Differentiation has never been more crucial. As the industry rebounds, restocks, and rehires the focus is also turning to innovation. Yes, consumers are eager to get back to restaurants, but they have not lost their appetite for experimentation and experience. For chains, being better is not enough. Success requires being different.

As former Walt Disney Company CEO Bob Iger says, “The riskiest thing we can do is just maintain the status quo.“

How chains approach innovation—their mindset, innovation processes, and engagement with suppliers and franchisees—varies considerably from company to company. It’s no wonder that their success is equally varied.

Achieving best-in-class is not a three-month project that can be assigned to someone. Best-in-class in an ongoing effort that requires self-assessment and an iterative process of improvement and refinement. But to assess your organization’s innovation sophistication, operators need an understanding of what is best-in-class. With that, they can compare where they are against where they want to be and determine where they want to improve.

THE FOODSERVICE CHAIN INNOVATION MATURITY MODEL

Sonar Insights and Kinetic12 recently published a Foodservice Chain Operator Innovation Maturity Model that outlines 16 characteristics that define a chain’s innovation sophistication across four levels of organizational maturity. These 16 characteristics are broken into five groups: Innovation Mindset, Innovation Strategy, Innovation Inputs, Innovation Structure, and Innovation Execution.

This model was developed in early 2021 through a series of interviews and surveys with restaurant chain professionals and is a tool to help chains assess their own innovation weak spots.

Innovation is crucial to differentiation, loyalty, traffic-building, and margin improvement.  Determining at what level a company is across each of the 16 dimensions can help them understand where they can improve and why their innovation is, at times, falling short.

WHAT IS BEST-IN-CLASS?

As shown in the Foodservice Chain Operator Innovation Maturity Model, Level 4 is best-in-class. But an organization doesn’t need to be there on all 16 characteristics. That would be too expensive and require too many resources to achieve. The goal instead is to scorecard your company and use the results to determine where the greatest return can be achieved through improvement.

Through research with chain operators, Sonar Insights and Kinetic12 identified seven common areas of innovation weakness (or opportunity). Through the process of score carding their own innovation maturity organizations will likely identify several, if not many, of these weaknesses.

The Seven Most Common Areas of Innovation Weakness

1. Inability to Identify Game Changing Ideas

Most organizations are good at executing innovation, but ironically are not good at identifying and developing game changing innovation ideas. Best-in-class in this area is driven by the characteristics under “Innovation Inputs, including:

• A holistic approach to trends and insights identification
• A defined and disciplined process for idea generation
• An effective approach to consumer and operational testing and validation

2. Lack of a Formal Innovation Strategy

Many chains do not have a formal written innovation strategy. This strategy is important to articulate innovation goals, their mix of LTOs versus adjacencies, white space expectations, and their pipeline. It’s also critical to identifying and securing the resources required to achieve this. Some chains have said “we don’t need a written plan; we know what we are doing.” But without alignment around a formal plan the organization is much more likely to be hijacked by opinion, be consumed by easy, short-term ideas at the expense of harder, game-changing ideas, or to fall into a reactive “chicken sandwich war/chase the competition” mode.   

3. Food-only Focus

Formal innovation processes in chain restaurants are mainly focused on food and miss out on the opportunity to deploy these resources against other critical areas of the business model. In a best-in-class organization, innovation has a more holistic scope and explores optimization of costs, operations, technologies and systems, labor deployment, customer engagement and the overall store footprint. It recognizes that innovation runs the entire business gamut and encourages thinking beyond the food.

4. Short-term Horizon

Innovation pipelines are predominantly short-term focused and heavily weighted to LTOs. There are several problems with this. First, LTOs and close-in line extensions are highly cannibalistic. While they may generate news and position the restaurant as “creative,” they don’t drive significant topline growth. Secondly, the aggressive LTO schedules of many chains consume innovation resources and prevent the brand from creating game changing innovation that broadens their customer appeal and brings in new customers. Best-in-class requires a balance between short and long-term innovation, between quick, easy to execute LTOs and bigger white space platforms.

5. Weak Front-End Process

Most chains have a weak front-end process, i.e., the translation of trends into dig sites that generate true game-changing ideas. This is due to two issues:

First, some organizations are only focused on the “do” but not worried about the “how.” They reward the output of innovation—the next great LTO but are less concerned with refining the front-end process that came up with the idea.

Second, senior leaders will say they are committed to innovation but have not properly structured the team for success. Best-in-class requires hiring people skilled in innovation development and ensuring they are dedicated to that task and have the proper resources to deliver.

