In March 2019, McDonalds bought Dynamic Yield – an Israeli startup that develops technologies aimed at personalizing the customer experience – for US$300 million. The company develops recommendation intelligence based on machine learning, which is being used by McDonalds in the digital displays of the drive-thrus to change recommendations according to the time of day, weather or popular items at the time, for example.
In 2018 the company tested the technology in some US branches, with the aim of expanding to all North American stores, followed by the main international markets. The initiative goes beyond just drive-thrus deployment, targeting all digital channels such as self-service kiosks and the company's global app.
Seven months after the acquisition of Dynamic Yield, in October 2019, the technology had already been applied in 9.500 North American drive-thruses, with the goal of finalizing the implementation in all branches in the USA and Australia by the end of the same year.
McDonalds hopes to boost sales by improving the consumer's shopping experience. The upselling technique is quite common in the fast food industry. Who has never been to McDonalds and heard “Would you like to increase the potato for X reais more?”. Dynamic Yield's technology allows the company to do just that, but in a more intelligent, efficient and, above all, personalized way. By having real-time operation data, the company can not only better react to consumer needs, but also predict or influence them.
In addition to increasing revenue, the technology also has the potential to benefit the company's supply chain. If the chain's systems and data are integrated, the main impacts are on demand planning and the possible reduction of stock out in restaurants. Imagine that a store has very low stock levels of McChicken's chicken fillet, whether due to forecasting errors or supply problems. The company can then temporarily remove the item from displays, discouraging demand to reduce the risk of stockouts. In this way, technology gives McDonalds the power to influence demand at each point of sale, whether to improve the consumer experience and leverage sales, or to cover operational or planning failures.
The possibility of reducing stock out is especially relevant in the case of new products or seasonal items (such as World Cup sandwiches), since it is very difficult to predict this type of demand, even more so at the branch level.
The purchase of Dynamic Yield was one of the big moves by the technology investment company, but it wasn't the only one. Others include the acquisition of 9,9% ($3,7 million) of Plexure (mobile software startup) in April 2019, and the purchase of Apprente (valued between $10-50 million in 2018) in September 2019 (startup that develops voice technologies with artificial intelligence – the objective is to automate order taking in stores).
Along with these investments, McDonalds is also transforming from an organizational point of view. In 2019, the company formed McD Tech Labs (a technology laboratory in Silicon Valley, made up of part of the Apprente team), and in early 2020 began to form a team focused on customer engagement for digital channels, which will be responsible for order taking, personalization, payments, loyalty and delivery. The existing marketing technology and global delivery teams will join this new team, which will be led by Lucy Brady, senior VP of corporate strategy and business development who will join as chief digital customer engagement officer.
References:
CNBC – McDonalds creates digital customer engagement team as part of its tech push. https://www.cnbc.com/2020/01/08/mcdonalds-creates-digital-customer-engagement-team-as-part-of-its-tech-push.html
McDonalds – Q3 2019 earnings call. https://s22.q4cdn.com/972634687/files/doc_downloads/2019/10/CORRECTED-TRANSCRIPT-McDonald’s-Corp.(MCD-US)-Q3-2019-Earnings-Call-22-October-2019-11-00-AM-ET.pdf
Restaurant Dive – McDonald's buys Dynamic Yield for $300M to improve drive-thru experience. https://www.restaurantdive.com/news/mcdonalds-buys-dynamic-yield-for-300m-to-improve-drive-thru-experience/551316/
Restaurant Dive – McDonald's acquires AI tech company Apprentice. https://www.restaurantdive.com/news/mcdonalds-acquires-ai-tech-company-apprente/562595/
Supply Chain Dive – How McDonald's super sizes its data for an optimized supply chain. https://www.supplychaindive.com/news/mcdonalds-AI-demand-planning-supply-chain-optimization/553185/
Thatiana Nomi
5 years of experience in consulting projects in Logistics and Supply Chain. Worked on logistics network optimization projects, service cost, logistics master plan, inventory policy definition, sales forecast, S&OP (Sales and Operations Planning) and transportation planning and management.
