Roadmap To Quick Service Restaurant 2.0: Catering To The Hyper-Connected Customer

August 02, 2018
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For quick service restaurants (QSRs), the era of QSR 2.0 is here. This means revamping operations to focus on every aspect of the customer experience, relying on digital technologies and end-to-end network transformation as the foundations. Learn how QSRs can make the 2.0 transition in an Analyst Connection featuring IDC's Jaideep Thyagarajan.

Read more in this edition of IDC Analyst Connection: QSR

Jaideep Thyagarajan
Research Analyst

The Quick Service Restaurants (QSR) industry is not spared by the onslaught of digital and the ensuing shifts in customer behavior. While QSRs are rushing headlong to digitally transform, it is important to understand what this transformation entails. For some players, it is about creatively engaging with customers. For others, it represents a fundamentally new way of doing business. IDC predicts that by the end of 2019, spending on digital transformation related initiatives will reach $1.7 trillion worldwide, a 42% increase from 2017. But lack of clear definition of how to digitally transform has resulted in numerous piecemeal initiatives which have eventually led to missed opportunities and inefficient spending. While it is tempting to search for simple answers, charting a meaningful and a sustainable roadmap to cater to today's hyper-connected customer can be your first step towards digitally transformation.

The following questions were posed by Comcast Business to Jaideep Thyagarajan, Senior Analyst for IDC's worldwide hospitality practice, on behalf of Comcast Business' customers.

Q. 2.0 generally denotes an advanced version of an original product, service or industry. Conceptually, how is QSR 2.0 different from other 2.0s?  

A. QSR 2.0 is not just a digitally sophisticated version of QSR that you can plug and play. Rather, it is about being open to reexamining your entire way of doing business and understanding where the new frontiers of value are. It is about understanding that digital transformation is multi-faced and does not involve just technology. It is about negating the misconception that digital transformation is your sure salvation. On the contrary, it is about cultivating a view that transformation is an ongoing process which requires investments in skills, infrastructure and sometimes even cleaning up existing systems, networks and processes.

QSR 2.0 is an industry framework for multi-dimensional transformation, in which every effort is directed towards being closely in-sync with how customer decision journeys evolve both inside and outside the business. This is sine qua non to staying ahead of trends. QSR2.0 requires investments that enable you to move from purely transactional customer relationships towards experience-centric relationships. This requires collaboration with an ecosystem of partners and working towards creating connected value chains. This will mean amalgamating people, processes and machines and dealing with the messiness that entails, unperturbed. Therefore, while the difference between QSR and QSR 2.0 is quite significant, it is not black and white.

Q. What are some of the technological challenges that plague the QSR industry today?

A. QSRs today have a clear mandate to solve any problem that arises in their quest for offering positive customer experiences round the clock. The issue is compounded by the reality that millennials are tough to woo. Millennials crave technology centric experiences at all stages of their engagement – delivered within highly personalized contexts, speedy delivery of high quality food, and order accuracy. All of which has to be delivered at the same time.

QSRs are under pressure to implement new technologies and most of them have a range of initiatives in place as a result. But, execution is difficult. Deep entrenchment of legacy systems, lack of organized ICT thought leadership, unclear understanding of emerging technologies and poor availability of digital talent is hampering the industry from making the necessary progress.

In addition, the ad hoc implementation of new technologies has exerted unreasonable stress on traditional networks, ultimately impacting their performance. Bandwidth limitations thus imposed have further resulted in unstructured allocation of systems and resources, which could otherwise be optimally utilized towards enhancing customer experience. This not only necessitates intelligent capacity addition, but also calls for operational prudence. But in the absence of alignment and common vision from the IT leadership, misguided efforts have often taken precedence.

Q. How is digital redefining the way customers engage with QSRs and how should restaurants planning to migrate to QSR 2.0 address complexities induced on their systems/networks due to digitization?

