Sample Amazon 6 page memo
I was really interested in the concept of the Amazon 6 Page memo idea. Jeff Bezos hates Powerpoint. I love it, but more for having pictures that intertwine with a powerful, emotive pitch. As far as delivering information to help a team to make a decision it isn’t great. I also find that a lot of meeting are dominated by overbearing people (often me 🙁 ), and whilst I work hard to give everyone a chance to give their input, it doesn’t always work. I am really keen to harness all of the smarts and passion of all of the team and I wanted to try an Amazon style 6 page memo as a way of getting everyone on one page.
Whilst it is very difficult to find concrete information about the Amazon 6 Page memo process, we decided to try it in order to achieve the following outcomes.
One of our companies, www.marketing4restaurants.com, has a product which provides a free restaurant online ordering system, which, funnily enough, we call the Free Restaurant OnLine Ordering System (FROLO). I wanted to create a discussion about the next stage of it’s growth. It has gone past beta product, and have gone past customer acceptance, in fact it is growing at 12% per month for the last 12 months. We want to look at what is required to bring it to the next level. I thought this would be a perfect opportunity to create a Amazon 6 page memo style document and see what sort of interaction, ideas and decision making that it could create for us.
What I wanted to get out of a Sample 6 Page Amazon memo:
Deep thinking – The memo was constructed to give the information about the problem, the numbers, and the background. For some of the team, they will be getting insights into a part of the business that they rarely think about, but often have a significant impact on. For example, developers coding the product can become far removed from the end user and this leads to issues with User Experience.
Time – It is too easy to skim a document and fake that you are across everything that has been written about. We provide enough time for everyone to read through the document and to understand the questions that we were trying to answer.
Input from all of the team – All of the people know some of the knowledge in the memo, but very few have visibility across all of the areas of the problem. This provides everyone with information so that they can understand the problem better and provide better input into the problem.
Better Decision Making – With everyone in the team having all of the information, the decisions will be based on facts, not preconceived ideas.
What did we get out of creating a Sample 6 Page Amazon memo.
Firstly, the process produces clarity. I needed to get all of the information and put it down on paper. This created a significant strategy document that will help new team members to get on board with a big part of our company.
The meeting went way over the 90 minutes that we allotted. I cut the meetng at 2.5 hours. Having said that, we had the entire team in the meeting, so there was probably 12 people in the meeting. I wanted everyone to understand the level of rigour that we are applying to our decision making process as well as creating a better understanding of the problem.
I was quite surprised at the level of participation from almost all of the team.
Lastly, I was excited to see the level of action around the issue. Team members were looking at the problem in a whole new light and we had actually created an ad hoc cross functional team.
Here is our sample 6 page Amazon memo.
The Free Restaurant OnLine Order System Roadmap
The Free Restaurant OnLine Ordering System provides restaurants with the ability to take orders online from their own website commission free. It feeds into our Version 1 Restaurant CRM system. This 6 page memo is designed to guide the prioritisation of the roadmap for the next 18 months of FROLO rollout to best assist restaurants and to see the growth to our first 1,000,000 orders.
Restaurants and online ordering
Take out food has been a part of many restaurants revenue mix for decades. Traditionally Pizza, Indian, Chinese and Thai restaurants have been cuisines that were most likely to offer home delivery or pickup. The benefit for Restaurants was 2 fold, there was less labour involved with the provision of the meal as there was no waiting on the table, no dish washing and it broke the bottleneck for the kitchen created by the number of seats in the restaurant. If the restaurant was full and the kitchen had spare capacity, that capacity could be turned towards eat out meals. It also widened the market for the Restaurants food – not everyone wants to or is able to eat in. Issues around drink driving, lack of wine list / corkage, need for a babysitter and ability to watch TV are all reasons why some people will not eat at a Restaurant on a given night. Delivery and take out have addressed this.
