The strategy behind McDonald's Dynamic Yield announcement

From the Strategy Toolkit January 2022 edition

On the topic of underwhelming results from technology strategies, let’s take a look at this recent press release from McDonald’s, “Mastercard to Add to Services Momentum with Acquisition of Dynamic Yield, McDonald’s Cutting-Edge Personalisation Platform”.*

* https://corporate.mcdonalds.com/corpmcd/en-us/our-stories/article/press-releases.mastercard-DY.html

The choice of words says it all.  In a world in which every company is a software company, whether they know it or not, a world in which every company is urged to identify and control their unique data, a world in which every company is urged to transform digitally, it is more than a little odd for McDonald’s to sell the digital startup it had only recently acquired and hailed as a major step in its own digital transformation.  Clearly, something went wrong.

In the press release, they try to spin the transaction as optimistically as possible, reiterating how much McDonald’s will use Dynamic Yield and what else Mastercard will bring to the table.  But don’t be fooled.  It is a retreat from digital transformation.  They highlighted the original purchase price ($300M) and hid the sales price.  If Dynamic Yield was driving some value at McDonald’s, then it wouldn’t be sold like this.  McDonald’s would be pouring more investment into the asset, especially when interest rates are so low and capital is so cheap.  And they would be partnering with many many external parties like Mastercard to grow the ecosystem.  And maybe eventually spin off the baby as a distinct multi-billion dollar entity.

This case reminds us of what happened at GE, with its Predict platform.  Some companies have what it takes for digital transformation.  Some companies have the capabilities.  Some, clearly, do not.

As we’ve said before, in strategy, it pays to Know Your Capabilities.