Survival of the Classical Company in Digital Era

Traditional businesses in various industries are now facing disruption from new business models.  These players are now struggling to adjust to the changing business landscape.  Over the past 10 years, many organizations implemented digital transformation. Some did succeed while some did not so.  One explicit success case of a traditional firm that invested in new technologies by adhering to its core businesses and emerged as leader in its field is Domino’s Pizza.

On the verge of its 60^th anniversary, the company kicked off as a small pizza shop in Michigan, U.S.A. Through franchising, Domino’s Pizza currently has 17,100 outlets in 90 countries (including Thailand, which is considered a relatively small market).  Since inception, Domino’s Pizza positioned itself as pizza shop that emphasized on delivery services in contrast with Pizza Hut, its sizable peer in the States that decorated its outlets for dine-in customers.  Therefore, Domino’s commanded relatively small spaces comprising kitchen, counter for food ordering, and seats in the waiting area.  This model required rather light investment budget, accommodated sale of franchise and, thus, allowed the company to grow rapidly. 

From the aforementioned business model, Domino’s was committed to process improvement to ensure fast delivery of its foods.  It once launched 30-minute guarantee campaign that excited and impressed customers for the speed of its services.  The campaign was called off in early 1990s as mounting pressure on delivery staffs led to frequent road accidents.  However, the company still committed to make customers think of pizza as convenient, fast, and inexpensive foods.  Therefore, it continued to explore new ways to improve its services. 

The company first launched its website in 1996 and continued to initiate ways to improve its services.  In 1998, it introduced heatwave, a hot bag that keeps pizza oven-hot to the customer's door.  Domino’s opened online ordering services through its website in 2007 and in that same year launched mobile ordering service, the first-ever food ordering transactions without talking to another person.  The company also deployed new technologies to develop other key services.  One milestone innovation is The Pizza Tracker, the first time in food industry that customers can track their orders throughout the whole process from ordering to arrival at their door steps.  Since the launch in 2008, Domino’s has clearly entered the digital era, laid solid operation system that led to satisfactory performances, and paved ways for continuous expansion both at home and abroad.

Domino’s Pizza, like many other businesses, also faced challenges that tested its strength.  With strong commitment to fast delivery, Domino’s appeared to have lost vision that customers required more than just speed but also tasty pizza.  To speed up delivery time, the company used frozen, canned, or pre-cooked ingredients to save cost and time for preparation.  In 2008, the company was widely criticized, both online and offline, for the lousy taste of its pizza. Such criticism dragged its shares to the bottom that year at below US$3. The company was not at ease with the situation and initiated a revival plan.  It set key targets, emphasizing on technological investment and create flows of innovations to capture spot in customers’ mind.  As a result, the company managed to grow continuously while Domino’s stocks generated hefty return at 100 folds from 2008 low to around US$290 in late 2019.  The significant turnaround derived from:

§   Listening to customers’ voices: When customers complained, the company listened and admitted to its flaws through a campaign called “Oh yes, we did.” It initiated process to test the taste of its pizza and re-designed every step from the preparation of pizza dough, sauces, cheeses, and all seasonings to create new pizza menu in 2010, the year Patrick Doyle was appointed new CEO. He personally appeared in the “Oh yes, we did” campaign, admitting that the taste of Domino’s pizza was not good enough and the company was willing to listen to customers’ voice while having completed a process to improve the taste of its pizza.  Moreover, Domino’s also used digital channels to communicate with customers.  Consequently, Domino’s customer base has expanded to cover more and more of those appreciating pizza taste rather than just the delivery speed. 

§   Positioning the future of the company in the digital era: After successfully convincing customers about the taste of its pizza, Domino’s continued to enhance its efficiency.  It did not position itself as mere Pizza Company but as Pizza Delivery Company that still emphasized on fast and convenient delivery. In food business world with persistent new comers, Domino’s cannot afford to be followers in the field. Under Patrick Doyle’s lead, the company valued and developed innovations to consistently improve the efficiency of its ordering and delivery services.  He even coined that Domino’s Pizza is “a tech company that happens to sell pizza.”  Therefore, Doyle added tech and IT executives to drive such vision.  Kelly Garcia, SVP of e-Commerce Development and Emerging Technologies at the time, told Forbes in an interview that when he first joined Domino’s in 2012 and was required to present plan to turn it into global e-commerce company, his first task was to convince the Board to approve massive IT investment project. Garcia depicted the future for the Board at a meeting and convinced them that such investment will be the way toward sustainable growth.  The next key step was to build corporate culture to accommodate the organization toward such direction.  He started by using the corporate vision as selling points to recruit new employees.  At present, the company has about 1,000 employees at its headquarters, more than half of which working on the technological front.

§   Continuous development and implementation: As Domino’s shifted full gear toward digital transformation, it comprehended with the market and discovered increasing popularity of mobile phone usage.  Therefore, it focused on developing structures and platform to accommodate mobile phone system.  The completion of such platform instantly changed business model of Domino’s as sales via mobile phone channels accounted for half of sales via digital channels, which at the time responsible for more than half of total sales.  Besides, the company also laid strategies to link all available ordering channels for the convenience of customers.  It became the origin of ordering innovation called Domino’s AnyWare (Figure 1) in 2015 that allowed customers to place order via 15 digital channels such as Apple TV, Google Home, Amazon Echo, Ford Sync, SMS, smartwatch, or other platforms like Twitter, Slack, pizza emoji, and Facebook messenger etc.

In addition, the company has in 2014 employed Dom voice ordering technology, similar to Apple’s Siri, to assist customers in food ordering.

In order to use innovation to improve delivery service, the company explored the usage of DXP vehicle with built-in oven in 2015, autonomous vehicle to deliver pizza in certain cities in the U.S. in 2016, and trial of pizza delivery service by drone just like Amazon. 

Figure 1: Domino’s AnyWare digital food ordering platform

The development through digital technology did not only enhance operation efficiency but customers’ information obtained via digital sales channels also helped the company improve its services.  For example, Pizza profile created by customers minimized clicking steps in making repeated orders.  All the developments made over time enhanced its capability to tackle any situation, even with the Covid-19 pandemic that forced global citizens to change their behaviors in daily lives.  Performance of Domino’s was not severely affected while its sales through digital channels even increased.  This is a fine lesson for sizable corporation in deploying digital technology for adjustments of business model and organization, improvement of operational efficiency, and enhancement of customers’ satisfaction. However, these can only happen when organization leaders and management recognize the significance and drive for the culture of persistent business innovations.

Ruangfon Jaismut
Curriculum and Facilitators
Thai Institute of Directors (IOD)