Traditionally Restaurants received the order either via phone, when they would give a pick up time, or the customer would come into the restaurant and place the order. This often meant customers waiting 20 – 30 minutes as the food was prepared.
Dockets are then created which are sent to the kitchen. The food is the cooked, packaged up and delivered to the front counter, either for pick up or for delivery to the customer by the Restaurant.
Delivery produces issues for restaurants, many of which aren’t experts in logistics. Often staff from front of house, in the kitchen or even the owner will do the delivery. This creates issues around vehicle management and costs, navigation, scheduling all around a service that peaks on Friday and Saturday.
The state of the online ordering industry
There is a growing trend towards customers ordering food online, whether it is direct from the restaurant or via an aggregator. The food may be picked up or the customer may want to have the food delivered. This trend is partially being driven by consumers becoming increasingly time poor and their willingness to pay for convenience to have the food delivered and partially through online ordering companies driving the dominant narrative that people should have more food delivered to them at home.
Companies like Domino’s in Australia have an opposite approach, with heavily discounted pick up pizza’s compared with delivery. A $4.95 Pizza is around $12 when it is delivered, imply a $7 delivery fee, although it is marketed as a $12 pizza with free delivery.
Throughout the world there are a number of different types of online ordering businesses. Almost all act as aggregators of Restaurants to provide a Business to Consumer model that aggregates restaurants into 1 website and 1 mobile application. The differentiators are grouped by whether or not they do deliveries as order aggregators such as Just Eat / Menulog and delivery aggregators such as UberEats, Foodora and Deliveroo who not only take the order, but also delivery it through a team of contract delivery riders. Some aggregators offer a hybrid model, like GrubHub which offers delivery in some areas, but online ordering only in other areas.
Weaknesses of current aggregators
The current business models have significant issues.
Just Eat has been profitable, but appears to fear the delivery aggregators, with the move to commence its own delivery service. It is expected that this will decrease the overall profitability of Just Eat.
The order aggregators are quite profitable, but there are low barriers to entry given that creating an online ordering application is much less expensive than it was when they commenced business. Many are over 10 years old and will have spent many millions of dollars in building platforms that now can be built for less than half a million. The market is becoming increasingly flooded with some POS systems starting to offer Online Ordering.
There is significant pressure for the delivery aggregators around the status of their riders. They are employed as independent contractors and many (almost all?) earn below the minimum wage in the countries that they operate. There is regulatory risk associated with this, along with the churn as riders leave after finding more profitable work. The work tends to suit the unemployed, the underemployed, or those who like getting paid some money to ride their bike and keep fit. The workplace health and safety status of the workers has raised concerns, including injuries and even deaths whilst conducting the deliveries especially around health care costs for injured ‘contractors’.
Delivery is a peaky business. Some restaurants may do 50% of their turnover in the 8 hours of Friday and Saturday night. This places significant pressure on kitchens, which flows out to delivery drivers.
Concerns have been raised about the food safety aspects of the delivery. There appears to be little quality control around the amount of time that the delivery takes, nor the temperature of the food. There are also numerous stories of riders helping themselves to a few fries, creating food safety regulation breaches as well as decreasing the amount of food that was intended for the customer.
Some Restaurants have expressed concern over the lack of quality control in the delivery process. Issues where the food is delivered in a much worse state than when it was prepared, when the food has been tampered with or when the delivery has taken a lot longer than expected all impact the Restaurant. UberEats has lead the way in attempting to push the management of the customer complaint onto the Restaurant, with new contracts stating that UberEats does not provide delivery, but a platform for riders to find jobs with Restaurants. This is seen by many Restaurants as making them responsible for a process over which they have no control, and unfairly impacts their brands as well as creating a customer service responsibility for a service they cannot control.
The delivery aggregators have struggled with profitability with numerous funding rounds. The mid term funding viability will be severely impacted if there are rulings against the independent contractor model.
