An in-depth look at how F&B businesses can harness new value creation models that have emerged in these recent pandemic times. A new type of profitable system created to leverage opportunities thanks to technology, in this case, the abundance of resources in the market made available by digital tools, such as the virtual kitchen.
From small startups to large corporations, few have not felt the impact of Covid-19 this past year. Businesses across industries and geographies have seen many challenges, some fighting to survive and others thriving, moving from new normal to the next normal. Within this context, it is interesting to observe the emergence of new value creation models. Digital technologies have for the first time in history created opportunities for connection and data development. Ideas, talent and finances once scarce are now available, accessible and above all abundant. This is where opportunities lie.
To create value today, organisations need vision and intuition paired with rapid execution capabilities and agility to perform in constantly changing markets. The combination of these business skills allows organisations to anticipate market trends and customer behaviours.
A new type of organisation is emerging – Exponential Organizations or ExO’s. They rapidly scale results and outperform the market showing excellence in terms of vision, intuition and execution. Their competitiveness is visible across industries. ExOs are defined as companies “whose impact or output is disproportionately large - at least 10 times larger -compared to its peers because of new organizational techniques that leverage accelerating technologies” (Ismail S. et al., 2014) proving that “building a successful platform strategy is more nuanced than building the largest network of users“ (David McIntyre, 2019).
Let’s take the food and beverage industry. The American National Restaurant Association report confirms 2020 has been the “annus horribilis” as the most challenging year ever experienced by the restaurant industry where dine-in restaurants may not return to normal for months, or perhaps even years. For most restaurant operators this means developing new economic models for the long term.
Research shows that prior to the pandemic, 80% of full-service restaurant traffic was on-premise and abruptly ended with losses between $30 and $50 billion per month. This might sound even harder taking into account that the National Restaurant Association, only a month before lockdown measures, projected to reach $899 billion in 2020. In this bleak scenario, we find a reassuring and diverging trend coming from digital and innovation.
On December 19th, 2020, in full pandemic, with a very provocative video, MrBeasts aka Jimmy Donaldson, the second highest paid star YouTube with over 87 Mio followers according to Forbes, announced the launch of 300 MrBeast virtual kitchens as a first step in the development of a new venture. The only way to be served at MrBeast burgers: via delivery app.
While using social media to gain viral attention for fast food concepts is not a new thing (Gaber, H. R., & Wright, L. T., 2014), in the case of MrBeast Burger, the figure of the creator, the idea and the size of the initiative contributed to create a unique response from media. The video of the launch collected over 51 million views in three months, the app quickly went to the top 100 app’s in the Food & Drink category on the Apple Store and has even been reported as crashing during the opening night. From a retail perspective, there is value in opening 300 restaurants. Strategically, it allows them to have a competitive advantage and maintain distance from the competition by major players such as McDonalds (Vignali, 2001).
Finally, from a business perspective, it seems that every step had been planned with a very structured and meticulous approach allowing the new food concept to be named “the most important restaurant concept in the U.S. right now“ by Jonathan Maze.
MrBeast is one of the brands of the Virtual Dining Concepts (VDC), a 2020 company created by longtime industry leader Robert Earl and tech visionary Robbie Earl, to leverage the trend of virtual kitchens and delivery-only restaurant concepts. The company is able to act as a platform putting together the production side with a set of emerging brands with a strong fan base; among them Tyga Bites, Wing Squad™, Mariah’s Cookies, Pauly D’s Italian Subs, Mario’s Tortas Lop and more.
Also known as cloud or ghost kitchens, a virtual kitchen is “restaurant that focuses exclusively on takeaways” (Choudhary, N. 2019). By not offering dine-in facilities, they are focused only on food production. Orders are received exclusively online and the food is delivered to customer only as takeaway.
From a strategic perspective, Virtual Dining Concept creates competitive advantage unbundling the current fast food value chain, and by doing this, represents a perfect example of Exponential Organizations. A new type of business created to leverage opportunities thanks to technology, in this case, the abundance of resources in the market made available by digital tools. Unused or partially used kitchens can find a new business life thanks to technology via access through multiple platforms and ecosystems to the existing market demand of fast food, currently served by delivery apps.
ExO’s are built by 10 attributes plus one. The attributes are divided in three parts:
Now we have defined an ExO, let’s apply the theory to MrBeast Burger.
Firstly, let’s talk about the environment. Exponential Organizations are built to take advantage of the paradigm of abundance of resources available in the market, as consequence of the disruptive force of digitalization in society. In this case, abundance can be found in the number of kitchens that are now un-used or operating at limited capacity because of Covid. This condition is a clear insight from an entrepreneurial perspective to build a business model able to exploit such a valid amount of assets as well as a big drive for traditional restaurant owners who see this project as an alternative revenue source.
The first of the attributes is the Massive Transformative Purpose which acts as the north star of the organization, the element that should provide the direction for strategic decision making. In this case, VDC’s purpose is well defined in helping the restaurant community generate additional revenue and sources of income through virtual brands.
Exponential Organisations also have internal attributes that are used to organise the abundance and structure the business.
It takes a minimum of four attributes correctly implemented and a good Massive Transformative Purpose to grow exponentially. The challenge is hard but the stakes are highly rewarding. For Virtual Dining Concepts and MrBeast Burger, the road is only at the beginning but the premises are there to bring this new creative model into the land of unicorns. We will be here, watching and enjoying our burgers.
Virtual Dining Concepts is just one of the many examples of Exponential Organizations. We witness the emergence of new business models demonstrating the importance of digital thinking and reinventing value creation. Becoming an exponential organisation and tapping into the abundance paradigm is key to thriving through this pandemic and the constantly changing times.