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 Essay on Managing Innovation Report-Deliveroo

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Managing Innovation Report: Deliveroo

1.0: Introduction

Competition is substantially conditioning different industries with companies battling for prominence and market share. Companies are compelled to seek a competitive edge if they are to survive and thrive. That explains why most business strategies are characterised by the need for beating competition. But the case is different for the blue ocean strategy which strives at making competition irrelevant. As such, this report will discuss the blue ocean strategy in fine details and show how the strategy can help businesses to make competition irrelevant. To bring the discussion into perspective, the report will demonstrate the application of the strategy in the case of Deliveroo, a UK-based technology startup. The report will show how the strategy applies in operation and functioning of the company.

3.0: Application of Blue Ocean Strategy

3.1: Introduction

Deliveroo is a multinational company which was founded by William Shu and Greg Orlowski in 2013. The firm specialises in delivering food and it provides this service on behalf of local chains and major restaurants. The firm has seen massive expansion becoming one of the most valuable startups in the UK (Business Insider, 2019). Deliveroo revolutionised the food industry by elegantly improving the customer experience in food delivery.

3.2: Historical Development

Citing the growth and development of Deliveroo since it was launched in 2013, the the effectiveness of the blue ocean strategy is apparent. Although this was not an entirely new concept given that a company like Just Eat has existed since 2001 (Sammonds, 2018), Deliveroo expanded the provisions of the industry to create greater value and new demand. Deliveroo focused on non-customers of the then food industry. Among the factors that made them non-customers included delays in delivery, limited food variety (only fast foods), and poor customer interaction and experience. Deliveroo sought to create new demand and that is why it partnered with different restaurants, both those who have delivery service and those that do not, to increase the variety of food and orders (Soo, 2018). Even better, Deliveroo introduced its own delivery service. That way, even restaurants without delivery service were enjoined. This helped in improving customer experience. For example, customers can check the progress of their order in the app. Food is also delivered within a short time and in the right state, cold or hot depending on the order. This then helped Deliveroo create new demand despite Just Eat charging an average delivery fee of £0.94 while that of Deliveroo standing at £2.50 (Sammonds, 2018).

Figure 5: Strategy Canvas – Deliveroo vs Just Eat

From the context of the four actions framework, firstly, factors which have been the basis of competition for long included delivery fee and food prices. This has been the norm for long and the industry took it for granted. Secondly, the factor which has been over-designed is the waiting time and variety of fast food restaurant in the rush to beat competition, and this augmented the cost. Thirdly, the factors that need to be raised were the logistic system and the machine learning system. Such systems have been ignored despite their importance in even optimising factors such as convenience and the waiting time. Finally, the improved systems would create a new and greater customer experience, which was never offered before. This is exactly what Deliveroo did in its creation of greater value and new demand. The firm partnered with different restaurants and chains to provide an extensive menu on its app and also offer quality food (Matoso, 2018).

Figure 6: The Four Actions Framework as they Relate to Deliveroo

Eliminate

Cheap Delivery service

Low end food

Raise

Logistic system

Machine learning system

Quick delivery time

Reduce

Variety of fast food restaurants

Create

Greater customer value and experience

Improved convenience

 

The company leveraged the logistic system and machine learning system to ensure that it delivered hot food and identified what is on demand (Matoso, 2018). This led to an improvement of the customer experience and the Deliveroo app was on high demand since customers had not received such an experience before. This then explains why the company has seen rapid expansion as it is now valued at $4 billion and it runs in 14 countries and 500 cities working with over 80,000 restaurants, 60,000 scooter and bike riders and 2,500 employees (BusIness Insider, 2019). In fact, Deliveroo has a commanding marketing position. Considering that Deliveroo has not even ventured into the US market (Business Insider, 2019), the blue ocean strategy is indeed rewarding. More so, Amazon has invested a whooping $575 million in the company (Business Insider, 2019). That shows that the company is set to experience further growth and expand to more countries and cities. Therefore, through the strategy, Deliveroo created a greater value and new demand, especially citing its shrewd ways of leveraging the logistic system and the machine learning system, and this will be discussed in detailed in the business model innovation section. This was ideal in breaking from the stiff competition in the industry.

