9 years, 9 months ago

Business Model Innovation: follow the customer, or others will!

Business Model Innovation: follow the customer, or others will!

Investing in the channel innovation, aligned with the customer relation you aspire, is crucial to come and/or stay in the picture of your intended audiences. We underlined this in the blog post in which I reviewed the HBR-article on Four paths of business model innovation. In this blog post we look into the specific case of channel innovation in fast food, were middle man pop-up to deliver chain restaurant food to homes.

Channel innovation in fast food in The Netherlands

Recently a video on Ring ‘n Bring (in Dutch) caught my attention. They deliver products from fast-food chains like Burger King, McDonalds and KFC. They have no official relation with these companies, but just stand in line like everyone else, place the order of their customer, check, pack and deliver. They also have an on demand button, by means of which you can send  Ring ‘n Bring to any other restaurant you like and let them place your order. Next to the website, they communicate with customers via email, telephone and WhatsApp.

For McDonalds in The Netherlands it is challenging to deal with this new player. On the one hand, this is an extra channel to the market, but on the other hand,  it is a channel they cannot control very well.  McDonalds decided to give this entrepreneur a hard time by making him stop using their name and logo. Not very successful, since “Donald’s Place” is still easily recognizable for any customer. Furthermore, Ring ‘n Bring employees are hard to distinguish from any other person waiting in the line for their orders to be taken.

Logo Donald’s Place

Channel innovation in fast food in the UK

In the UK, ‘Munchie Man’ Paul Appleby is running a similar concept and seems to be successful.

And also in the UK the fast food chains are not welcoming the new revenue stream with open arms, using arguments on the usage of the brand and trade name and stating doubts about the food quality, without giving proper recommendations or setting requirements for storing and transporting their food.

Channel innovation in fast food in the Philippines

McDonalds in Europe should (an probably is) considering the options to react to the underlying customer needs that make these services pop-up. Delivering BigMacs is very common in for instance The Philippines, where ‘McDelivery’ is a success since 2005, run by McDonalds Philippines. This neutralizes their arguments about food quality and safety regarding delivery services in the Netherlands and the UK. (Or are health and quality standards of Philippians lower?)

Channel innovation is business model innovation

Channel innovations are relatively easy to implement, compared to product innovations and customer innovations. Channels are changing fast and customers are switching channels faster than McDonalds can open new restaurants. Fast food restaurants need very clear insight in the reasons why people are going to their restaurants. The fact that these delivery services pop-up and are successful underlines that a large group of (young) customers is not willing to move themselves in the direction of the food they want, and that they expect the food to move in their direction, whenever and wherever they are. There are clear parallels with how the music and movie industry reacted to channel innovation disrupting their business models. (What will a Spotify for fast food look like?? Is there a market for a subscription to unlimited amounts of fast food from any restaurant?)

If companies are not able to deliver against changed expectations, they will lose a group of customers to any other company that ís. Business model innovations, including the introduction of new channels, are hard to handle by existing (large) companies, but they just cannot be ignored in this era of ever-changing (digital) demands.

For McDonalds, it is a challenge to integrate delivery into their franchise formula. How will franchisees survive when the revenue is moving from their stores or restaurants, to the central website? They should be able to crack this nut, as many delivery oriented (pizza) chains are franchise models. But the McDonalds business model is not only about franchising, but also about renting locations. This part is at serious risk, or at least is changing. Expensive, visible locations are less of a differentiator when delivering the food.

‘McDelivery’ is working in the Philippines, so why push back in Europe? The challenge is known to the McDonalds organization, since I couldn’t have state it better than Ray Kroc on the McDonalds Philippines website. But “The right place at the right time” is defined only by your customers!