6. Limited Engagement of the Broader Cross-Functional Team

Innovation in chains is typically led by either the culinary or marketing functions but research indicates these efforts do not always include the input and engagement of a broader cross-functional team. For example, the franchisee representatives and operations are involved in the vetting and testing phases but less so in the trend, insight and ideation process. Best-in-class innovation has engagement from both internal and external stakeholders as well as subject matter experts, from early-stage trends exploration to execution and that this will improve the chances of finding and executing great ideas.

7. No Post-Launch Score Carding Process

Few chains do a very good job at post launch analysis. Few have a formal score carding process for collecting metrics, customer feedback, and operational learnings. Best-in-class organizations make learning from experience a priority and applying that insight to future innovation development.

ACHIEVING BEST IN CLASS

There are many areas of innovation improvement, or refinement, that can impact results for restaurant chains looking to optimize their innovation success.  Investing to improve any of the 16 areas in the Innovation Maturity Model can have a significant impact on the organization. 

Innovation is crucial to sustaining the relevance and interest of a brand. Even chains that are successful need to re-examine their current structure and processes and be willing to invest and refine to move closer to best-in-class.

Here are five areas of innovation upgrade that address many of the common weaknesses identified in the Maturity Model research.

Five Areas of Innovation Upgrade that Yield Big Results

1. Innovation Strategy Development

Surprisingly, many chains do not have a formal written innovation strategy, which is not to say they don’t ever develop great innovation. But not having a strategy can also result in a disjointed approach to trends analysis, ideation, and managing the pipeline. Best-in-class organizations have a written strategy and understand the value it can bring to ensuring focus, discipline, alignment, and execution consistency.

2. Front-End Process Refinement

Although trends and insights are known by some as the “fuzzy front-end,” it shouldn’t be.  Optimizing the front-end of innovation means first building a process for Trends Exploration that looks at the consumer, competition, suppliers, technology, global food, ingredients, and analogous markets to understand relevant and emerging influences, needs, wants, and issues that create opportunity for innovation.  The second half of the front-end process is to create Innovation Dig Sites based on the trends that identify big areas ripe for exploration. These dig sites could be focused on food-forward flavors or formats, enabling technologies, service models, operational efficiencies or a specific consumer need state.

3. Pipeline Optimization

For organizations that do an effective job at the front-end process their weak spot may be in mining the dig sites to create compelling and impactful innovation ideas and innovation platforms. Pipeline Optimization is about ideating to come up with a balanced mix of short and long-term projects. Short-term ideas could include LTOs, recipe cost-optimization, or menu-simplification to eliminate single-use SKUs.  Long-term projects could include new platforms such as the development of a new delivery-only menu or the redesign of the kitchen prep process to reduce labor.

4. Cross-functional Commitment

When it comes to innovation, there is no monopoly on the best ideas. Organizations that invite more people from across the company have a greater chance of success because they can bring new ideas and solutions to the table than if only marketing and culinary are involved. Innovation projects can become bigger because people from legal, finance, R&D, and operations can translate insights differently than marketing and culinary. And, when explored together, the byproduct can be better buy-in and momentum across the organization to bring ideas to life more quickly and get them integrated into the business.

5. Maturity Model Score Carding & Assessment

The final area of innovation upgrade is to use the Chain Innovation maturity Model and conduct a self-assessment to understand the level of the organization across the 16 innovation characteristics.  Once a chain understands where they stand versus best-in-class they can make a decision on which areas they would like to work on that will yield the greatest innovations “upgrade.”

As we move forward into the next normal it is crucial for chains to refine and optimize their approach to innovation. The scope of best-in-class innovation is far more than just the menu. It must also be the service model, technologies, cost management, the supply chain, and employee engagement.

Great managers understand that business success comes from staying relevant just as much as from managing a cost-effective and profitable restaurant. Best-in-class innovators understand that effective innovation can deliver all three.

Tim Hand is a partner with Kinetic12 Consulting, a Chicago-based Foodservice and general management consulting firm. The firm guides multiple best practice projects and forums, and consults with leading Foodservice suppliers, operators, PE firms and associations on strategic initiatives. Their previous leadership roles at Foodservice manufacturers and restaurant chain operations provides a balanced perspective and insight into how the industry is evolving and what must be done to stay relevant.

Aaron Welling and Sonny Virakpanyou are co-founders of Sonar Insights, a market research and innovation consulting firm based in Washington State. Sonar Insights helps organizations to better understand their customers, their industry, and the world around them to make more informed strategies and breakthrough innovations. Their previous experience working on innovation globally across industries gives them a unique perspective that they leverage to help organizations maximize innovation strategies and projects.