3.3: Future Development Pathways

As Kim and Mauborgne (2005) claimed, the blue ocean strategy is not sustainable without constant innovation. Deliveroo is already glaring at fierce competition owing to launch of the like of Uber Eats, which came after it. Deliveroo should thus continue to consistently focus on ways of differentiating itself if it is to continue breaking away from this competition. The future still looks bright since the company can find ways of upholding differentiation and low cost. Firstly, there is the issue of paying drivers, which has always been a problem in the gig economy. Drivers have held a series of protests and Deliveroo was even taken to court, though the company won the legal fight against the Independent Workers Union of Great Britain (IWGB) (Business Insider, 2019). But the company still hatched a plan in which it increased its workers welfare by offering accident cover, medical cover, and first-aid training (Business Insider, 2019). The company can then focus on improving the welfare of its drivers further.

Also, Deliveroo should explore the opportunity of making its own food. The case is mainly so because it already launched the Deliveroo Editions, which feature pop-up kitchens (Matoso, 2018). If the company starts to make its own food, it can differentiate further while still enhancing low costs, and food can be delivered at a cheaper rate. This will go a long way to cater for customers who are highly price sensitive. Also, the company should focus on leveraging technological advancement in the near feature so that delivery are done by drones or/and driverless cars. Hence, Deliveroo still faces promising opportunities through which it can improve efficiency and effectiveness. Additionally, the company is glaring at the opportunity of expanding its global reach. As already stated before, the company is yet to enter the US, which is a promising market. Deliveroo should strategise on entering America and render the great customer service in that developed country.

Figure 7: Strategy Canvas- Deliveroo vs Euber Eats

3.4: Business Model Innovation

As hinted earlier, Deliveroo’s business model is championed by its logistic system and machine learning system as a way of creating greater value. The company maintains a promise of delivering in 32 minutes or less, and providing food as it should be (Matoso, 2018). If it is pizza, it will be hot when it reaches the customer, and if it is ice cream, it will still be cold. Even better, the app keeps the customer updated during the waiting time until his/her order is delivered (Soo, 2018). To make fast delivery a reality, the company uses localised systems of zones (Matoso, 2018). This ensures that drivers delivers at areas which are geographically close to them. The logistics also include calculations of factors such as local traffic and how long it takes for the food’s state to change (Matoso, 2018). That is why the company manages to deliver food within the slated time and in the desirable state.

Another key feature that the company uses to create greater value and break away from the competition is to identify the existing gaps in the market thanks to the machine learning system. With the help of this system, Deliveroo critically analyses the data of customers in different geographical areas. Consequently, the company knows and understands which cuisines are on demand or missing in certain areas (Matoso, 2018). This is also in consideration of the people that reside in a particular area. For example, the company can identify that certain ethnic cuisines are missing or in short supply in a particular area yet the demand is high.

With such information, the company can approach the relevant restaurants to initiate a plan of ensuring the delivery of such cuisines. This has been brought to reality thanks to Deliveroo Editions. The Editions see the company establish pop-up kitchen and the relevant restaurants bring in their chef to make the required cuisines (Soo, 2018). Therefore, Deliveroo uses its data to bring valuable and greater customer experiences to different areas without necessarily having to build restaurants in the areas. The company thus serves as a powerful tool that connects restaurants with customers. Global restaurants franchises can then be secured thanks to such a groundbreaking approach. Hence, Deliveroo is keen on exploiting the blue ocean strategy in its pursuant of differentiation and low cost. The idea of Deliveroo Editions is set to provide consumers with great experiences, the cuisines of their choice and from their preferred restaurants. The case is mainly so because the data even informs the company about the economic status of the people (Matoso, 2018). This is important because the company will ensure not only accessibility but also affordability.

Figure 8: Deliveroo Business Canvas – 2013 and 2019

Key Partners

Riders

Restaurants

Investors

Amazon

Insurance companies

Partner with Tesla or other producer of electric cars

Partner with drone manufacturers

Key Activities

Data management

Digitally connecting restaurants with customers

Delivery services

Value Preposition

Quality food from your preferred restaurant delivered at your door

Fast delivery

Cheaper delivery

More shortened delivery time

Ordering food prepared by Deliveroo

Driverless cars

Drones

 

Customer Relationships

Self-service with personal assistance

Customer Segments

Ideal restaurants

Consumers looking for quality food, faster delivery and better customer experience

