From Waiters To Widgets: Navigating Industry Change Prepared for Les Roches School of Hospitality Management 11 November 2009

Overview About Strategy & Market Intelligence Order Channel Revolution What’s Happening? Business Impact Examples and Lessons Learned

About Strategy Define Determine strategy based on actionable Market Intelligence Align Communicate strategy to your team and organize resources to deliver it Execute Put programs in place and manage measurable results over time

Considering Context What’s happening? How does it affect my business? “In the second quarter, 28% of all handsets sold in the U.S. were smartphones” What’s happening? How does it affect my business?

What’s Happening? Consumer Demands Operational Challenges Speed Convenience Low Cost Operational Challenges Labor/Training Food Costs Depressed Demand Activity Average hours per day, civilian population Weekdays Weekends and holidays (2) Total, eating and drinking 1.18 1.35 Eating and drinking 1.07 1.19 Travel related to eating and drinking .10 .15 “Restaurant industry job growth will actually grow faster than the U.S. population, particularly in the key demographics of teens and young adults” http://www.bls.gov/tus/current/eating.htm http://www.restaurant.org/pressroom/pressrelease.cfm?ID=1725

Every Segment Is Responding Pizza Fine Dining QSR Consumer Demands Speed Convenience Low Cost Operational Challenges Labor/Training Food Costs Depressed Demand Convenience Fast Casual Grocery Casual http://www.foodservice.com/articles/show.cfm?contentid=4112&title=Restaurant%20Consumer%20Discontinuity

The Pizza Problem 50% of pizzas are ordered on Friday and Saturday Major spikes occur on specific days Superbowl Sunday is the single biggest sales day of the year Several other holidays show similar spikes Very difficult for the restaurant staff to manage these efficiently http://pizzasandstuff.blogspot.com/2008/01/pizza-people-prepare-for-superbowl.html

Stage 1: Call Center Solution Larger pizza chains took the ordering out of the restaurant Call centers to handle volume peaks Initial activities in early 1980s Problems still remaining: Labor costs Economies of scale don’t work for smaller chains and independents

E-commerce to the Rescue Why not use this order channel for pizzas too? http://www.marketingcharts.com/direct/us-retail-e-commerce-growth-rate-rebounds-in-april-4723/comscore-ecommerce-1q01-1q08-vs-commerce-departmentjpg/

Stage 2: Automated Ordering “Hockey stick” adoption of new order channels Papa John’s launched online ordering nationwide in 2001 Others experimenting and testing locally 2007-2008 was turning point Domino’s and Pizza Hut went nationwide Mobile and text ordering launched in 2007 Widgets arrived in 2008; iphone apps in 2009 May 2008: Papa Johns recorded over a billion dollars in orders from their online/text ordering system since launch Benefits Lower cost transactions Higher consumer ticket Better consumer experience Papajohn’s widgets in 2008 http://savvydoc.wordpress.com/2008/05/12/papa-johns-earns-over-1-billion-in-revenue-from-online-pizza-ordering/ http://www.marketingvox.com/pizza-chains-make-dough-with-mobile-apps-045422/?utm_campaign=newsletter&utm_source=mv&utm_medium=textlink

Other Ordering Options Drive-thru Over 65% of some QSR franchises’ business is through the drive-thru QSRs experimenting with remote order-taking Phone Ahead/Curbside Casual restaurants increasingly experimenting with curbside Fast casuals looking at “phone ahead” windows Self-service Kiosk/Tabletop

Anytime, Any“where”

The Customer Experience 1-1.5+ hours 2-3 minutes 1 second

How Does It Affect My Business? Consumers buying in different contexts Channel/consumer segment relationships Branding and customer experience/loyalty Operational linkage and monitoring Etc… Sales Marketing Operations IT Finance HR 2-3 minutes in the drive thru What choices must be made?

Customer Engagement “The new App is not only a convenient way to order from Pizza Hut – it's an entertaining way to place your order. The App uses innovative iPhone and iPod touch features including the Multi-touch user interface and accelerometer to make ordering each individual menu item a fun and customized experience.” A new wrinkle on the old “give ‘em a little theater” approach

Atari + Chuck E. Cheese = Uwink “A social entertainment and dining experience Order by touchscreen at the table Games which facilitate interaction with other customers Sports events on multiple large screens Walls display art, themes, games and guests’ personalized pictures and graphics” He’s selling the software to do this too… http://current.com/items/89232065_hi-tech-restaurant-takes-advantage-of-smart-tabletop-for-ordering.htm http://kioskmarketplace.com/article.php?id=21085&f=1&s=3

A Different Approach… http://www.chicagotribune.com/features/chi-1011-baylessoct11,0,6789265.story

Perspectives to Consider Customers Operations E-commerce Social Media (2.0) Restaurant Technology Order Channel Evolution Consumer Technology Entertainment/Gaming http://tech.yahoo.com/news/nm/20091104/wr_nm/us_videogames_playfish http://www.marketingvox.com/luxury-chains-move-online-to-compete-with-discounters-045425/?utm_campaign=newsletter&utm_source=mv&utm_medium=textlink

Make No Assumptions http://www.blueoceanstrategy.com/index.php

Finding Time for Strategy http://blog.beliefnet.com/beyondblue How do you make sure strategic thinking happens?

In Summary Many new order channels have recently become available Define Determine strategy based on actionable Market Intelligence Many new order channels have recently become available Compelling customer experiences are a major opportunity Align Communicate strategy to your team and organize resources to deliver it Execute Put programs in place and manage measurable results over time

Thank You! Valerie Shuman Shuman Consulting Group, LLC 5141 Crain Street, Suite 300 Skokie, IL 60077 T: +1-312-072-0220 E: vs@shumangroupllc.com Thank You!