Hi, welcome to this special session of the platform thinking book. Today we've got a guest with us, we've got Matteo Sarzana, general manager of Deliveroo, Italy. Welcome Matteo. Thank you for having me today. So, I would like to start with a very simple question: who are you? Well, hi, my name is Matteo, I am the one who actually started delivering Italy back in 2015. We have just celebrated our sixth birthday. Before that, my life was completely different: I was working in an advertising agency at first for the first five years of my career, then I got the opportunity of starting a digital agency here in Italy back in 2008. The name was BML and I actually have been the general manager for that agency until 2014. After that, I joined an italian startup named Zuppa. I've been there for a year and then I got this exciting opportunity having met with a couple of people who introduced me to Deliveroo. I knew nothing about delivery at that time. I didn't know what they were doing, I wouldn't have bet a single euro that this company would have had this great success but eventually I decided to join. I decided it was the right opportunity for me and I signed my contract in July 2015. We got to London in September 1st. We met with the team and a month and a half later we were delivering orders in Milan. And can you tell us more about the history of Deliveroo, so how it all started? Well, I wasn't the one who started it, our founder William Shoe started it. William has actually a great story, because he was born in the US but his parents are Taiwanese, he actually had a great career in a completely different field, he was vice president for an investment bank in New York. Eventually was promoted and he joined the branch in London, he got to London and all of a sudden he discovered that actually none of the restaurants that he loved were delivering food, which was a huge problem for him because he was working like his ass off literally. He was working more than 100 hours per week and he started wondering why restaurants in London were not delivering food. I mean, it was used to New York where everything is open 24/7, you can get whatever you want anytime and he started to look into this industry and he discovered a very simple truth and the truth was that restaurants are very good at doing food. Wow, what a discovery, but then they are not at all good at doing logistics, customer service and marketing so he was there in his office and he was willing to get full circle. Well if no one is doing that, I'm gonna do that. So he dropped his job... again, he was vice president of his investment so he was not doing any internship. He started an MBA at work and a year after, with his old friend from Connecticut, he actually started their plan and the idea was very simple. He said: "Well, if no one is delivering food from those restaurants, I'm gonna build the platform who's gonna deliver food from them". The idea was extremely simple but groundbreaking at that time; the best part of it though is that the first restaurant to actually believe in in the idea was an Italian restaurant. It was in Chelsea and the first rider of course was we, so he started looking at the business model. He understood three things: the first one was that it was actually generating a lot of additional revenues for restaurant because the business model is based on the fact that restaurants only pay Deliveroo when it gets in order and the money that the restaurant pays a commission based on the amount of money that the customer is ordering. The second one was that there are a lot of people who are looking for a very free way of working which are the riders which can basically join the platform. Anytime they can reject orders, they can start and finish any time of the day they want and the third one was that there were actually millions of people willing to order food and the main difference, compared to the previous platforms that were operating in the area, was that the restaurants that we are delivering food from are very good restaurants and more than that, those are restaurants that people know and love already, so the moment we started putting like the big brands in the platform like Pizza Express, I'm talking about Nando's, Chipotle... people started over because they trusted the fact that if those restaurants were willing to deliver food through the platform clients could actually trust the platform themselves. The business started at the end of 2012. In London 2013, again in London, they opened another city, I guess it was Brighton. Then they started getting very good traction and attention from VC fans. At the beginning everything was started with money coming from family and fools and it depends on the way you look at it. 2015 has been the year in which Deliveroo really stepped up the game: we opened 12 countries at that time and the first big VC funds like Excel started investing money in Deliveroo. We started 25 million and 75 and that's when I joined, so the idea, I mean, we've all been brought to the company to basically start the company in the other countries and started in Milan, in Italy. We are now in more than 600 cities, we cover 50 percent of the population. If I look at the day we started and the conversation that I had with Will... I mean the interview I had with Will, when I decided to join he asked me in how many cities we want to be... maybe 6,7... but then we started seeing how much people love food in Italy and how much people were trusting the platform to deliver food and deliver if not exactly the same experience that you have in a restaurant at least the same food experience that you can accomplish. You know, correct me if I'm wrong, but I think that the situation of food and restaurants in italy and in England can be very different, so when you say that these famous, you know, restaurant chains actually helped