Digitizing the Arches - how McDonald's intends to tackle its inconsistent digita...

how McDonald's intends to tackle its inconsistent digital experience

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Back in 1970, McDonald’s founder Ray Kroc said, "I don’t know what we’ll be selling in the year 2000, but I know that we’ll be selling more of it than anybody else.” A lot changed during the intervening 30 years and continues to do so today, not least in terms of the way the fast food taps into technology. 

As CEO Chris Kempczinski told investors last week: 

Today, there is no bigger growth opportunity than the one that we see in digital and technology

As diginomica has noted over the years, McDonald’s has invested heavily in the three Ds of drive-thru, digital and delivery. The next phase of this comes in the shape of a strategy known as Accelerating the Arches and with a fourth D - development. 

Digital and tech are inherently a scale game, argues Kempczinski, and that gives McDonald’s an advantage in the competitive Quick Service Restaurant sector - that’s fast food to you and me: 

McDonald’s superior scale means that we can build capabilities at a pace and cost that no one else in our industry can match. And as more and more customers, literally hundreds of millions, join our digital ecosystem, our pricing tools get sharper, our AI models get smarter, our restaurants become easier to operate, and most importantly, the overall customer experience improves. The network effects from digital and tech are real and they favor McDonald’s. 

And there have been undoubted successes to date, he notes: 

In the digital world, our app is the gateway into the McDonald’s experience. Across 50 of our largest markets, we have had over 100 million customer registrations on our mobile app during just the last 12 months, exceeding all other restaurant brands. We have built one of the largest loyalty programs in the world. Today, we have 150 million users that have been active in the last 90 days across our top 50 markets, with 70 million in China alone. This provides us with scalable data to serve each of our customers in unique and engaging ways. Our purpose-built technology has propelled this momentum. It represents a continuation of McDonald’s heritage to continue to reimagine the customer experience.

But...

But there’s more to be done, as Brian Rice, Global Chief Information Officer, candidly admits: 

While Accelerating the Arches is working, we’re not yet leveraging the full potential of technology nor are we leveraging the full potential of our scale, at least not yet, but soon we will.

There are some clearly-identified issues to be addressed, he explains: 

McDonald’s significant global expansion over the years was fueled by a decentralized model. As we grew, our technology became more fragmented, and as a result, our current landscape is very complex. We have an inconsistent digital experience in hundreds of different systems to manage. But as the world changes, we know how important it is to more quickly anticipate our customer needs and expectations.

So how does the firm intend to super-size its tech success story? That involves marrying that scale that Kempczinski cites to technology in order to deliver on a strategy called Digitizing the Arches. Rice expands: 

To deliver at the speed that our customers expect, we must address key technology challenges, including a fragmented digital experience. To do that, as part of Digitizing the Arches, we are advancing what is already one of the largest consumer platforms in the world. This will be a consistent platform to engage our fans from our mobile app to our loyalty program to web-based ordering to our kiosk and beyond. With a consistent approach, we will be able to deploy innovations with much greater speed and agility.

RIce points to the example of McDonald’s Ready on Arrival mobile offering which went live earlier this year. This uses geofence tech to enable staff to prepare orders while customers are on the way to pick up:

The reason it will take several months to deploy this to our top six markets as a result of the different market versions of our technology. If we had a consistent digital experience in place today, we would be able to make a single version of Ready On Arrival available to all markets at the same time. This is an example of leveraging our scale. What’s more, this solution will enable us to provide customers with a more reliable and familiar experience regardless of where they go or how they order.

Today, we have different versions of our mobile app within each of our large markets that can’t be used across borders. In the future, customers will no longer have to download a new app if they’re traveling between countries, safe from France to the UK.

In store

Digital transformation has also been seen in physical McDonald’s stores, including the rollout of self-service kiosks. But again, there’s more to do, says Rice: 

.Today, our restaurant infrastructure is out of sync with our digital future, which can contribute to reliability and stability issues. As part of Digitizing the Arches, we are announcing today a significant partnership with Google to build the most sophisticated and productive restaurant technology platform in the industry. This will equip restaurant teams with advanced technology to deliver amazing hospitality to customers.

As part of the partnership, we will extend Google’s cloud through edge computing into our restaurants in over 100 markets around the world. This is a pioneering initiative that will not only improve stability and help us bring innovation to our restaurants more quickly, but it will enable several important new use cases.

As a key component of the wider overhaul of the restaurant platform, McDonald’s is developing a Connected Restaurant capability that Internet of Things-enabled restaurant equipment will plug into. Rice pitches this as “a data highway for our restaurants” that will provide end-to-end visibility of how each of restaurant is performing. This will, says Rice, unlock cost savings opportunities, improve food quality and enhance customer and crew experiences, as well as increasing restaurant uptime.

You want AI with that?

And is compulsory in 2023, there’s a generative AI angle on all this. Rice says: 

Extending the cloud into our restaurants will also accelerate the use of generative AI into our restaurants…McDonald’s has been an early adopter and pioneer in the use of AI. For example, voice ordering is deployed in nearly 100 drive-throughs across the US. Through our pilot, we have now tuned the models to provide a high degree of order accuracy, which is driving benefits, including a more consistent customer experience and reducing complexity for our crew.

As we continue to gather learnings from our pilot restaurants, we expect to make a decision on the expansion opportunity by the end of 2024. But we’ve only just gotten started. We believe gen AI offers another opportunity for McDonald’s to build structural competitive advantage by leveraging our scale. The more data you feed gen AI models, the better they become. And with a larger scale, gen AI is exposed to more diverse information, and this diversity allows models to understand a broader range of patterns and nuances, enabling them to make more informed decisions. our scale, again, gives us a unique advantage.

All of this lays down a stronger foundation for future innovation, argues Chief Customer Officer Manu Steijaert:

We believe that new technologies, including gen AI, automation, voice ordering, computer, predictive analytics and the Internet of Things all offer the potential for the future of restaurant operations at McDonald’s. Some of these technologies are already in use in our restaurants today. 

So, for example, over 19,000 restaurants around the world are using a system called e-production, which uses predictive analytics to provide forecasts to crew on what they need to cook and when based on expected demand. This system leads to hotter and fresher food being delivered to our customers while reducing complexity for our crew.

Additionally, in some of our largest IOM (International Operated Markets), we deploy scales that use AI technology to help, to confirm the accuracy of delivery orders before they leave our restaurants. This also results in a better customer and courier experience.

Digitizing the Arches will provide restaurants with a stable and consistent platform which all these systems and even more sophisticated technologies can run. And it would also future-proof our restaurants with the ability to integrate robotics when there’s a compelling business.

All of which will have a transformative effect, he concludes: 

Adopting these technologies at scale, alongside our operations, DNA and commitment to continuous improvement can revolutionize how restaurant teams deliver unique and personalized experience to our customers while delivering a better experience for our crew.

In part 2 of this article, the focus on personalization and customer loyalty is on the menu.