{"id":20640,"date":"2016-11-18T17:58:39","date_gmt":"2016-11-18T22:58:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/dominos-pizza-giant-or-tech-startup\/"},"modified":"2016-11-18T17:58:39","modified_gmt":"2016-11-18T22:58:39","slug":"dominos-pizza-giant-or-tech-startup","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/dominos-pizza-giant-or-tech-startup\/","title":{"rendered":"Domino\u2019s: Pizza Giant, or Tech Startup?"},"content":{"rendered":"

Domino\u2019s Struggles in the Late 00\u2019s<\/strong><\/p>\n

After strong performance through the turn of the century, Domino\u2019s Pizza had fallen from one of the most highly regarded pizza franchises in the US, to one of the most disliked franchises in late 2008. The company\u2019s initial stores had limited patron capacity, influencing the owners to hire laid-off factory workers to distribute their pizza\u2019s instead of selling in store, and in turn, renovated the pizza industry. [1] By the early 2000\u2019s the franchise had grown to nearly 7000 stores in the U.S., with annual earnings of $36.8M. [1]<\/p>\n

However, throughout the decade, competitive franchises such as Papa John\u2019s and Pizza Hut won the public\u2019s vote on taste, and had acquired the same delivery capabilities that gave Domino\u2019s their competitive advantage. In 2009, Brand Keys found in a U.S. pizza taste test, Domino\u2019s ranked tied for last with Chuck-E-Cheese\u2019s among public opinion. [2] By Dec. 2008, the company\u2019s stock price had fallen to $3.86\/share from $32.47\/share in Mar. 2007, a drop of 88.1%. Comparatively, Papa John\u2019s had only fallen approximately 40% during the economic recession. [3]<\/p>\n

The Domino\u2019s Resurgence via Digital<\/strong><\/p>\n

In 2010, Domino\u2019s hired CEO, J. Patrick Doyle, to focus on restoring the taste of their product, while seeking a new competitive advantage. [4] Doyle determined that by creating an online marketplace that was both user friendly, and efficient, they could significantly improve their user experience. Starting in 2010, combined with a marketing campaign that admitted the low quality of their pizzas\u2019 taste, Domino\u2019s created a transparent relationship with customers through a series of digital products.<\/p>\n

Establishing a goal of earning at least 50 percent of 2015 sales via online platforms, Dominos started with developing an online Pizza Tracker and Pizza Builder for customers. [5] The Pizza Tracker allowed customers to have immediate updates as their order was received, assembled, cooked, packaged, and delivered. Additionally, the Pizza Builder allowed customers to customize their order online. This was soon followed by Pizza Profiles, allowing returning users to have their preferences, payment information, and locations pre-entered, significantly reducing order time and improving usability. [5] By October 2011, the company had passed its 2007 stock price of $32.47\/share and had reached all time high rates. [3]<\/p>\n

Business Implications of Shifting to Online Orders<\/strong><\/p>\n

By 2015, Domino\u2019s had achieved selling more than 50% of revenues online, and in the process, recognized benefits that coincided with the growth of their e-commerce division. Domino\u2019s recognized that orders placed online, were on average, larger than orders received by over the phone sales. Yum!, owners of Pizza Hut, also identified the same sentiment, claiming 30% larger sales online than instore. [6] Additionally, studies showed that customers also preferred the convenience of digital ordering. [7] Via digital sales, Domino\u2019s had created value for customers by again focusing on speed of delivery, and usability, but by using a more current methodology. In the process, they also garnered more recurring customers, that spent more on their products.<\/p>\n

Operational Implications of Shifting to Online Orders<\/strong><\/p>\n

While supply costs and capex associated with stores had not faced stark increases over the past decade, Domino\u2019s recognized an impending challenge of increasing minimum wage. [6] Recently, legislation has passed increasing both the cost per hour that the company pays its employees, and required employee benefits. Digital orders required fewer employees to manage phone calls and customer interfaces, creating significant labor savings. Additionally, the company\u2019s tracking apps dispersed more information at the end of the supply chain, providing detailed delivery information, reducing complaints. Finally, the platforms gathered more detailed information regarding user trends, better allowing them to predict demand.<\/p>\n