you in building a trust into the platform: do you expect to have these chains so popular as they are in England or it is more a local kind of food and restaurants? So, you're right, I mean, the restaurant industry is completely different in the UK, I would say more than 80 percent of the restaurants that you have on the platform are part of the bigger chain. In Italy it is exactly the opposite but the dynamic is actually exactly the same because our business is not only local, not only hyper local, it's something even more than accurate, so if you look at the business from a consumer perspective what you are interested in is that restaurant in your street that you know and you don't care whether that restaurant is part of the chain or not, you want to have that restaurant on your platform. Consider that the average order distance between the customer and the restaurant is less than one kilometer, so if you look at it from that perspective what really matters is that you have the restaurants that people love. In Italy most of them are the local gems, in the UK they may be chains but then, if you don't have either the local gems or the big brand name, the business is not gonna work, so you have to have that combination. In Italy what is challenging is that in order to build the right supply with the right number of restaurants on the platform, it takes more time because when you open a new city you don't have all of a sudden like the 25 brand names that you find in every city, you may have like five or six but then you have to build all the others by going there, talking to people, talking to the restaurant, talking to the consumers, understand which are the relevant restaurants in that area that you are opening that are gonna make the platform interesting for for consumers... so it's different from an overall food and beverage industry but the customer and consumer dynamics are exactly the same. So that's interesting and, you know, somehow you brought a big brand in Italy so it's you kind of built the platform here in Italy. Can you please go back to those days and tell us how was it? So, I was to build a platform in a different country in a moment in which platforms were everywhere but not as we know them today. It was quite challenging. I will always remember the first time I spoke about objectives and KPI for the quarters, so we defined what the objectives were and then I asked: "So, great, we need to get there but how much money are we going to be able to spend in order to get there?" And the answer was: "So, there's no budget", which doesn't mean that you have no money, it means that if you reach your objectives and you spend too much, you're gonna be fired; if you don't reach your objective then you spend like a small amount of money, you're gonna be fired, you're only gonna keep your job if you reach the objective by spending the right amount. How do we get there? Luckily we've always looked at Deliveroo as a global brand, but a local business. Going back to the question about the restaurants that's true also for a brand which was not only launched only one city but at the beginning we were only operating in a small area segment so we were to be extremely local in delivering the message. The good news at the time was that in Milan there were at least 15 competitors doing or claiming they were doing exactly the same or at least they were delivering food, so when we launched a business we said: well we need to make extremely clear what our point of difference is going to be and our launch campaign was super simple it was knock-knock like nothing indoors, the restaurant still have delivered in 32 minutes which at that time was a groundbreaking message because no one was actually promising to customers that the food would have got to the door in an exact amount of time that was one; two we had the ability to track the rider, which was a first; and third for the industry and third, we had like the big brand names that we were starting with. So the combination of these three factors created a unique selling proposition for consumers and I will always remember that the very first thousand feedbacks that we got from customers were: I've never ordered, I tried you because I wanted to blame you that you were doing advertising but actually you delivered in less than 32 minutes, which was key at that time, so service six years ago was key, things have changed over time of course, because many more other competitors entered the market all claiming or promising exactly the same delivery time, the same restaurants, so that's where we moved from a USP based on actual facts to a much more brand love proposition, that's why we started sponsoring the Italian football team that was the best bet ever. We started working together with movie production houses. There is a movie with Frank Matano which is gonna be in theaters in a couple of weeks and the story is about a deliver rider, then artists like pop artists started using the liberal brand name in their songs, so we are still of course trying to build the top brand, which means to me the deliver has to be a brand people use when they think and they talk about food delivery because it's so common and so familiar and so many people use it that it would make no sense to use another verb to talk about food delivery. Still we are far away from that, I mean, food delivery has been in the spotlight for a very long time and everyone thinks that everyone uses food delivery but penetration across Italy is still extremely low, what we know is that the biggest challenge that we have to go against is to make people try the service once they do that. Most of the time they are hooked to the service, but there is still a barrier about trusting an online platform, no matter if it's a liberal or anyone else trusting someone as delivering food and also, let's say, an ethical