While Starbucks and Burger King have been suffering this year, global sales have been increasing for seven months in a row at McDonald’s.
How exactly is the McCafé a strategic, business model innovation?
Let’s have a look at the definition of Strategic Innovation (for more see this post). Strategic Innovation is about:
- new business models (including a new value chain architecture), or
- new markets (either by creating new ones or reshaping existing ones), or
- increased value for both the customer and the company
or a combination of these three.
Let’s start with the new market: McCafé not only represents a new market for McDonald’s, but looking at the customers of McCafés, one can see that they tap on new customers as well. First people who would not go to a McDonald’s can be seen in restaurants now. For example parents who might just have gone in because their kids wouldn’t stop begging, now enjoy a coffee along a piece of cake, while the youngsters are having a BigMac.
And the youngsters tend to stay longer in the restaurants as well, having a latte after the McMeal. McCafés are a blend between Starbucks and a regular McDonald’s, with a cozier atmosphere than the regular McDonald’s store. At the same time the coffee is cheaper than at Starbucks. So McDonald’s is tapping into a market who can not afford, or is not willing to afford, a Starbucks coffee.
With the new design of McCafés they can still enjoy a little bit of 3rd place compared to a Burger King for example, which clearly respresents increased value for the customer and McDonald’s at the same time, as it is profiting not only from the increased sales, but also the “better” image it is gaining among new and existing customer groups.
As for the new business model: the new store layout with combined restaurants and McCafés, or the new stand alone McCafés, are a new way of delivering value to the customers. The new layout and atmosphere invite people to linger in the shop for an extended period of time (like at Starbucks), instead of just hoping in for a quick bite (like you do at any regular fast food restaurant).
Furthermore the McCafé concept enables McDonald’s to use it’s existing assets in a new way and thus create new revenues from these assets.
How can you use existing assets to create new value for existing customers or create a new market altogether?
Read more at the Financial Times.
