When AI meets the burger and the bean - Starbucks and McDonald's pursuit of personalization

Profile picture for user slauchlan By Stuart Lauchlan November 4, 2019
Summary:
Starbucks and McDonald's latest manifestation of digital transformation leadership comes in the form of customer-centric AI initiatives.

Starbucks McD

Regular readers will know that two of the organizations that diginomica regularly cites as digital transformation best practice exemplars are Starbucks and McDonald’s. Both firms invest heavily in technology to create competitive differentiation in areas such as mobile ordering and in-store self-service kiosks to improve the customer experience.

The latest focus of investment for both is around Artificial Intelligence and Machine Learning. Now while that may only to be expected in terms of digital ‘buzzword bingo’, the two firms are looking to such tech to increase their personalization capabilities. This isn’t about automated baristas or robot burger flippers.

On Starbucks part, the locus of interest here is an initiative known as Deep Brew. CEO Kevin Johnson defines this thus:

Deep Brew will increasingly power our personalization engine, optimize store labor allocations, and drive inventory management in our stores. We plan to leverage Deep Brew in ways that free up our partners, so that they can spend more time connecting with customers. Deep Brew is a key differentiator for the future. And as we continue our quest to build world-class AI capabilities, to better support partners.

There’s also an Internet of Things angle courtesy of the company’s new Mastrena machines that were introduced primarily to deliver faster shots of coffee, but which have another use as Johnson notes:

Those machines have Internet of Things sensors built into them. And so we get telemetry data that comes into our support center. We can see every shot of espresso that's being pulled and we can see centrally if there is a machine that's out there that needs tuning or maintenance. And that allows us to improve the quality of the shots that we're pulling…with the Deep Brew and our predictive analytics, we're going to be able to determine if a machine needs preventative maintenance on it before it breaks.

So that’s a back office benefit without doubt, but it’s how the application of AI/ML impacts on the wider customer engagement with Starbucks that is open to question. Will the rise of the robo-barista lead to the end of the human being who can’t spell your name on a paper cup?

On that subject, a recent LinkedIn post from Johnson bears some attention, as he pitches himself as:

someone who is now focused on creating experiences grounded in humanity, I also have a great appreciation and understanding of the importance of something at the core of the human experience: good, old-fashioned, face-to-face human interaction.

This personal characterisation is a useful extension of a meme that Starbucks has pushed hard over the years, that of the role of its stores as being ‘the heart of the community, places where people can come to work, relax, meet up etc:

Starbucks has always been dedicated to creating an environment that’s as much about human connection as it is about coffee…Each store is part of a community and subscribes to the concept of the “Third Place,” providing a warm welcoming place for human connection where everyone can feel included. These kinds of community gathering places are more important today than at any time in our history.

Starbucks has an evolving part to play, he suggests, at a time when “unparalleled technological connection is unfolding concurrently with the age of unprecedented human disconnection “ to lead to “a world of chronic loneliness”:

What I find very interesting, even paradoxical, is that although technology is contributing to a global epidemic of human loneliness, it is also technology and innovation that is an unlock for Starbucks partners to amplify human connection in our stores.

This is where Starbuck’s ambition to become “world class in leveraging Artificial Intelligence (AI)” comes in in order to “harness AI to liberate store partners (employees)  from non-customer facing activities and enable them to spend more time connecting with customers”.

Cynics will not that this is ‘aspirational AI’ 101, of course. It’s not about new tech coming along and stealing your job; it’s about new tech coming along and taking away the drudge and drear and letting you get on with something more interesting instead. To that end, Johnson points to Deep Brew:

Deep Brew will automate our inventory and replenishment orders to save time and ensure we always have the right items available for every store. It will also predict staffing needs to ensure we are ready to better serve our customers. In all cases, this is freeing up our Starbucks partners to focus on the customer. Deep Brew is also already being applied to personalize customer offers and recommendations on our mobile app to improve the customer experience. Deep Brew solutions will support our partners in many ways such as sequencing orders, anticipating equipment maintenance, streamlining supply chain logistics, and more. It’s all so our partners can spend more time focusing on the most rewarding parts of working at Starbucks – connecting with customers and practicing their coffee craft.

Buying prowess

How that pans out in practice is something that will become apparent over the coming years. Deep Brew is still a relatively new initiative at Starbucks and one that is being built out in-house.  In contrast McDonald’s AI ambitions have been characterised to date by acquisition of tech firms to build a skills base.

Back in March the firm bought Israeli AI mar-tech firm Dynamic Yield for $300 million, its biggest acquisition in decades. The intent was to boost intelligent personalization initiatives for the fast food chain, beginning with customised drive-thru digital displays. As we noted prevously:

The basic principle is simple enough. Customers drive up to the order point and are presented with a digital menu that will already be tailored to factors such as the temperature, weather conditions, time of day, local events and trending menu items. As customers place their orders, further recommendations will be presented based upon the choices that are being made.

Following up on that, the company snapped up Silicon Valley start-up Apprente, an AI firm focusing on voice recognition. The team there has now been rolled into a new body called McD Tech Labs, charged with pushing forward AI innovation across the company, beginning with its drive-thru business, but extending out over time to so-called ‘McDelivery’, Mobile Order and Pay, digital menu boards, and self-order kiosks.

There has been some success to date. Dynamic Yield’s tech is now in use in more than 9,500 US drive-thrus, with full roll-out to every US restaurant with an outdoor digital menu board due to be complete by the end of 2019.

Prior to his unceremonious shock departure from McDonald’s this week, former CEO Steve Easterbook, the prime mover behind the company’s digital focus in recent years, said:

We've effectively rolled out from core capability of Dynamic Yield, kind of what we would [call] ‘suggest itself’. The beauty of this is there is nothing that customer has to adjust to. They almost don't know that this experience is happening for them as we've got dynamic digital menu boards. Effectively as they start to place their order, the menu boards respond to that ordering process and therefore are more likely to suggest items a customer will want and less likely to show items that customers are less likely to want.

This is only the beginning, he predicted:

Of course, Machine Learning helps you improve that and particularly given the transaction levels we have across our business we can learn very quickly. But there's further capabilities as we're learning. So for example, there's an area now where they can offer ‘trending now’, which will actually pick up items either in a restaurant or a local group of restaurants that are proven to be particularly popular at that point in time. So there's kind of another level of dynamic interaction going there.

At this point, we're only really talking about having it on the outdoor digital menu boards. But suffice to say part of the investment we're making in the business with talent and expertise is to look how can we integrate that into the cell phone or kiosk and perhaps ultimately the global mobile app as well.

So I think we're at early stages already very encouraged about the results we're seeing. The speed with which we can execute and roll this out, deploy this is really giving us a lot of confidence that we can get this across…This is encouraging operators to invest in the technology because they're seeing the return. And as I say, this is just for the core basic capability and there's more we can add to it.

My take

These are two digital leaders taking a pragmatic approach to AI innovation rather than chasing an opportunistic photo opp with a robot slapping on the secret sauce. Of course that will inevitably come, but for the moment both Starbucks and McDonald’s focus on the personalization of the customer experience is sensible.

Johnson’s ‘mom, pop and apple pie’ vision of an AI-enabled future of enhance human connectivity may be strike some palates as more sickly sweet than a caramel frapaccino with extra sugar, but it’s a pitch that plays to the current zeitgeist. As for Easterbrook, his departure - following a consensual relationship with a McDonald’s employee - is a loss to the firm’s digital ambition, but it’s to be hoped that his five years of evangelism on the subject will be enough to ensure that there’s no slowing down now.