A. Digital is redefining how customers engage with QSRs at every stage of the customer journey. Customers use digital means throughout their QSR journey: consideration, purchase, wait, consume, retain. Today's customer is attracted by digital personalized promotions, prefers voice-enabled ordering, demands digital order tracking, and is drawn by digital loyalty programs. Consequently, we are observing that QSRs are raising stakes and investing in technologies to streamline and simplify customer journeys, while delivering improved operational efficiency. QSRs are toying with omni-channel voice ordering, kiosks, contactless payments, robotics, artificial intelligence, digital signages and personalization of customer rewards to up their digital ante.

As QSRs assemble these digital building blocks for the long term, undeniably, they are introducing new complexities into their systems and networks. There is also the temptation to quickly digitize each journey exclusively, which only recreates internal silos that you are very trying to break apart. The trick therefore is to sequence your transformation brick by brick. It is important that you start with a focus on building your foundational networks to ensure you are equipping yourself for scale. While you are at it, start considering an environment that includes both on-premise, cloud and networking technologies like SD-WAN to ensure frictionless handling of traffic. This ensures that you are undertaking a balanced approach to achieve both speed and scale, which are essential for any transformation journey.

 Q. Elaborate on some of the network-oriented solutions which can inject agility and customer-centricity as QSRs digitally evolve into QSR 2.0?

A. The influx of emerging technologies – both customer facing and operational – demand high performance, redundant, always-available network infrastructure. Network transformation is thus a pre-requisite to digital transformation. There are numerous robust communication services available today in the market which can be utilized. An in-store managed wi-fi network and managed router solution for each restaurant in the chain are like table stakes. In addition, a ubiquitous 4G business continuity, a distributed IPsec VPN network wrapped with a possibility of an always-on infrastructure through redundant connections at each location – and to the network and corporate data centers – are foundational constituents of an end-to-end network transformation.

It is important to be cognizant of the requirement that oftentimes, QSRs need to share information related to performance, marketing, and training between headquarters and franchises. Vice-versa, personnel at different franchises will need on-demand access to training videos and to facilitate other interactions. Any network downtime under such circumstances is simply unacceptable. So, it is crucial that you select a vendor that can support distributed enterprises with high-capacity and more importantly, highly-reliable communication and managed services.

Q. What are the key elements of a QSR 2.0 digital game plan?

A. After clearly defining what digital transformation means to you according to your individual contexts, it is important to develop a shared understanding of your existing digital potential. Second, the development of new digital capabilities cannot be just handed off to a digital team. Since digital approaches need cross-functional collaboration, it is important to rethink organizational structure and ensure that digitalization is an organization-wide agenda and not something which is happening in silos. And while you cast a vision for your digital evolution in the medium to long term, keep an eye on putting the right technology foundation in place. This is particularly applicable in today's context because of the difficulty in comprehending the impact on IT architectures due to the sheer number of technology trends and developments. 

Next, as you deploy customer facing digital tools, it is important to remember that behind these tools you must have the capability to collect, clean and use data from multiple internal and external sources. The importance of data cannot be stressed more in today's context. It is data that brings attention to operations, customer insight and performance management which are the heart of success of any transformation effort. Lastly, relentlessly pursue network operational excellence. Regardless of modernizing network infrastructures, networks remain abstract and ever changing. Focus on revising and fine-tuning your network strategy, making constant cost-benefit analyses based on balanced technical and business rationale. Remember that the secret is to develop an integrated digital capability that not only enables you to delight the customer across their QSR journey but also unlocks your operational value.

Jaideep is a senior market analyst responsible for the Asia/Pacific Retail and Worldwide Hospitality research programs. He is based in Australia. The central theme of his research includes analyzing how retailers and hoteliers spend on technology by understanding individual player dynamics and drivers. Jaideep actively engages with end-user and vendor communities and is committed to building long-term relationships with clients based in the Asia/Pacific market, helping them to think through strategic issues and ultimately delight their customers.

This publication was produced by IDC Custom Solutions. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Custom Solutions makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee.

Quick Service Restaurants (QSR's) must create a roadmap to cater to today's hyper-connected customer - a first step towards digitally transformation.

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