In a fascinating story about food and innovation for Bloomburg Businessweek, Thomas Buckley and Leslie Patton write about how McDonald’s CEO Steve Easterbrook has been implementing some revolutionary changes to the fast food chain’s business model. Easterbrook wants, they say, “to reclaim the company’s image as a beacon of innovation, a designation McDonald’s hasn’t enjoyed since roughly the Truman administration.” Despite pushback from some franchise owners, the multibillion dollar company is trying to pull customers back from places like Five Guys and Chipotle by adding Uber Eats, item customization, and hoping to remake stores into data harvesting systems. To show how these programs fit into the company’s history, the authors describe the technological innovations that allowed McDonald’s to expand from a single tiny California burger stand into a titanic brand that feeds 1% of the human population. Even if you don’t eat at McDonald’s, it’s interesting to read about the struggles of a seemingly ever-present global brand that, like Coke and Nestle, has shaped the health of our species, and diluted many countries’ regional identity to a form as dull and predictable as the pink slime that becomes a chicken nugget. Now the challenge is for McDonald’s to rebuild itself into what the authors call “the Amazon of excess sodium.”
Easterbrook’s strategy so far has been vindicated by the numbers. That tailwind is breathing new life into the business. Strong drives 40 miles from his home in Aurora, Ill., every morning to be at his desk by 6 a.m., where he and a handful of other masochistic early risers blast rousing tunes by Journey or Adele on a Bose sound system to get the day going. It’s a routine they began after moving into the new head office, a $250 million building replete with sofa pods in the red and yellow McDonald’s color scheme, an amphitheater, rooftop terraces, and thousands of antique and modern Happy Meal toys locked inside cased glass like priceless museum specimens. Easterbrook opened the office in June of last year in a bid to attract young, tech-forward talent.
In March, McDonald’s acquired artificial intelligence startup Dynamic Yield, headquartered in New York and Tel Aviv, for $300 million—the company’s largest acquisition in 20 years. The burger chain had been testing the machine learning software on drive-thrus at four restaurants in Florida, where screens automatically updated with different items based on the time of day, restaurant traffic, weather, and trending purchases at comparable locations. That technology has been deployed at 8,000 McDonald’s and counting, with plans to be in almost all drive-thrus in the U.S. and Australia by the end of the year, Easterbrook says. The deal signaled an ambition to align the chain with the same predictive algorithms that power impulsive purchasing on Amazon.com or streaming preferences on Netflix. In April, McDonald’s acquired a minority stake in New Zealand-based mobile app vendor Plexure Group Ltd., which helps restaurants engage with diners on their phone with tailored offerings and loyalty programs. The effort falls into the consumer-goods industry’s wider trend toward micromarketing, which has proved effective in driving sales.
In early September, McDonald’s said it was buying Silicon Valley startup Apprente Inc., a developer of voice-recognition technology. The idea is to help speed up lines by eventually having a machine, instead of a person, on the other side of the intercom to relay orders to kitchen staff. The deal for Apprente is McDonald’s third such investment in a technology business in the past six months as the company shakes off a tamer takeover strategy that for decades had focused on buying and selling restaurants from or to operators. McDonald’s is pursuing this new business model even as the latest burger trends steal the buzz from its offerings. Beyond fashionable vegan patties, a new and daunting foe is the fried chicken sandwich at Popeyes Louisiana Kitchen (a Miami-based chain owned by the same company that controls Burger King), which became a national obsession when it was introduced in the U.S. in August.