性视界

Peering out of the window of his uber at 1:30 AM EST, he pondered what his next move would be. The thought of pizza suddenly rushed into his mind causing him to grab for his phone. Approximately 90 seconds later, his order was聽placed: two golden medium pies of pizza and a side of stuffed cheesy bread. Suddenly, he found himself in an unexpected race against time: the Domino鈥檚 Tracker^庐 tool estimated exactly where along the production process his order stood. Everything seemed so transparent and the order was being processed lighting聽fast. Mr. Randomcaseprotagonist found himself pondering, 鈥淲ill I get home in time to enjoy my pizza 鈥� pizza that was cooked by Ecem, my favorite Domino’s pizza chef?鈥�

Business Model

Domino鈥檚 ability to create value for its customers, capture value for its shareholders, and share value with its ecosystem centers around its ability to deliver customers delicious pizza in a convenient and consistent way. Since its founding in 1960, Domino鈥檚 has maintained pizza delivery as core to executing against this business model and has maintained its leadership position in the space by continuously investing in, adapting, and improving it鈥檚 operating model. [1]

However, in the “pizza”聽business, there are limitations to the operational levers that can be pulled in order to maintain a competitive edge. For example, the聽traditional benefit of sourcing leverage that operational scale provides has a limited benefit for Domino’s in that a 20% saving in raw material purchase price only reduces the price of pizza by ~$1-$2/pie, which is聽not nearly enough to attract/retain聽most customers. In a higher price per purchase industry such as automobiles, however,聽a 20% difference in the price dramatically alter the purchasing decision process.

Recognizing this, Domino鈥檚 has invested significant time, effort, and capital towards continously improving its operating聽model to build a differentiated customer experience that serves as a聽鈥渕oat鈥� against competition.

Operating Model

Domino鈥檚 is the leading pizza delivery company in the world, operating approximately 12,000 stores in 80 countries around the world, delivering more than 1,000,000 pizzas a day. [1] One would not think of Domino鈥檚 as a 鈥渢ech鈥� company, but it actually invests more in its聽Information Technology department than any other department in the company. This is because Domino鈥檚 operating model heavily relies on the聽use of digital technology to maintain its聽edge in pizza delivery. In fact, today, Domino鈥檚 is consistently one of the top five companies in terms of online transactions (behind聽the likes of Amazon and Apple), about 50% of Domino’s sales in the U.S. comes through its聽digital ordering channels, and 95% are done through their apps. [2]

Technological Innovations in Delivery:聽In recent years, Domino鈥檚 has made major advancements in online and mobile pizza ordering, allowing it to competitively differentiate itself from traditional pizza rivals such as Papa John鈥檚 and Pizza hut as well as smaller mom and pop shops. One of the most visible consumer facing innovations is the Domino鈥檚 Tracker^庐听(referenced above), which is a visual progress bar that provides customers聽with real-time updates on their delivery as it makes its way through Domino鈥檚 supply chain.

 

 

 

 

 

While not particularly complex on the surface, this innovation was tremendously expensive and complex for Domino鈥檚 to implement because it required the company to digitally link each step of their production and delivery process in a way that it could be visually聽displayed to customers on a real-time basis. However, the value this technological capability provides Domino鈥檚 and its customers is equally significant. From the customer鈥檚 perspective, the transparency this tracker created eliminated many of the 鈥渦nknowns鈥� as it relates to pizza delivery (no more guessing and/or calling the store multiple times to ask where the pizza is!), and as a result, 聽significantly improved levels of customer satisfaction. For Domino鈥檚, tremendous value has been created because the improved customer satisfaction leads to a higher likelihood of a repeat and/or word of mouth purchase.

Intentional Innovation Process: This is just聽one example of an innovation Domino鈥檚 has implemented in it鈥檚 operating model to maintain its edge in executing its business model. In order to generate such innovations, Domino鈥檚 utilizes the 鈥渇ast-fail鈥� managerial approach that is most famously applied in Silicon Valley firms (such as Facebook) to ensure they are providing innovative products for ever changing consumer demands. This approach/mantra is an organizational ethos that stems from a debacle/recovery it experienced when it publicly acknowledged聽in the late 2000’s聽that its pizza tasted terribly and that it was doing everything it could to listen to customers and聽fix聽its pizza. The organizational learning from this experience was that failing often leads to product/process improvements (see results below) and, therefore, that risks should be embraced. [3]

This approach聽led the company to embrace innovations such as the Domino鈥檚 Tracker, investments in iOS and Android Apps, partnerships with Ford (to order pizza directly from the in-car control panel), and Siri/voice based ordering. By continuously investing in operating model innovations, Domino鈥檚 is doing its best to ensure that they maintain a leadership position in delivering customers superior total value which will result in continued shareholder value creation.

Risks: By leveraging technology and data, Domino鈥檚 is able to remove much of the friction that previously existed in the pizza delivery process. However, as they continue to push further into the digital technology/connectivity, Domino’s management team聽remains conscious of cyber security risks聽and how sensitive their聽good/service (highly discretionary) is聽to a change in perception about personal information security. [4]

 

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