bias that we Italians have, which is about not cooking food for the people that you love whilst if you think about it from a different perspective, if you don't have to cook because none of us is going to be a michelin star chef anytime in the future, maybe that's time that you can actually dedicate to the people that you love in a much better way than by cooking food becoming crazy because you forgot that. I think that you need to cook the grinder recipe and those are the three main elements. So you're very clear in telling us what is the value proposition for the final customer but I was wondering, in order to have this business running, you also need to have restaurants on the other side and I can imagine that today it must be quite easy to convince a restaurant to jump on a platform but I'm curious, so what did you do at the beginning? Did you promise some things or was any kind of particular service you were providing? No well, at the beginning it was actually much harder because even though we were showing restaurants by using like the business cases from the UK, or from France, which had already launched, we were actually demonstrating that we are bringing additional revenues and so actually more magnitude restaurants. Restaurants were skeptical that we would have been able to actually deliver food with the same quality that people were enjoying inside, so it took some time to start with the most important brands. But as soon as those brands started, they have not been able to drive more customers to the platform but also more restaurants because what started was, well, if that restaurant I believe is serving good food is actually undelivered, then I may join as well, but that's true, you know, what it's true also for riders. When we talk about customers in delivery, we consider three different customers, so the people are actually ordering food, the restaurants and the riders are themselves, so what we offer them is actually very good pay for an unskilled job with a lot of freedom but at a certain time with several securities that we give them, like insurance, additional benefits, bonuses and stuff like that, so we do really look at this as a platform which is a three-sided marketplace, where every single customer has to be happy, so for customers enjoying food for restaurants is additional revenues and for riders is a well-paid job with enough freedom, but at the same time with guarantees that they're safe on the road. We met in those years, it was 2015 and you were actually one of the first people we interviewed for the research we were doing on platforms back then, and I do remember coming there in your offices, feeling the thrill of launching a new city. I'm not even sure in which office you have been because we have been in six so far. I think it was the second, if I remember correctly. You already moved, but you were moving somewhere else and I do remember you were launching a new city, each city was like a huge milestone. You said you were thinking about six. You are in 600 or something like that, can you tell us something more about those days, so what it was to launch a new city, what it meant? How were you managing that kind of process? So, you know, what to be very honest it was very much test and learn because if you were to start a delivery company today it would be plenty of business cases, you could speak with a lot of people telling about the experience. Back six years ago and, to be extremely honest, that's also the reason why I've been hired without having like logistic experience or supply chain experienc, no one knew how this business should have been run. To give an example, when we opened the third city we started with Milan, we opened Rome and then we were looking at the third city, to say: what are we going to open? Is it going to be Tourin, Florence, Naples, Bologna? We decided to actually open Piacenza. It makes no sense if you look at it, but it was actually one of the best decisions we have ever taken, because my idea back then was: well, everyone is going to focus on these six or nine or 12 big cities in italy, but then if we really want to expand throughout the country we need to prove that our model works in a small city as well, then say it's not the smallest in which we played, we are now in much much smaller cities but we had to prove the business work and that's how we learned the differences between operating in Piacenza compared to Milan, compared to Rome, and that's how we have built a model which is now able to open anything between 10 and 30 new cities every month. The good news was that this test and learn process was a daily one, because using all the data that we are collecting, looking at all the metrics that are actually metrics that are built every day, every second, we could actually see and understand what was wrong. Given another example, how far away should the restaurant deliver its food? I mean, of course if you large the eye, you're gonna be able to serve more people and possibly more orders but then which is the trade of between serving more faraway people who are gonna more likely get their food cold. So you have to have more refunds. Is that better or you should have more strict eye, serve less people delivering, less orders, give the restaurant less revenues but understand you're losing less money in order to compensate people for the better experience? So all these tradeoffs have been used, I mean, we change them not daily but every couple of weeks, we try and find the best solution for using all the levers that we have locally in order to deliver the best experience, but I mean, you ask about the thrill or the excitement. It's really to see that everything you change really do have an effect on each of the customers that we serve and you see that immediately you don't have to wait, it's not like spending three months creating a