Exploring systematic ways of working outside-in at Deliveroo
Finally, in the last stage of becoming an outside-in company, as Moments of Belief gather momentum, an organisation finds more systematic ways of working outside-in, something that Deliveroo shows well.
Deliveroo is a start-up that has disrupted the food takeaway business in multiple countries. They bring high-quality meals from restaurants that often don’t deliver straight to customers. This has been achieved at the same time as establishing an outside-in belief system.
While Deliveroo’s journey as a start-up is not quite the same as a company moving from inside-out to outside-in, it can be just as tough to move from nothing to operating at scale at breath-taking speed through multiple fundraising rounds while avoiding an inside-out, target-led set of beliefs.
Deliveroo shows how introducing more systematic ways of being customer-led can reinforce outside-in beliefs leading the company to spot gaps and opportunities in what customers receive and in what the business can offer. In 2018, five years since it was launched, Deliveroo was valued at $2 billion.38
The business was founded by Will Shu, an investment banker who worked long hours and was sick of eating unsatisfying supermarket ready meals every night for dinner. Coming from New York, he knew takeout food didn’t have to be this way. T was literally working the same hours as in New York, but I had to go to Tesco’s every night... it just became really depressing,’’39 he told one interviewer. Like so many breakthrough innovations coming from the personal experience of a gap or a bad service level, Shu’s burningness was a mixture of complete dissatisfaction (pain) at his choice of after-work dining options and ambition that it could be better. The city was full of great restaurants, but he was amazed that so few of them delivered food.
Shu had a belief that people would pay well for good food delivered as distinct from lower quality offerings from takeaway outlets. By establishing Deliveroo’s own fleet of delivery riders, he was able to create rapid access to genuinely good hot food. This was a big bet. The main competition just provided an ordering platform and relied on the restaurants and takeaways to provide the delivery service. That meant the loss of quality control for both the food and the service with customers unable to see where their order was on its journey towards them.
Deliveroo is one of only a handful of companies that have overhauled an entire ecosystem, participating in the gig economy, changing the look of the roads with its fleet of delivery riders. It has been a catalyst for change in many cities, altering the way we eat.
From the beginning, Deliveroo challenged assumptions, taking an outside-in approach. In February 2013, ignoring sceptics who told him
‘English people don’t want good food delivered!’, Shu launched Deliveroo in Chelsea, his home neighbourhood. As Shu recalled:
I was the first delivery guy and for eight months I delivered food every single day for five hours, not because I really needed to for money’s sake but because I really wanted to understand what the customer went through.40
In the early days, Shu’s banker friends kept ordering from Deliveroo because they found it hilarious that he was their delivery guy. A hedge fund trader who Shu hadn’t seen for five years was shocked when he delivered a pizza to his big house in Knightsbridge thinking he must have fallen on hard times, saying, ‘Will, what are you doing? Are you okay?’
Six years in, Deliveroo was earning revenues of more than £350 million through 60,000 riders in 500 cities and 13 countries from over 80,000 restaurants with no more than 30 minutes from order to receipt.41
Deliveroo’s first big Moment of Belief was investing in its own delivery and logistics operation to ensure that they were in control of food arriving hot and within thirty minutes for its customers. Deliveroo makes money by charging restaurants a commission and customers a simple low fee on its app. It offers restaurants who don’t normally deliver an extra source of revenue by outsourcing the job to Deliveroo. Indeed, the company says that restaurants who partner with the delivery firm see their revenue increase by up to 30%. For example, Sunday, Deliveroo’s busiest day, tends to be the day when many restaurants are empty.
Deliveroo’s focus on logistics has fuelled its rapid growth. Being a nearly full-time delivery driver in the first 10 months of the business, Shu learned about efficiency. ‘I did it seven days a week. You do that and you get pat- tern-recognition in minutes. You can shave off elements of the journey,’ he said.42
Today Deliveroo has systems that give it control and also feedback on how the system is performing. It uses a routing algorithm that picks the right driver to collect an order from a restaurant then deliver it to its destination. A team of data scientists looks for efficiencies by breaking down the delivery process; this includes the interaction with the customer, the process of cycling or driving to the restaurant, picking up the food at the back door, or punching in a code at the restaurant to get in and then getting the food swiftly and safely to the customer who ordered it, through often complex entry systems, doors and stairs.
The data-led learning can be highly actionable. Shu explained:
If you tell the restaurant precisely when the [delivery] guy is going to be there, that’s better than saying he’ll be there in ю minutes ... You give them precision. A Neapolitan pizza takes 90 seconds to cook.
A steak takes 10 minutes. How do you pair that so the food is piping hot when the guy gets there? We have a million tests going on all over the place.43
Deliveroo uses real-time data, constantly calculating and recalculating the best combination of riders to orders through a dispatch engine affectionately known as ‘Frank.’ It can change decisions in response to live new information like a sudden accident and subsequent traffic jams.
Taking seriously its customer-led purpose to provide the best restaurant- quality food to its customers, Deliveroo has designed its own food containers to protect the food on its travels while keeping it piping hot. It has individual compartments for different parts of the dish and this packaging has become another revenue stream, being sold to Deliveroo’s restaurant partners.
Deliveroo then found there were unexpected insights available from its data pool that showed new opportunities to better meet customer needs. The business now has a new perspective, seeing where demand lies, where suppliers are and how these pieces of the puzzle fit together across a city. It revealed cuisine blackspots in big urban areas. For example, despite the demand in similar neighbourhoods, there were very few good-quality burger restaurants in Camberwell, an area of South London.
So Deliveroo created an outside-in response. Deliveroo Editions became an entirely new part of their business model. Seeing a cuisine blackspot, Deliveroo now establishes kitchens with restaurant partners in shipping containers in unused local spaces. These low-cost, low-risk outlets are purely focused on Deliveroo deliveries and do not operate as restaurants in their own right. In high-demand areas, Deliveroo funds the cost of the new kitchen set-ups. Its plans showed 134 of these kitchens in the UK by the end of 2018 and openings in Madrid, Paris, Sydney and Amsterdam, alongside existing kitchens in Singapore, Dubai and Melbourne.44
As a poster child for the gig economy, Deliveroo has inevitably faced criticism for its fleet of self-employed delivery riders. While Deliveroo pays above the minimum wage in the UK (£10 an hour), riders have no contracted hours and don’t get sick pay or paid holidays. In outside-in fashion, Deliveroo is working with governments to change employment legislation so that it can offer its riders both flexibility and security. Until then, Deliveroo provides warm, waterproof visible uniforms, gets involved in local community groups, organises casual meetups for riders in Nando’s and hosts dinners for riders during Ramadan.
Deliveroo’s outside-in growth was based on its understanding that good food delivered fast and hot was what mattered to customers, then finding systematic ways of using data at scale to do this more effectively. In so doing it has created whole new business opportunities and business models.