No Nothing Burgers on the menu - digital learnings from McDonald's

Profile picture for user slauchlan By Stuart Lauchlan July 25, 2017
Summary:
McDonald's digital transformation story is one of a global brand in reinvention mode, but a big learning is that you can't hurry change even in the fast food game.

breakfast
Different to digital

What’s a crucial learning point when considering digital initiatives and roll-outs? The answer, of course, is many and varied, but if you’re Steve Easterbook, CEO of McDonald’s, one of them is:

They are different from, say, our All Day Breakfast launch.

On the face of it that seems like a statement of the painfully obvious - maybe even one of those great big Nothing Burgers we keep hearing about from certain people in the US these days.

But in fact he’s making a serious point, which is that change - and digital change in particular - takes time, particularly when that change involves re-inventing a corporate culture and business model.

For McDonald’s, as we saw earlier in the year, that change is being driven by a tryptych of so-called velocity drivers - digital, delivery and Experience of the Future (EOTF). Easterbrook explains of the All Day Breakfast comparison:

This was an extension of our popular Breakfast business and drove an immediate increase in sales. Our velocity accelerators provide new ways for our customers to experience McDonald's. It will take time to build awareness, which is the initial step forward toward changing customer behavior in a way that will be meaningful for our business.

He adds:

The slower ramp-up is when we're introducing a new platform which is changing consumer behavior. So delivery and some of the digital initiatives, like mobile order and pay, [areas] where consumers have got so used to experiencing McDonald's in a certain way, getting them to change those behaviors takes a little while.

The exception to this speed caution is EOTF, which involves the physical transformation of McDonald’s branches, incorporating new technology, such as the self-order menu kiosks. EOTF actually kicks in pretty quickly, says Easterbrook:

Once the restaurant is transformed – it may close for 10 days or close for 12 days while the reinvestments and all the elements are being introduced, [but] we see a pick-up almost immediately. Within that first four to six weeks, we just see customer curiosity, word-of-mouth, local launch events where we create some fun around it because it transforms a restaurant both internally and externally.

The more convenient we make it for our customers to enjoy McDonald's, the more they reward us with their business. EOTF fundamentally changes the way customers interact with our brand. We are providing an experience that is more personal and less stressful, matching our best people with technology platforms like self-order kiosks, digital menu boards and table service.

Delivering

There are similar objectives of higher levels of convenience and greater personalisation of service for customers when it comes to the wider digital strategy, with the current priority here being to expand the reach of mobile order-and-pay, says Easterbrook:

We are on track to make mobile order and pay available in 20,000 restaurants worldwide by the end of 2017, including our 14,000 restaurants in the US. As part of a sequence roll out, we brought mobile order and pay to more than 5,000 restaurants around the world. Whilst we're in early days, we're seeing higher average checks and the curbside pickup is a convenience that customers value and thus, enabling us to grow capacity at peak times.

That’s important in order to avoid the mistake Starbucks made with its mobile order-and-pay rollout, which resulted in gridlock at the service counters as customers ordered their lattes remotely, then found themselves standing in line in the store anyway to collect them. As a fast food chain, McDonald’s is consious of the need for speed when it comes to fulfliing orders. Easterbrook says this is being factored in:

What you'll see with a lot of the elements that we introduce through the broader Experience of the Future and the digital programs are aimed at smoothing out the congestion points, the pinch points in the McDonald's experience. So everything from if people want to pay through technology, whether it's through the Apple Pay feature or through credit, debit card, that shaves seconds off the payment process. If they want to order in advance, through mobile order and pay or away from the front counter, the self-order kiosk, that again helps the congestion during the peak periods.

Also, just the customer flow, we're very mindful. As we reinvest in the restaurants and the dining areas, we're very mindful that the customer flow from when they enter through the doors, either go to the kiosk, go to the front counter, how that interacts with table service, how can we smooth that whole experience to eliminate the pinch points?

The third element of the McDonald’s transformation thinking is delivery - or as Easterbrook puts it, “Our ambition to redefine convenience for our customers”. A delivery pilot took place in few dozen restaurants in Miami at the start of this year and that’s now been scaled up to over 4000 restaurants around the globe. This is a big deal, reckons Easterbook:

Delivery also shows how McDonald's can leverage our size and scale, as nearly 75% of the population in our top markets are literally within three miles of a McDonald's, giving us an unmatched advantage in bringing great-tasting food to customers quickly. In each of the markets where we've launched delivery this year, our size and scale has provided an additional advantage.

Of course, being McDonald’s does help when it comes to setting up partnerships with the likes of UberEats to fulfil those delivery ambitions and to piggy-back on those partners own tech investments. Easterbrook explains:

On UberEats and really with all the third-party operators that we have entered into relationships with around the world, they all fully understand that as we develop our app, that customers will be able to route their delivery order through our app onto their third-party platforms. Thereby, as we develop our digital capabilities, any form of CRM loyalty will come with that. We've been mindful of that and very transparent with our partners. And that'll further strengthen the experience for the customers.

The partners also benefit here, he adds:

They're beginning to see a number of the McDonald's orders they fulfill are customers who've newly downloaded their app. So we are generating traffic to their app, which clearly is great for them, and it also shows incrementality to us. But also, the business benefits them as well…It’s part of the three-legged stool we speak about, so as well as them bringing value to us with the business that we generate in incrementality, clearly, we are very advantageous to them into introducing new customers to their platforms.

All told, digital transformation is an ongoing learning process for McDonald’s, concludes Easterbrook, and one which he anticipates will never end:

As we've seen with mobile order and pay, the reality is we want to get products into the marketplace where we can learn, improve, learn, improve, learn, improve, because we'll never have the perfect product. Technology doesn't work that way…That’s typically the sort of ramp-up curve you see in technology, which is get in the marketplace, learn quickly, be agile and then go hard at it.

That’s particularly important at the moment, with the food retail sector still reeling from the planned Amazon takeover of Whole Foods. Easterbook notes:

It just demonstrates how disruptive the business world is and how quickly it moves. We continually challenge ourselves to be our own internal activists…we’ve got the culture now running through our leadership teams, both in the markets and in the headquarters, where we're continually challenging ourselves, knowing that the market's not standing still.

It's an interesting world - and it's only going to start moving quicker. Whenever I've have the opportunity to meet fellow CEOs at events, I think that the one common observation all of us would make is that today is about the slowest the world's ever going to be moving at. It's only going to move quicker tomorrow. So saddle up and enjoy it because it's a frantic pace.

My take

When we first took a look at McDonald’s digital transformation, I found it to be an interesting example of a instantly-recognised global brand with a very simple business model and go-to-market proposition having to reinvent itself to secure its own future. The evidence to date is that it’s a reinvention that is super-sizing itself.