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Fastcoworks Created for and commissioned by Workday
Fastcoworks Created for and commissioned by Workday

3 minute read

Fast Forward Workday

How Panera Bread Baked Digital Innovation into its Growth Strategy

Q&A with Blaine Hurst, Chief Transformation and Growth Officer, Panera Bread

How Panera Bread Baked Digital Innovation into its Growth Strategy

Not so long ago, Panera Bread was anything but a digital trailblazer. Founded as St. Louis Bread in the 1980s, the company was managing 2,000 bakery-cafes throughout North America without a significant investment in digital growth. That all changed in 2014 with the launch of Panera 2.0.

The program, which incorporates a series of integrated technologies, digitally mobilizes everything from ordering and paying at in-store kiosks (much faster service) to operations (employee training and protocols to ensure increased speed doesn’t decrease accuracy of order fulfillment). Through the Panera app, a customer can now even place an order up to five days in advance and recall their favorite meals and drinks from previous orders.

Panera 2.0 has been a rapid success. By Q2 2015, same-store sales grew 2.4% in the bakery-cafes that had adopted the technology compared to 0.1% the year before. Transaction growth—a measure of how many people visited a Panera year-over-year—increased 1.1%, an impressive rise by industry standards. By Q1 2016, earnings per share were up 21%.

For Blaine Hurst, Panera’s chief transformation and growth officer, the results are an appetizing validation of the tech-centered strategy that he helped craft, initially to make up for lost time.

How did Panera 2.0 originate?

If you look at where Panera was with respect to technology in 2011, when "2.0" was conceived, we were way behind. We had not made a significant investment in technology for many, many years. Frankly, we had only done enough to keep the restaurants running. Clearly, the world was rapidly changing in terms of how consumers and entire industries were adopting mobile technology. That wasn’t yet widespread in our industry, but we knew it was only a matter of time. We knew we had a chance to lead.

How did customers respond to the new ordering tools?

Technology rapidly transformed our business. Across our digital platforms, we now process between 130,000 and 150,000 customer transactions every day—which far exceeds our early expectations. We’ve converted roughly 500 of our cafes to the 2.0 model over the past 18 months, and all of the new stores we open this year will be 2.0 versions. This is how we’re going to be doing business from now on.

What's the key metric for assessing the program’s impact?

We measure 2.0's success, first and foremost, in terms of whether or not it’s growing sales, and the answer to that is definitely yes. In Panera 2.0 cafes, sales are growing faster than our other cafes by multiple percentage points, and we foresee $1 billion in digital sales by 2017.

See also: Blaine Hurst On Navigating A Digital Transformation

What’s been the most surprising ripple effect of the company’s focus on tech?

The most significant positive change that we didn’t foresee was the material increase in the frequency of return guests to our 2.0 cafes. Panera has one of the largest loyalty programs in the restaurant industry, with more than 17 million active members and more than 11 million customers we are able to reach through email. We are able to view data on how often members visit our cafes. When we saw the increase in frequency of visits once loyalty members became rapid-pickup customers or kiosk customers, it was a striking, and unexpected, result.

We also receive about 200,000 email survey responses each month from our loyalty customers, which provides phenomenal insight into what's working, and what's not. That’s an enormous amount of data with invaluable perspectives on our innovations to date, and a key source of insight.

What’s the role of data in Panera’s growth strategy going forward?

I’m old school in an entrepreneurial, gut-feel, talk-to-customers kind of way. The challenge with that model is as you get to scale, there’s no way to be omniscient. With our 2.0 data, we can very quickly assess what’s working and what’s not working, in any region of the country or customer segment. But even with this ability to get quick reads and to rapidly adjust, we’re only scratching the surface of the sort of radically transformed value we can deliver to customers.

I don’t believe data can replace the entrepreneurial core of what we do. Panera 2.0 isn’t all about the technology. In the end, the only thing that really matters is the guest’s experience. Panera must be a great place to eat. When you walk down the street holding a Panera cup, how do you feel? That’s the real question for us, and no matter how much or how fast we grow, we can’t ever lose sight of that.

This article was created and commissioned by Workday, and the views expressed are their own.