A CRITICAL ANALYSIS OF TIM HORTONS DNA

A Critical Analysis of Tim Hortons DNA and Proposed Leadership Strategies for International Expansion Joseph Decker, Nick Mamolo, and Constanza Ponce de Leon Gonzaga University Comprehensive Leadership Program October 2013

Joseph Decker, Nick Mamolo and Constanza Ponce de Leon are all Senior Undergraduate students and members of the Comprehensive Leadership Program at Gonzaga University. The funding for the research, travel and time involved in this article was supported in full by the Murdock Charitable Trusts Vision Call Internship Program. Correspondence concerning this article should be addressed to Josh Armstrong, Director of the Comprehensive Leadership Program at Gonzaga University, 502. E Boone Ave, Spokane WA, 99258. Contact: [email protected]

A CRITICAL ANALYSIS OF TIM HORTONS DNA Thesis By focusing on intentional adaptive strategies rather than technical solutions, Tim Hortons can successfully export their concept and culture on an international scale, but only

after a conscious strengthening of the companys three vital DNA components (Heifetz & Linsky, 2002). Through the application of Ron Heifetzs theory for successful change in a business or organization, this brief will analyze the structures crucial to Tim Hortons historical success, the companys present state of stagnation and disequilibrium, and the vital leadership styles and innovations they must incorporate for continued growth (Heifetz & Linsky, 2002). Introduction The simple truth of Tim Hortons overwhelming success in Canada cannot be refuted. In terms of market penetration, market share, number of locations, and brand recognition, Tim Hortons dominates the Quick Service Restaurant industry throughout the country (Tim Hortons, 2013). Since its inception almost fifty years ago, Tim Hortons has become almost as indicative of its country of origin as the red maple leaf. Indeed, many believe that Tim Hortons has blurred the lines between simple business and a way of life (Cowen, 2013). To fully comprehend the reasons behind the overwhelming presence Tim Hortons possesses within Canada, one must not only examine the fruitful business strategies employed by the company, but more importantly, analyze the ideals and concepts espoused by their various corporate leaders. According to leadership theorist Ron Heifetz, the characteristics that express and differentiate a company make up its DNA (Heifetz, 2010). The core components of Tim Hortons DNA can be categorized into three different but interconnected categories. The four foundations of Tim Hortons that express their structural or institutional DNA are franchising, real estate, vertical integration, and a we fit anywhere attitude (Adduono, 2013) . Next, the simplicity and

A CRITICAL ANALYSIS OF TIM HORTONS DNA quality of the original coffee and doughnuts offered by Tim Hortons make up the companys product DNA. Lastly, the attitude of service and the beliefs outlined within their Vision and

Values statement comprise their ideological DNA. The question for Tim Hortons and their desire for international expansion, then, is whether this genetic make-up could successfully be exported on an international scale. Could a brand so uniquely Canadian ever experience the same amount of growth in another country? Stagnation and Complacency With over 3,000 locations all across Canada, Tim Hortons does not need to focus on rapid continued expansion within its country of origin (Adduono, Sulhi, Derkson, & Woodruff, 2013). Change is necessary within Tim Hortons because of the desire to expand on a global scale; paradoxically, the companys structural DNA that allowed for such success through franchising and controlled real estate has also bred a lack of creativity. The incredible success and culture that Tim Hortons has developed within the Canadian market has inadvertently led to formulaic answers and an overall sense of complacency and stagnancy. Tim Hortons corporate leadership knows precisely what works in terms of creating a new franchise in Canada, and has sought to apply the same formula, with few technical adaptations, to the new international environment. This will not work on a global scale, however. Tim Hortons is a piece of Canadian culture, pastime and sport that can be easily identified and carries with it a sense of nostalgia and familiarity. The name itself is an intangible asset for the company. Franchising works so well within Canada because the name has already been established, and the challenges to opening a new store within Canada can all be answered through tested technical solutions. How, then, does

A CRITICAL ANALYSIS OF TIM HORTONS DNA Tim Hortons create value for the international customer without a sense of connection to the name? The answer lies in adaptive learning and leadership. Adaptive Challenges Successful change, according to Ron Heifetz, begins with distinguishing what is essential to preserve from [an] organizations heritage from what is expendable (Heifetz, Grashow & Linsky, 2009). In essence, this defines the theory known as adaptive leadership. Adaptive leadership mandates a focus on strengths, and incorporates new learning to overcome challenges that have not been encountered before (Heifetz, 2010). New CEO Mark Caira and new company directors must take advantage of their recent integration to Tim Hortons by utilizing an on the balcony perspective (Heifetz, Grashow & Linksy, 2009). It is imperative

that Tim Hortons new leadership give employees a strong sense of the history of the enterprise and whats good about its past, as well as an idea of the market forces at work today and the responsibility people must take in shaping the future (Heifetz & Laurie, 2001, p.38). They must step out of the companys inertia and view the company from an objective perspective, while then analyzing what leadership techniques need to be employed. Tim Hortons must first recognize, utilize and solidify what defines their identity, and only then can they hope to adapt this structure to the global marketplace. For example, rather than an immediate push for international expansion, they must take time to obtain insight from their own cultural assessment activities, through the question of board members and consultants, or through educational programs at which they meet other leaders (Schein, 2004, p.298). The company is currently at a crossroads in their history, with the potential for incredible new growth, if they first focus on areas of improvement and solidification within their current business structure. Tim Hortons must make their original coffee and donuts,

