On January 23rd, Clayton M. Christensen, a Harvard Business School Professor and the famous author of the book “ The Innovator’s dilemma” passed away. To most people, he was not only the most profound management thinkers of our generation but someone who thought beyond capitalism and in his later years focused on writing and talking about how we should measure success and our life.
The Innovator’s dilemma focused on two things — 1. The S Curve which talks about iterations and new products take time to evolve. and 2. Incumbents suffer to adapt fast and evolve.
Things take time to evolve and the ones who catch these trends early and make the change win and can be hailed as Innovators. Henry Ford was one such person. Is Elon Musk an innovator? I don’t think so. He takes existing concepts and manages to operationally and creatively manage the process to make it successful.
I believe on the other hand that Garret Camp and Travis Kalanick are innovators. They took on the entire transportation industry globally in 2010 and in a span of 10 years build Uber to be a household name. They followed the book and its concepts — 1. Iterated fast ( Dynamic pricing, Uber pool etc.) and new products (Uber eats , Uber cards) and 2. Taxi operators globally struggled to adapt and tried to forcibly stop them.
Why am I talking about this when the title is about how we will eat? Patience grasshopper!
Kalanick sold his stake in Uber ($2.5B) and has pumped in $300 Million of his own money along with the Saudi investment arm ( who put $400M) to fund a company called “Cloud Kitchens”.
Cloud Kitchens was named after Kalanick found the concpet of dark kitchens enticing and bough the rights to a company in the UK which was building out “dark kitchens”.
Dark kitchens, also known as ghost kitchens, are purpose built facilities that are leased to restaurants to prepare food for delivery, off-site from their full-service/walk-in location. Ghost kitchens also allow “virtual restaurants” (those with no full-service location) to launch brands and offer delivery-only service.
Kalanick as you can pick up from my story above is trying it again. He is utilizing the same concepts of the Innovators Dilemma to pick on incumbents and the advantages of technology but this time unlike Uber, he is not going city by city. He is doing it globally in one shot. A Big risk , but you know what — He is a lucky guy. COVID-19 happened this year.
As all of us sit locked for the next few months ( its four weeks up for me already) , the restaurant industry has gone to the dumps. Take-out and delivery has been the norm. The UberEats, postmates, swiggy’s and Zomato’s of the world are driving around delivering food in every part of the world from Wuhan to the suburbs of Chicago delivering food to every strata of society.
The lockdown is here to last a few more months possibly , but is it back to business for restaurants and catering services around the world? Not a chance.
Creatures of Comfort
Humans are probably the laziest animals on the planet. Well, our laziness has driven to some amazing inventions — vaccum cleaner, electricity, dishwasher and washing machines. Even one of the deadliest sins is named after the slowest animal — the sloth ; which moves slowly by nature. Sloths we are right now and have been over the past few years as Grubhub and seamless slowly took over and gave us the option — Why head out for lunch at work , when you can have it delivered.
The past few weeks have created a need for humans to adapt to cooking and learning what to do with their new found time. Cooking as a past time or a hobby is well and good for some of them but the majority are just not interested in it. It’s too much work. With a click of a button, I can order food — hot , ready to eat and something I would never be able to learn to make. Thai, French , Greek, Japanese, Fast-food ; anything to our liking.
The unraveling
Restaurant focus on seven key metrics to make sure they are in business:
Cost Metrics:
a. Cost of Goods Sold (COGS)
b. Prime Cost ( COGS + Labor cost)
c. Break even Point
Performance Metrics:
a. Customer Acquisition and Retention Rates
b. Net Profit Margin
c. Table turnover rate — Number of guests served during a time period / Number of seats
d. Revenue per seat — Total Sales / Number of Seats
The last two metrics show you clearly the state of things to come.
The hospitality industry ( Restaurants, hotels, Resorts, banquet halls — any place which serves food and has tables) will have to undergo a major shift in their business models and thinking.
It’s not just that there will be fewer tables in a restaurant because they cant put more people beside each other due to the distance needed. People will demand more from a place of eating. Where did the food come from? Is it heated well to eliminate all sorts of germs ? What kind of cleanliness has the restaurant adapted? Where is the source of all the food? Who handled it?
All these questions add to one thing — Cost. The cost of delivering food to a table grows and the number of tables decrease. This means the price per plate has to increase.
A $17 plate of fettuccine alfredo will have to go to $32 or more. The number of restaurants who serve that much will have to decrease to reach that price point and trust has to be built to support that.
Or —
Ghost Kitchens become the new norm.
We will still have restaurants and venues to procure food from. But, now that the habit of delivery has been built in , people will think about food quite differently.
Governments will also regulate what can and cannot be established. Kitchens will need spaces too. The idea of having bar food burger as you have a drink will change because you will think twice on whats happening back there. In addition, the bar will need to figure out how to price it right to get the customer to pay for it.
Spaces become central in this discussion. How we gather becomes a point of discussion. Can structures be setup which have been sanitized and ready to accept a confined group of people or will we have to check each person before they enter? What is a concept of a house party ? Who should you invite to your house? How much food will be involved ? How much will be cooked and how much will be ordered to ensure guests know it was handled well and managed well.
Innovations
If a chef or an aspiring foodie wants to try a new concept, the speed at which they could put together an eatery was 8 to 12 months , will now be a month. Just like how the speed of building an internet startup decreased, Ghost kitchens will allow new ways of creating dishes and experimenting it quickly with users. The distribution model is there, the customer acquisition channels are there, all they need is tweaking and creating newer unique and secret recipes.
Travis — if you ever read this, I am open to talking more :). Or if you are someone who wants to venture into food, happy to help think differently on what your idea should be to launch.
Bill Gates talks about a possibility of a new strain of virus every twenty years or so. The next virus wont be respiratory. The next virus will be determined by how we eat and how we manage the cycle of food. Will we remain sloths or will we become efficient calorie consumers?
The world is not going to be the same for sure , but its definitely going to be different.