Challenges Moving Forward<\/strong><\/p>\n

Competitors were quick to follow Domino\u2019s online model, with Papa John\u2019s recognized as the leader in digital orders at 55% of its sales coming from online. [6] Additionally, the market is not promising, with only 0.77% of e-commerce coming from Accommodation and Food Services, and with average pizza store sales among companies down $514,679 from 2014 to 2015. [8, 9] With their competitive advantage matched again, Domino\u2019s must continue to innovate, and evolve their operations. Signs of this path include the launch of their own version of Siri (DOM), Apple Watch apps, and Twitter orders, along with Domino\u2019s Robotic Unit (DRU). [10] DRU includes a drone delivery service that was launched in New Zeeland in November 2016, and investigations into autonomous vehicles.<\/p>\n

Moving forward, Domino\u2019s should double down on their DRU division. This may be the only identifiable differentiating value proposition for both customers, and the company. To do so, requires significant investments in capital (robotics, vehicles, new centralized production centers), and in R&D (GPS Map Development, safety conscious robotics, and UI development). The best way for Domino\u2019s to accomplish this, may be to target unsaturated markets such as in China via traditional routes, and using these increases in revenue to pursue future developments.<\/p>\n

Word Count: 779 (excluding citations and titles)<\/p>\n

[1] Domino\u2019s, Inc. History, http:\/\/www.fundinguniverse.com\/company-histories\/domino-s-inc-history\/<\/a>, Accessed November 2016.<\/p>\n

[2] Baertlein, Lisa. December 16, 2009. Domino\u2019s Revamps Pizza Recipe Amid Competition, http:\/\/www.reuters.com\/article\/dominos-idUSN165885620091216<\/a>, Accessed November 2016.<\/p>\n

[3] Yahoo Finance. Domino\u2019s Pizza, Inc. (DPZ), https:\/\/finance.yahoo.com\/quote\/DPZ?p=DPZ<\/a>, Accessed November 2016.<\/p>\n

[4] Le, Parshut, Domino\u2019s The Turnaround, http:\/\/www.econ.ucla.edu\/sboard\/teaching\/tech\/dominos.pdf<\/a>, Accessed November 2016.<\/p>\n

[5] Miller, Michael. March 29, 2016. Why Domino\u2019s Is Now a Tech Company That Sells Pizza, http:\/\/forwardthinking.pcmag.com\/none\/343258-why-domino-s-is-now-a-tech-company-that-sells-pizza<\/a>, Accessed November 2016.<\/p>\n

[6] Levy, Adam. May 21, 2016. Why Papa John\u2019s and Domino\u2019s Are All About Digital Pizza Ordering, http:\/\/www.nasdaq.com\/article\/why-papa-johns-and-dominos-are-all-about-digital-pizza-ordering-cm624550<\/a>, Accessed November 2016.<\/p>\n

[7] Pizza Industry Analysis 2016 \u2013 Cost & Trends. https:\/\/www.franchisehelp.com\/industry-reports\/pizza-industry-report\/<\/a>, Accessed November 2016.<\/p>\n

[8] US Census, E-Stats 2014: Measuring the Electronic Economy. June 7, 2016. http:\/\/www.census.gov\/content\/dam\/Census\/library\/publications\/2016\/econ\/e14-estats.pdf<\/a>, Accessed November 2016.<\/p>\n

[9] Hynum, Rick, The 2016 Pizza Power Report: A State-of-the-Industry Analysis, http:\/\/www.pmq.com\/December-2015\/The-2016-Pizza-Power-Report-A-state-of-the-industry-analysis\/<\/a>, Accessed November 2016.<\/p>\n

[10] Domino\u2019s Website, Technology & Innovation, https:\/\/www.dominos.com.au\/inside-dominos\/technology<\/a>, Accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

How Domino\u2019s Pizza leveraged technological innovation to re-establish itself as one of the top two pizza distributors in the Unites States, and what it means for their future. <\/p>\n","protected":false},"author":2580,"featured_media":20641,"comment_status":"open","ping_status":"closed","template":"","categories":[2618,852,49,146,818],"class_list":["post-20640","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-digital-age","category-dominos","category-e-commerce","category-online","category-pizza"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"\nDomino\u2019s: Pizza Giant, or Tech Startup? - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/dominos-pizza-giant-or-tech-startup\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Domino\u2019s: Pizza Giant, or Tech Startup? 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