Highly price sensitive customers

Key Resources

Routing Algorithm

Digital platform

Brand

Marketing

Consumer loyalty and service

Channels

Website

Application

Social media

Referrals

Cost Structure

Contracted drivers

Staff (HR, IT and R& D)

Legal and marketing costs

Revenue Streams

Order commissions

Delivery fee

 

4.0: Conclusion

The blue ocean strategy is a rewarding endeavour since it mainly focuses on exploring an unknown market space. This can be well beyond the existing industry or can take the form of an expansion from an existing industry. But the execution of the strategy alone does not guarantee sustainability in the long-term. The business must maintain constant innovation to enjoy the strategy in the long-run. As already depicted, the four actions framework bordering on this strategy are categorised into – eliminate, reduce, raise and create. The four set the way for differentiation and low cost as prescribed by the strategy canvas. Towards that end, Deliveroo leveraged the strategy to pursue differentiation and low cost by expanding the existing food industry. It did so by creating new demand following an investment in factors which deterred the non-consumers of the industry – long delivery time, lack of food variety and poor customer relations. This approach saw the company expand the menu of delivered food, increase orders and the customer base, enhance the delivery of quality food, and optimise the logistic system as well as the machine learning system. And the future looks bright given opportunities such as entering the US markets, the company preparing its own food, and using drones and driveless cars for delivery. Managing Innovation Report Deliveroo

5.0: Bibliography

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Bretcu, A. (2018) ‘Competitive Strategies between the Red Ocean and Blue Ocean’, Analele Universitatii ‘Eftimie Murgu’ Resita. Fascicola II. Studii Economice, (25), pp. 17–25.

Business Insider. 2019. How Deliveroo went from being the idea of a hungry banker to a $2 billion food delivery giant coveted by Amazon. Available at: https://www.pulse.com.gh/bi/tech/how-deliveroo-went-from-being-the-idea-of-a-hungry-banker-to-a-dollar2-billion-food/78wvyvd[Accessed 26 July 2019]

Denning, Steve. 2017. Moving To Blue Ocean Strategy: A Five-Step Process To Make The Shift. Available at:https://www.forbes.com/sites/stevedenning/2017/09/24/moving-to-blue-ocean-strategy-a-five-step-process-to-make-the-shift/#7e6ff5347f11 [Accessed 26 July 2019]

Edwards, Carlyann. 2018. Blue Ocean Strategy: Creating Your Own Market. Available at: https://www.businessnewsdaily.com/5647-blue-ocean-strategy.html [Accessed 26 July 2019]

Hollensen, Svend. (2013). ‘The Blue Ocean that disappeared – the case of Nintendo Wii’, Journal of Business Strategy, 34(5), pp. 25-35

Kim, Chan and Mauborgne, R. (2015) ‘Blue Ocean Strategy: FROM THEORY TO PRACTICE’, California Management Review, 47(3), pp. 105–121. doi: 10.2307/41166308.

Kim, W. C., & Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Mass, Harvard Business School Press.

Leavy, B. (2018) ‘Value innovation and how to successfully incubate “blue ocean” initiatives’, Strategy & Leadership, 46(3), pp. 10–20. doi: 10.1108/SL-02-2018-0020.

Matoso, Sebastian. 2018. How Deliveroo is transforming its business model to survive. Available at: https://medium.com/mion-innovation-that-rocks/deliveroo-show-me-the-money-fc926b29e4ea[Accessed 26 July 2019]

Olson, Parmy. 2016. Here’s How Deliveroo Built An Army Of 5,000 Drivers In Just 3 Years. Available at: https://www.forbes.com/sites/parmyolson/2016/02/17/deliveroo-army-5000-drivers-3-years/#147da13420bd[Accessed 26 July 2019]

Owler Inc. 2009. Foodora’s Competitors, Revenue, Number of Employees, Funding and Acquisitions. Available at: https://www.owler.com/company/foodora[Accessed 26 July 2019]

Sammonds, Charlie. 2018. Inside Deliveroo’s Digital Strategy. Available at: https://channels.theinnovationenterprise.com/articles/inside-deliveroo-s-digital-strategy[Accessed 26 July 2019]

Soo, Zen. 2018. From investment banker to delivery man: how Deliveroo chief Will Shu built a US$2 billion company. Available at: https://www.scmp.com/tech/enterprises/article/2166800/investment-banker-delivery-man-how-deliveroo-chief-will-shu-built[Accessed 26 July 2019]

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