizes these steps.

Figure 1: Stages in Idea Development. Source (Porter and Norton 82)

The first step is idea generation. All employees are encouraged to be innovative in their respective areas of work. Whenever an employee comes up with a new idea, he or she will have to discuss it with fellow employees before taking it to the panel of experts within the firm for the screening stage. The screening process basically involves determining the viability of the idea and its ability to achieve a given goal. If its viability is confirmed, it will move to the next stage of concept testing. If the idea was about coming up with a new product, a sample will be made to determine if it can meet the expectations of the targeted clients. If it passes this stage, it moves to business analysis stage where a team of experts will conduct a cost-benefit analysis to determine if indeed the firm will gain economic benefit from such a venture. The idea will go to the next stage of product development.

The firm will develop a number of products based on the new idea to determine if it has the capacity to deliver the expected value as defined by the new idea. If this is a success, then the next stage will be test marketing. At this stage, a sample of products is availed to selected customers to determine their reactions. Test marketing helps in confirming whether or not the intended market would accept the product. It avoids cases where a firm commercializes a product that does not meet the expectations of the customers. Such an attempt may not only lead to serious financial loss but also customer dissatisfaction. If test marketing is successful, the firm will then commercialize the idea by producing the products in mass. The final stage is a review of the performance of the product in the market to determine if it is achieving the set objectives.

Organizational structure/culture and how it has affected innovation

According to Porter and Norton, organizational culture refers to practices promoted by the management and embraced by employees that define how they relate to one another and how they approach their tasks (67). At Darden Restaurant, one of the prominent practices that have been common is teamwork. Employees of this firm cherish working as a unit. This has promoted innovation in this firm because employees get to share and develop new concepts that can help the firm achieve its strategic vision. The management has also been successful in promoting a culture where everyone appreciates diversity of the workforce.

The firm employs people from various backgrounds. The diversity has never been an issue. Discrimination based on race, religion, gender, or any other demographical factors have been curbed. This culture has promoted unity and strength within the workforce. It has been a positive force that has enabled this firm to be very innovative. Instead of spending time on issues about race and religion, employees utilize their time trying to come up with better ways of handling their tasks. The reward system has also promoted creativity among the employees. They know that for every idea that they come up with, there will always be a reward as a way of encouraging them to be more creative.

How the firm has demonstrated learning regarding innovation performance

This firm has demonstrated learning regarding innovation performance in different ways. First, developing an idea incubator is a clear demonstration that this firm has learnt that ideas must be nurtured in order to turn them into successful projects. The management has also learnt that employees are the richest sources of innovative ideas. That is why it has created a compensatory system to reward innovative minds. The firm has also learnt that innovation involves change. Change must be implemented in a systematic manner, and one of the best theories of change that is common within this firm is shown in the figure below.

Figure 1: Change Model. Source (Porter and Norton 78)

This model emphasize on the need to prepare all the stakeholders when planning to introduce change in a process referred to as unfreezing. To unfreeze, the management should explain to all the stakeholders why the new system needs to be changed, and the benefits that the new system shall bring. Above all, the process aims eliminating the fear of the unknown among the stakeholders to make them more receptive towards the new system. When the management is convinced that everyone is ready for the change, then the new system should be introduced. The final stage is to refreeze where the newly introduced concepts become integral part of organizational culture. This model helps in minimizing resistance to change that is always common if stakeholders are not properly prepared for it.

Conclusion

Darden Restaurant is a successful company that has been in operation since 1938. When it started its operations, market rivalry was relatively low. However, things have changed in the modern market following the emergence of new firms into this industry. In order to remain competitive in the market, this firm has embraced creativity and innovation in its operations. It has exhibited innovativeness in its production strategies and product delivery methods. At a time when other firms in this industry are narrowing their line of products, this firm is increasing its product lines to capture more customers in the market.

Works Cited

Enz, Cathy. Hospitality Strategic Management: Concepts and Cases. Hoboken: John Wiley & Sons, 2010. Print.

Lewis, Pamela. Management: Challenges for Tomorrow’s Leaders. Mason: South-Western, 2007. Print.

Pasiuk, Laurie. Vault Guide to the Top Hospitality & Tourism Industry Employers. New York: Vault, Inc, 2005. Print.

Porter, Gary, and Curtis Norton. Financial Accounting: The Impact on Decision Makers. London: McMillan, 2014. Print.

Reid, Robert, and David Bojanic. Hospitality Marketing Management. Hoboken: John Wiley & Sons, 2010. Print.

Smart, James. Darden Restaurants Brands. New York: General Books, 2010. Print.

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