Domino's, A Pizza or Delivery Company?

Automation Will Give Businesses a Chance to Compete on New Dimensions

Way back in the day when I was an enterprising young Domino's Pizza manager, I learned all the ins and outs of running a small business. Like most restaurant P&L's, the controllable expenses like labor and cost of goods (food) were the biggest expenses and the difference between profit and loss. For my store, labor and delivery costs were over 30% of our revenue which was higher than our food cost. So, a simple strategic question is what business is Domino's really in, food or logistics? Its a fundamental business question that many companies are going to need to ask more frequently as the pace of consumer behavior change moves to Ludicrous speed.

Like the oft quoted boiling frog analogy (myth?, I personally have always wondered who the heck tested this theory and why they didn't go to jail for animal cruelty), many businesses are in that slowly warming pot of water and might be long dead before they realize the magnitude of the threat. When I was working for Walmart's marketing team in 2007, many people both in and out of the company would say that Walmart's shoppers would be the be among the last to get a smartphone. Even if this was correct, which is wasn't, lower income shoppers over-indexed on smartphone adoption, why would you wait? People love new technology, why not embrace and own the inevitable instead of discounting the impacts and threats. My favorite retail quote is that Ecommerce is STILL less than 10% of overall volume. Again, so what?

The shift from gathering to receiving products is well underway and a host of new technology is going to hasten the expansion of options and expectation of shoppers.

Companies like Dominos (and all sectors) have some interesting decisions to make going forward. Is the delivery itself a critical part of the value chain or is making great food and aligning technology for customer flexibility and simplicity a better option? It's likely that a delivery specialist or even a outside category disruptor like Tesla could be much more efficient at pizza delivery, leaving Domino's to focus on making really great pizza and innovating relationship building with its shoppers. Domino's has invested hard in technology and probably has one of the best positioned home delivery pizza chains with respect to its use of use of technology. It did not wait around for its customers to catch up or for technology to 'mature' (whatever the heck that means), it aggressively begin to enable technology across a broad range of devices and platforms so that its customers could choose what's important to them instead of forcing them into what IT believed mattered.

I firmly believe this is the simple secret to business strategy and marketing today. Shopper's are firmly in control and will engage when and where they choose. It's the pinnacle of arrogance to believe that your brand is more important than a shopper's ability to choose. To remain relevant, brand must adopt and fully embrace and open brand mentality vs. being a city on the hill. Whenever I read a press release that includes the language of 'allows a consumer to do so and so,' I know I'm looking at an irrelevant brand. Your brand doesn't 'allow' a shopper to do shit. It may enable, help and even encourage, but there are plenty of competitors that you haven't even begun to think of yet that will be more than happy to ALLOW your customer to not need you. New companies are hungry too, they see the lethargy of current markets transitioning to new shopper paradigms and are using this advantage to completely destroy existing business models.

Consider that Tesla is now worth more than Ford and just surpassed GM in value as well. The interesting thing is that Tesla likely doesn't consider itself a car company but rather a transportation and logistics company. Cars are simply Tesla's current format, its approach is to rethink everything from power to autonomous driving. This open brand model constantly asks what if. What if our company is actually a trucking company, or a taxi service, or a school bus operator or maybe even a retailer (Google is on its way to becoming a top 10 retailer now). If you're just focusing on the business you're currently in, you're likely missing the bigger picture of what you actually sell. I just need a pizza when and where I want, how it gets to me really doesn't matter and I know the general price from all providers. If its better, faster, easier and more fun, I'll choose that brand to fulfill my order.