January 7, 2008

McDonalds and Enterprise Architecture

User-centric EA is focused on meeting the architecture needs of the users and stakeholders.

The Wall Street Journal, 7 January 2008, reports that McDonald’s is changing course and installing specialty coffee bars like Starbucks.

The question is whether this new target architecture for McDonalds is meeting the needs of their consumers or are they simply copying Starbucks business model (but it’s wrong for McDonald’s clientele)?

“McDonald’s is setting to poach Starbucks customers with the biggest addition to its menu in 30 years. Starting this year, the company’s nearly 14,000 U.S. locations will install coffee bars, with ‘baristas’ serving cappuccinos, lattes, mochas, and the frappe, similar to Starbucks ice-blended Frappuccino.”

McDonalds and Starbucks, which at one time seemed to be in completely different market segments are now going head-to-head. “McDonald’s upgraded its drip coffee and its interior, while Starbucks added drive-through windows and hot breakfast sandwiches.”

McDonald’s is expecting to add $1 billion in revenue (to their annual sales of $21.6 billion) from this coffee program and the addition of smoothies and bottled beverages. “McDonald’s is entering the sixth year of a successful turnaround, while Starbucks has begun struggling after years of strong earning and stock growth.”

So it seems like McDonald’s knows what they’re doing right now.

What’s driving the McDonalds-Starbucks convergence?

“Convenience has become the dominant force shaping the food-service industry. Consumers who are unwilling to cross the street to get coffee or make a left turn to grab lunch have pushed all food purveyors to adapt the strategies of fast-food chains.”

“McDonald’s executives say they aren’t launching espresso drinks to go after Starbucks, but instead to cater to consumers’ growing interest in specialty drinks.”

McDonald’s has realized that “they were missing out on the fastest-growing parts of the beverage business. Data showed that soda sales [McDonald’s specializes in Coke] had flattened while sales of specialty coffee and smoothies were growing at double-digit rates outside McDonald’s. Customers were buying food at McDonald’s, then going to convenience stores to get bottled energy drinks, sports drinks, and tea, as well as sodas by Coke competitors.”

Finally, McDonald’s has done extensive research and testing on the introduction of the coffee bars, including “three hour interviews where they videotaped the customers talking about their coffee-buying habits. The researchers got in the cars of the customers and drove with them to their favorite coffee place and then took them to McDonalds and had them try the espresso drinks.”

McDonald’s new strategy is well researched and data driven, and their identification of user needs and trends, like convenience and specialty drinks, is sound and appears like a solid user-centric EA target and plan.

However, could this strategy still backfire for McDonald’s?

Yes, “it could slow down operations and alienate customers who come to McDonalds for cheap, simple fare rather than theatrics. Franchisees say that many of their customers don’t know what a latte is.”

Will the new McDonald’s target architecture succeed?

Yes and no. While McDonald’s is off to a very good start—in February, “Consumer Reports rated the chain’s drip coffee [the precursor to their new coffee bars] as better-tasting than Starbucks,”—yes, I know this hard to believe, for me too—it seems unlikely that McDonald’s can easily emulate the Starbucks ambiance of style, comfort, and hip that their stores offer. Let’s face it, you like to hang out in Starbucks, but you barely want to touch the skeevy environment in McDonalds.


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