A CRITICAL ANALYSIS OF TIM HORTONS DNA

offered through friendly customer service and an emphasis on their community involvement, the cornerstone of their company, without feeling the need to transform this basic structure when expanding into foreign markets. Contrastingly, with an interest in incrementing sales and value, CEO Caira is considering the possibility of trying new avenues like vending machines and slapping its brand on consumer products in stores and malls (Altstedter, 2013). This does not align with the structural DNA of the company, and relies on name recognition in a foreign market that does not recognize it. Structural innovation and creation is not always a positive venture if it does not allow the company to remain true to its DNA, and what made it great in the first place. For this reason, a cautious approach to globalization should be adopted. Once the process of strengthening the DNA of the company is complete, Tim Hortons will need to successfully manage the multiple adaptive challenges they will encounter through international expansion. They will face problems that other corporations, like McDonalds, who came before them, did not encounter. McDonalds model for international success provides a common framework for [their] global business yet allows for local adaptation (McDonalds, 2013). McDonalds realized what made them successful in the first place, focused on those aspects of their business, and then applied these structures in a model that shaped itself to their new environment. However, they were able to do this through simple technical changes and tweaks to their original business structure, rather than having to completely rethink their methods of integration. Unlike when McDonalds first expanded on an international scale, global markets today are extremely saturated, which makes penetration problematic for Tim Hortons. They will experience an incredible amount of competition, and must first adapt before attempting to overcome it.

A CRITICAL ANALYSIS OF TIM HORTONS DNA In addition, vertical integration has been vital for Tim Hortons as it allows it to operate

with much lower costs, therefore experiencing higher profits. However, since they do not possess a technical solution to the lack of supply-chain management within the foreign market, Tim Hortons must develop an adaptive answer. In addition, the company has been able to run efficiently by minimizing the principle agent problem other companies face by effectively training and incorporating their franchisees. However, once they start to expand further and further, this problem could begin to grow as they incorporate new members into the Tim Hortons family who might come from divergent backgrounds. Tim Hortons will need to effectively adapt its leadership to face these new challenges in order to bring newfound success to the company. They must become well acquainted with the community they wish to enter, through local consultation and targeted market research. Summary Tim Hortons incredible growth within Canada can be explained through the defining components of the companys DNA. Up to this point in the companys history, they have haphazardly attempted to internationalize, without a clear understanding of what would differentiate them as a company. If they hope to do this successfully, they must first solidify their core DNA, while simultaneously gaining perspective on potential foreign markets they wish to penetrate. They face highly saturated foreign markets, lack name recognition within those markets, and cannot utilize their established vertical integration model abroad. It is evident that Tim Hortons faces challenges for which they do not possess pre-established answers. Therefore, they must utilize and adopt adaptive leadership to combat these challenges. Focusing on their structural, product, and ideological DNA will offer Tim Hortons the resilience to survive in a foreign market. Implementing adaptive leadership, researching the culture of the market they

A CRITICAL ANALYSIS OF TIM HORTONS DNA

wish to penetrate, and taking risks to establish relations with the new communities will give them the tools they need to flourish.

A CRITICAL ANALYSIS OF TIM HORTONS DNA References Adduono, J., Sulhi, L., Derkson, S., & Woodruff, L. (2013). Tim Hortons in 2013:Can its success in Canada be exported globally? Unpublished case study, International Leadership Asssociation. Altstedter , A. (2013, September 13). Tim hortons ceo says must win battle for u.s. consumers (2).Bloomberg Businessweek. Retrieved from http://www.businessweek.com/news/2013-09-16/tim-hortons-ceo-says-must-win-battlefor-u-dot-s-dot-consumers?track=sticky The Canadian Press. (2013, September 17). Dollars to donuts, marc caira is preparing tim hortons for moments of truth. Retrieved from http://www2.macleans.ca/2013/09/17/ dollars-to-donuts-marc-caira-is-preparing-timhortons-for-moments-of-truth/ Cowan, J. (2013, February 19). Why tim hortons can't rrroll into the united states. Retrieved from http://www.canadianbusiness.com/blogs-and-comment/tim-hortons-americanexpansion failure/

Heifetz, R., Grashow, A., & Linsky, M. (2009). The practice of adaptive leadership. Boston: Harvard Business School Publishing.

Heifetz, R. A., & Laurie, D. L. (2001). The work of leadership. Harvard Business Review, 35. Heifetz, R. A., & Linsky, M. (2002). Leadership on the line. (pp. 9-78). Boston: Harvard Business School Publishing. Houpt, S. (2010, March 05). Tim hortons: Where commerce, culture interact. Retrieved from http://www.theglobeandmail.com/report-on-business/industry-news/marketing/tim-horton where-commerce-culture-intersect/article4318874/

A CRITICAL ANALYSIS OF TIM HORTONS DNA

The Huffington Post Canada. (2013, September 17). Tim hortons ceo: Company must succeed in u.s. as growth in canada stays slow. Retrieved from http://www.huffingtonpost.ca/2013 /09/17/tim-hortons-ceo-us-growth_n_3941673.html Madston Black. (Writer) (2010). Professor ron heifetz presentation. [Video podcast]. Retrieved from http://www.madstonblack.com/professor-ron-heifetz-presentation.html McDonalds. (2013) Company profile. Retrieved from http://www.aboutmcdonalds.com/mcd/investors/company_profile.html
Schein, E. H. (2004). Organizational culture and leadership. (3rd Edition ed., pp. 297-298). Hoboken: Jossey-Bass.

Tim Hortons. (2013) Investor relations. Retrieved from http://www.timhortons.com/us/en/about/investors.html Torres, R., Reeves, M. & Love, C. (2010, August). Adaptive leadership. Perspectives, Retrieved from http://www.bcg.com/documents/file67908.pdf