A restaurant chain might not be the first place that comes to mind as a hub of innovative thinking—a consequence perhaps of the corporate motherships that standardize everything from the order-taker’s scripted lines to the clamshell boxes presented on abundant plastic trays.
Even though his own company’s menu includes simple staples like soups, sandwiches, and a variety of other baked goods, Panera Bread founder and CEO Ron Shaich nevertheless likes to talk at length about big ideas like innovation and elevating the customer experience.
Those ideals have inspired him to write a comprehensive new recipe for his St. Louis-based company. Because even in a business like Panera, the core competencies of which include serving up a variety of meats between two slices of bread, there's apparently still room for new insights that break from the past.
"What I began to understand is the one-size-fits-all service system wasn’t working anymore," says Shaich. "Also, that the operating procedures we were using, we’d outgrown them."
Shaich’s goal, in short, is a reinvention of the customer experience that replaces standardization with different experiences for different customer segments. It started with the memo he drafted a few years ago, sketching out improvements he eventually wanted to make that cut against the grain in an industry that can seem to fetishize efficiency.
The result is Panera 2.0. That’s the company’s label for the new model of integrated technologies and processes it’s rolling out to help differentiate customers who eat inside the chain’s cafés from those who just want to grab and go—and to start serving them in new ways.
Advancements include iPad kiosks as a new way to order in the cafes, intended to cut down on crowds in front of cashier stations. Customers also will be able to digitally place an order with their mobile device from within the café and have the meal delivered to their table, as well as be able to save order customizations and "favorites" for easier ordering next time.
Another new ordering option will let customers place orders digitally via the web or mobile devices in advance, and pick up their food at a pre-determined time without waiting in line.
The Panera 2.0 model was announced earlier in 2014, and it’s now in place at a few dozen locations. By the end of the year, about 100 cafés will have switched to the new system, with the rest of the company's locations planned to follow suit next year.
"Some people confuse this as a technology solution," Shaich told Fast Company in late July 2014, the same day Panera reported second quarter earnings. "It isn’t. It’s a solution for guest satisfaction. It’s about changing the guest experience. ‘Eat-in’ and ‘to-go’ really needed their own unique systems."
He says he arrived at that conclusion back in 2010, after stepping down as CEO and becoming Panera’s executive chairman. It was around that time he started thinking more about how he might regard Panera if he wasn’t part of the company.
He paid close attention to his own ordering and eating experiences there. He mentally poked at the organization, looking for flaws.
"I’ve long held to a view of innovation that says the role of the CEO is essentially to figure out where the world is going and to ensure his or her company is there when that world unfolds," he says. Shaich came back as Panera's CEO in 2012.
"It’s not simply about delivery or squeezing more efficiency out of the process. It’s about making sure the organization is doing more down the road. And it starts with understanding what job you’re trying to complete for what audience and what really matters to them."
Shaich relied in part on his personal experience with the brand to figure out what his audience might want.
A couple of times each week, he explains, he gives his kids a ride to school. They’re often running late, which means that on the way to the local Panera to pick up breakfast for everyone, Shaich quickly fell into a routine of calling ahead to place his order.
He’d make the call about seven or eight minutes out. The manager would read it back. Shaich would stress that he’s only a few minutes away and that his son would be dashing in with the credit card. Invariably, the whole transaction would be done in less than a minute, and everyone would be on their way.
"It’s phenomenal, right?" he recounted. "But I started to think to myself—this is great for me, the CEO, but what about the other 10 million customers a week? And I began to imagine a way we’d do to-go orders like this, using mobile, using the web, and we could have the food waiting for you."
"Then there’s be other times, I’d arrive [at Panera] at the crack of 9 a.m. I’d walk up; I’m hungry, but I’ve only allocated 30 minutes to this meeting, and I sure don’t want to spend seven minutes waiting in line. So why don’t we do something about that? You could hop onto your phone, four strokes, get your order placed. And I began to imagine a world where you could walk up to a kiosk and do the same thing."
What he envisioned, though, was more than the launch of a special payment app or some kind of dedicated online ordering solution. What he wanted to roll out was an integrated whole.
Not only would it involve multiple outlets through which orders could be placed, but it would require changes to the company’s production systems, too. Cash registers, he explains, serve as a kind of funnel that limits customer volume, and when you add what’s essentially "unlimited ordering inputs via the web," the production capabilities have to improve in tandem.
Thus began the process by which he conceived Panera 2.0. It started, he says, with deciding on core values, on the strategic vision, and building out from there.
"My sense is you have to build in your mind’s eye a rendering for this, almost like a watercolor, but in 3-D," he says. "If you can’t see it and describe it, you can’t test it. Once I’ve got that in mind, I can look at it from an audience perspective. I can look at it financially. Then you can reduce it down to a prototype. And once you’ve got it prototyped, you’re in a position to start to scale it out."
A large-scale operational change like this at a company, he says, also requires building credibility for it and selling it.
"Big companies like Panera are set up to say ‘no,’" he says. "There’s lots of disincentives to saying yes. So I wrote the vision to help sell it, then we started to prototype it. The first one took us two years and opened in August 2012 in Braintree, Massachusetts. We studied that. I actually ran it. I was there 100 hours the first week. It was our first attempt and we had to understand it and fine-tune it."
The company watched the prototype in action for several months, then repeated the process by opening a few more prototypes to confirm what had been learned from the first go-round. The company, Shaich says, then started seeing material improvements in key metrics like sales and customer satisfaction.
It proved the basic assumption Shaich started with. The expectations of his customers were changing, and it was nudging his industry someplace new.
Confronting that shift requires a brand of business leadership that’s anticipatory and nimble, he says, whether the company involved makes pricey electronics or sandwiches on artisan bread.
"The end I have in mind is doing something that matters to the person coming through that door," Shaich says. "The means to doing that was this Panera 2.0 system. If we’ve got the means right and make a better experience for them, if we solve for that end, then the by-product is they come more often and sales go up."
"There’s a great expression: Courage is acting in the face of fear," he adds. "One of the things I feel intensely about is that the greatest way we can make a difference is not in managing risk but in seeing opportunity. As a leader, the greatest value I can bring is discovering new opportunities for the company and make sure we actually get there. If we don’t, then the world will continue to change, and the company won’t keep up with it."