huge brand campaign and then you see the result and you have to wait another six months to track the results... it's like we have launched a new restaurant last week, we have seen the uplifting volumes, new customers, a change in average order value, changing frequency and that happens every single day, which is also stressing from another point of view, but that's a separate story. But still staying in those early days, you kind of have someone for the single city, how were you able to bring on board restaurants there? How were things moving at the very beginning? So, we loved to call each other the 300s of delivery, like the movie, because we were basically moving almost the full team in the new cities that we were going to launch, operating from there and then launching the city and going back to Milan. Actually in each of the first three cities, so Milan, Rome and Piacenza, we had an actual office in each of those cities, then as soon as we started looking at the business metrics and business costs of running like that we started modeling a completely remote way of launching cities, which doesn't only involve signing restaurants, it's also hiring the riders, doing the marketing campaigns in order to start the city, and now we operate in a full remote way which was super useful during the pandemic because we could actually launch new cities without having people going anywhere. So you said something like 600s and when I was talking with you in those days I was like: come on, I live outside Milan, I will never be so lucky to have the chance to use Deliveroo, if I don't, you know, move in the city. Well, now I can actually do it even though I'm not living in a city. I'm actually living in a small town in the neighborhood of the city and if I understood correctly, but correct me if I'm wrong, that's possible thanks to Deliveroo marketplace, so this evolution that you brought to the model. How is it now? How is it working? What is launching a new city today? So, it's both, I mean to be clear we have two models: one is Deliveroo core, which is Deliveroo riders delivering food from restaurants, and then marketplaces, Deliveroo enabling customers to order from restaurants who have their own delivery. When we started expanding, we did the market research and we saw that in those small cities, in those remote areas, most of the restaurants already had their own delivery service and so we developed marketplace with a unique mission, which is: if you have your own fleet, you can still use it, we are going to drive orders to your restaurant but then if, at any point, you are running out of workforce in order to deliver, we can tap in with our own resources. Nonetheless, I mean, usually the average quality of those restaurants it's average and so in each city that we have launched we may start with marketplace but then we do look for the local gems and we try to find the best restaurants and have our own delivery because the experience is so much better, because you cannot track someone else rider, you cannot have the right inventory management live, so it's a completely different experience. So our model still relies a lot more on the experience that we're able to deliver with the core service. Okay, thank you, so we are reaching the very end of this conversation together and I would have a final question for you which is: you know this course is titled platform thinking, we are trying to see how platforms are reshaping lives of people, how are reshaping businesses and this is happening at a quite fast pace, changing from country to country, from industry to industry and changing from year to year quite importantly. It was 2015, it is 2021. It's completely different. What do you see in the future of platforms, not for delivery even broader, wherever you wish. I think platforms will play a much bigger role in the future. The question is a different one, which is how can platforms stay relevant for all the customers they serve, because the more we evolve, the more technology evolves, the easier it's going to be for a platform to be copied as the need for the platforms to keep innovating themselves and keep finding new ways to become relevant for the consumers. If you look at what we have done, we have not changed the fundamentals of our business model but we have changed what we offer to each of the customers: for restaurants, for example, we started a while ago offering data sharing and data consultancy because we noticed that rise, even though restaurants could already access data, they were not able to actually process them and transform these into new business metrics. For riders we have changed the way we work with them, as soon as we started understanding that the most important value for them was the freedom to work when they want. Hence, the idea of finding a way to pay for their services in a different way. For consumers we started with only the big brand names, only these super cool restaurants. Now you can basically find every restaurant that you want, because we understood that customers are the ultimate decision makers, so the guy orders. Let me give you an example in Milan, from Nobu and spends a hundred bucks for for sushi. Is the same guy who may order a kebab at 2 a.m saturday night because he's craving that kind of food. So, to sum up my answer to your question is: platforms are still a big part of our lives, they will be even bigger in the future but they have to find meaningful ways to stay in touch with their customers and the important part of that is that customer is not only the guy ordering food but it's the whole ecosystem which makes the platform survive because without restaurant, as you have said, and without riders, we would not be able to deliver food. Wow, thank you very much, thank you for staying here with us and for sharing your experience in Deliveroo, thank you Matteo.