One source of strength for the aggregators, but a major issue for the Restaurants, is the time taken for the Restaurant to be paid. Aggregators are able to process the payment and use that funding for a number of days before it is paid to the restaurant, minus the fees that they have accrued over the period of time since the last payment. This is a large sum of money for each of the regulators and represents a strain to the Restaurants, which traditionally have poor cash flow.
Aggregators as Restaurant Intermediaries
Aggregators have branded their services as being about marketing for the restaurants and bringing them new customers. This fee should either be accepted as a fee for marketing or marketing and delivery, depending on the service that is rendered. The aggregators operate in a 2 (or 3) sided market place, with the requirement for diners, restaurants (and delivery riders). In a bid to build up the awareness of diners, there has been heavy promotion of their the aggregator brands, whilst simultaneously trying to minimise the value of the Restaurant brands.
In reality, the aggregators have relied on Restaurant owners to put their widget on their websites to capture the customer details until their websites gained the momentum that was needed to become a customer habit. Restaurants are charged for orders from their existing customers, sometimes having repeat, regular customers continually charged for the orders, with no incremental review to the Restaurant.
The aggregators charged a fee for this, around 13% for order aggregators and 35% for delivery aggregators. The 22% differential gives the Restaurant between the choice of shipping each meal at an average loss of 8% and providing the delivery, or having the delivery done by a delivery aggregator, but being charged an unsustainable 35%. Restaurants have started to leave these platforms as they haven’t been able to make it profitable with some Restaurants having significant increases in turnover, but widening losses.
Aggregators in general do not provide the customer email address. The long term value of the customer is extremely hard to increase when the email address is not provided to the customer. There is no opportunity to email customers to re-engage with them. All of the aggregators state that this is because of privacy legislation, but it is really an attempt to own the customer, rather than the restaurant. The issue with this is when the customer comes from the Restaurant website – the Restaurant is handing the customer contact details to the Aggregator, which then goes into the Aggregators marketing list, meaning that offers, discounts and other promotions from Restaurants struggling financially and forced to offer steep discounts. This is a leading cause of decreasing customer loyalty, we believe.
Aggregators have used promotional collateral such as delivery bags and signage, awards and POS material to get restaurants to promote the brand of the aggregator rather than their own brand. This works because the Restaurant may not be able to develop their own branding, nor afford to have it printed across a range of promotional material.
Menulog has attempted to associate it’s name with the process of ordering food online, with the call “Just Menulog it”.
Menulog in Australia has gone one step further and has now stopped providing the customer phone number. In order to contact the customer, the Restaurant calls a Menulog number and enters the receipt number for the customer. This is only available for a limited time period. After that there is no way for the Restaurant to contact the customer, apart from the physical address, if it was a delivery. This is a further step to distance the Restaurant from the customer.
Further efforts to distant the Restaurant from their customers come from brandjacking and adwords arbitrage. Brandjacking occurs when an aggregator registers a domain name, eg myrestaurantsydney.com and places a website on it. The customer thinks that they are dealing direct with the Restaurant when the Restaurant is not involved at all. The aggregator produces a statement that this is a customer that their marketing bought to the Restaurant, when in reality it was a Restaurant customer looking for the Restaurant. It is uncertain if this is misleading and deceptive conduct on behalf of the aggregator. Adwords arbitrage occurs when an aggregator bids on the keys associated with the Restaurant and drives them either to a brandjack site, or to their own website page for that Restaurant. Once again, unless the customer realises that they are clicking on an ad, they will think that they are dealing with the Restaurant, when they aren’t.
The ability to act as intermediaries between customers and Restaurants has weakened the customer’s loyalty to the individual Restaurant. Customers are more likely to be swayed from one Restaurant to another, especially with discounts and offers. This has allowed aggregators to provide higher orders to Restaurants that are willing to pay higher commissions. This creates an auction process whereby orders go to the highest bidding Restaurant. We believe that these are the most likely to be struggling and price sensitive as well as customers who can’t remember their favourite Restaurant are less likely to become repeat customers.
