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Digital transformation and data centricity in fast food: The foray of McDonald's

McDonald's CEO is out, but his data-focused legacy is likely to stay. McDonald's has seemingly invested in digital transformation, including the digitization of operational processes such as in-store ordering through kiosks and home delivery. On the face of it, a shift from ordering at a counter to ordering at a kiosk is straightforward and replaces fast-food workers with giant tablets. Obvious gains include efficiency from increased order processing capacity, and, as the ex-CEO argues, increased spending on kiosks*. There is more to that, though. Kiosks can collect richer customer data and potentially create more customer data. Using the kiosks, McDonald's can learn which products and extras customers scroll through before making a selection, whether they add an extra patty only to decide later not to keep it in their final order, etc. McDonald's can also add data products to these kiosks such as a recommender system to create and collect more behavioral data, and guide customers into spending more and better. The company is planning to digitize its drive-through ordering as well, by replacing orders put through fast-food workers with a voice recognition software and possibly conversational AI (WSJ coverage). In addition, McDonald’s plans to make its drive-through menus dynamic, changing based on the weather, traffic, time of day, and potentially personal data (e.g., a drive-through customer's licence plate number can be a nice unique identifier).

Not to mention the robot fryers and other supply-side digitization efforts, this is already quite a long list of data-focused investments for a fast food chain. A recent Bloomberg article featuring the ex-CEO, however, fails to communicate a coherent strategy behind these efforts, if there is one. The article lists some of the aforementioned investments and ends with the ex-CEO's take on the changes:

"But for all the technological breakthroughs, the deals, and the jousting with franchisees, the company’s guiding light has barely changed. Inside a room beyond a corridor stamped with the word “innovate” in block capital letters, the hum of computers and data processing towers is drowned out by a cacophony of test-kitchen staff running trials on secret processes that aim to shave seconds off a Big Mac’s assembly, much like in the old days, when McDonald’s first upended the food industry."

“In old-school business logic, the big eats the small. In the modern day, the fast eats the slow,” says the ex-CEO. This tragic interpretation leads to doubt about whether these investments are governed by a coherent, focused strategy, or "the company’s guiding light has barely changed," as the article suggests. If the latter is true, and if McDonald's is racing just to do it first and do it fast as the ex-CEO says, it may be far from incorporating its data efforts into its strategy and achieving data centricity. This is because data centricity at its core requires a reformulation of problems rather than blindly solving the same problems, (and so does digital transformation). This is one of a series of posts on "data centricity," a strategy framework in progress. Comments and feedback are welcome in any form.

*Not sure why spending would increase. It looks like the ex-CEO said “What we’re finding is when people dwell more, they select more.” I wonder whether McDonald's did an experiment or ran a robust analysis on this problem. The article cites a study showing that hedonistic consumption increases when a touchscreen device is used compared to a desktop. While the kiosk question at McDonald's requires a comparison between apples and oranges, the cited study compares oranges with grapefruits.

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