McDonald’s bet on digital transformation and a technology-led growth strategy has been a use case exemplar to which we’ve returned on many occasions. The fast food giant has spent millions of dollars over the past few years introducing digital tech into its customer experience front end and operational delivery back end, spend that has to date produced demonstrable ROI for the firm.
Yesterday it upped the ante with what it hopes will be a new ‘secret sauce’ with the $300 million acquisition of Israeli Artificial Intelligence (AI) firm Dynamic Yield, following on from some pilot schemes that took place in the US last year. Steve Easterbrook, McDonald’s CEO, says:
Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms. With this acquisition, we’re expanding both our ability to increase the role technology and data will play in our future and the speed with which we’ll be able to implement our vision of creating more personalised experiences for our customers.
What does McDonald’s plan to do with its very own AI firm? The theory is simple enough.
Dynamic Yield’s tech is designed to use machine learning algorithms to enable businesses to tailor their websites to individual consumers according to behavioral patterns.
McDonald’s intends to personalize its menus for specific customers or for specific external factors. So, if it’s a very hot day, the digital menus now being rolled out across McDonald’s restaurants might pitch a McFlurry as the ‘preferred’ choice, complete with special offers. Or if there’s a major event nearby that attracts a teen demographic, for example, the menu would prioritise dollar meal bargains for a student budget.
In time, the AI capabilities might lead to the menus recognizing particular car license plates and adjust their priority items based upon a customer’s previous selections. That particular use case will be top of mind as in the first instance, Dynamic Yield’s “decision technology” will be deployed on drive-thru outdoor menu boards.But over time the intention is to incorporate the tech into the self-service kiosks and to the McDonald’s smartphone ordering app.
Who is Dynamic Yield? Founded in 2011 by Liad Agmon and Omri Mendelevich, the Tel Aviv-based firm has around 200 employees and counts a number of major firms as its clients, including IKEA and William Hill. Post-acquisition, it will continue to operate as a standalone entity so that it can service third parties as well as McDonald’s. Agmon says:
We started Dynamic Yield seven years ago with the premise that customer-centric brands must make personalization a core activity.
The time-scales involved for rolling out the new AI tech haven’t been detailed, but Easterbrook has previously pointed to 2019 as a year in which the firm’s technology-upgrades to the so-called Experience of the Future will ramp up, with over half of McDonald’s outlets around the world already on board:
Customer expectations for the way they interact with brands continue to rise. We have made additional progress in 2018 rolling out digital platforms, making the McDonald's experience simpler and more personalized for our customers.
In the years ahead, we will continue making strides through digital channels to reward customers with good value and relevant offers as well as incorporating fun experiences they appreciate from our brands. These opportunities are possible because the extensive work we completed in deploying technology throughout the McDonald's system, including self-order kiosks in nearly 17,000 restaurants, digital menu boards in more than 21,000 restaurants.
This isn’t the first time McDonald’s has experimented with this sort of AI-based approach. Back in 2015 the firm piloted digital menu boards in some locations that were able to make recommendations for food and drink choices based on the weather conditions at the time. What’s being talked about now is clearly going to be a lot more sophisticated over time and will be making use of the data gathered through the investment in self-service kiosks and other digital channels.
The firm’s interest in AI isn’t just on the front end though. Last year Larry DIgnan at ZDnet highlighted the potential at the back end:
Joel Eagle, senior director of technology and architecture at McDonald's, isn't responsible for the experience in the front of the store, but his group is an enabler. Increasingly, Eagle is looking at artificial intelligence, machine learning and cloud computing to improve "the internal customer experience.”
On the front end, I confess I really don’t care for ‘personalised recommendations’ when doing any form of online shopping, let alone grabbing a burger. But I recognise the rationale and the appeal for some.
That said, McDonald’s bet on AI will inevitably deliver another stick with which its critics can beat it. Consider this from The Telegraph, which urges us all to “be worried” that “the world's most maligned producer of fast food” has bought itself an AI firm:
The technology used by the firm could make its fast food even more addictive…Upon further digging, the worrying thought of McDonald’s targeting people around the world to try and lure them to their unhealthy menus seems a small part of the story. McDonald's appears to be taking a leaf out of Amazon founder Jeff Bezos’ book. The billionaire’s business model, to date, has been largely to absorb companies and sell its bespoke technology as a service. But its beginnings were simply selling books. That begs the question: how much longer will McDonald’s be simply flipping burgers?
The sky is falling, the sky is falling!!!
In fact McDonald’s is just the latest retail firm to make an AI investment. Walmart just last month snapped up another Israeli AI firm, Aspectiva, wile Nordstrom has two AI start-ups in its investment portfolio.
AI is on the menu for anyone selling via digital channels. The Holy Grail of personalization is as appetising for McDonald’s as it is for anyone else.