This is also having an overall negative impact on the Restaurant industry, decreasing the amount of money that customers are prepared to pay, decreasing customer loyalty, decreasing portion size and decreasing profitability as struggling Restaurants are the ones most likely to offer discounts.
Menulog and Just Eat have commenced trials with delivery, which we believe is tacit acknowledgement that there is not enough difference between the 13% fees that they charge and the 35% that UberEats and Deliveroo are charging to warrant the fees. In Australia, Menulog has been hit very heavily as Restaurants have moved to UberEats and Deliveroo in areas where they offer their services and Menulog being left with areas with lower concentrations of population and restaurants. To remain competitive and ensure growth, they may be required provide delivery, a service that is notoriously unprofitable. It is expected that this will reduce the profitability of companies like Just Eat.
UberEats in particular has been heavily involved in autonomous vehicle delivery. Leveraging off the investment by Uber, driveless delivery will make a fundamental change in the economics of delivery.
Trials have also been conducted into order delivery by drones. There are issues around payload and regulatory concerns, which are not insurmountable and as technology progresses, it will become increasingly viable.
Deliveroo has publicly stated that it is their intent to cook their own food. They will extend their Deliveroo Editions concept to achieve this. Deliveroo Editions has provided chefs with ‘kitchens in a container’ which have been placed in areas of known high demand for a cuisine. It allows the Restaurant to increase its geographic footprint by cooking food a new area and getting that food quickly delivered to new customers. It appears that Deliveroo is planning to dispense with the chefs and put their own cooks in. The economies of scales will mean that they will be able to produce food cheaply, paying minimal fees for setup, rent and staff. Their large advantage, however, will be that they will have their own dark restaurants in marketplace that is their own marketplace. They will own the data, the customers and the sales process. This will make it extremely difficult for traditional restaurants to compete with.
FROLOs role in Restaurant Disintermediation
FROLO is popular for restaurants for 2 reasons. It is, as the name suggests, free. There are no monthly or per order charges. There is a growing awareness that the ‘marketing’ fees that the aggregators are charging are unsustainable. Restaurants can save in excess of $1,000 per month.
The ‘marketing fee’ that is being charged by the aggregators is becoming increasingly questioned because the aggregators do not provide the customer contact details of the customer. Without the email address, it is difficult to argue that there is any marketing value apart from the one time order.
Restaurants are increasingly becoming aware of this and therefore are looking for alternatives to the aggregators as well as a better understanding of the data sovereignty over their own customer’s details. By collecting the email address and customer details for the Restaurant, FROLO is dramatically able to increase long term customer value for a customer.
FROLO is one of the few online ordering system offering a loyalty discount. This was dropped by Menulog, we believe because it made it too difficult to move customers around to the Restaurants that were prepared to pay higher commission.
Feeding the customer contact details into the Restaurant CRM is seen as being a significant win for the Restaurants.
Current State of FROLO
FROLO is currently growing at 12% per month and has been growing for 12 months at this rate. It is quite stable with a low support tail as almost all of the bugs have been eradicated. Version 2 of the FROLO backend was released late last year and represents a best of breed mobile phone kitchen management application, making it simple for kitchen managers to see and manage each of the orders. Integration with Epson printers has been achieved, providing flexibility for the Restaurant in the way that they want to manage orders in the kitchen, with either traditional dockets or through the use of mobile phone.
It currently has customers in the United States and in the United Kingdom and a number of countries. The payment gateway used does not support all of the countries that we have active customers in.
Given the current state of the industry and the uptake of FROLO in our target markets:
- What is required to increase the uptake to see us hit our first 1,000,000 orders?
- What features will help us to achieve our mission of helping Restaurants find more customers and turn them into repeat customers?
- How do we manage the expected growth?
- Are there any issues that decrease uptake or long term restaurant usage?
- What features are Restaurants looking for in FROLO and what will help them in the kitchen?