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KEEPING THE ENGINE HUMMING

NURTURING THE HABIT OF INNOVATING

When a big, ambitious company is floundering, executives are often tempted to “go big” with innovation. They may choose to bet the company on a visionary moonshot-style program, perhaps one developed by a handful of technical wizards in a secret skunkworks isolated from the rest of the business, with the goal of creating a breathtaking new product or service that blows away the competition.

It’s a glamorous, exciting strategy—and occasionally it even works.

But history shows that, more often, companies that bounce back from near-death experiences do so not through a single “big bang” of creativity. A much better strategy is making innovating a habit that permeates the organization, generating dozens of small improvements that ultimately add up to a giant turnaround.

That’s the path chosen in 2010 by J. Patrick Doyle, then CEO of Domino’s Pizza, and the team that surrounded him. At that moment, the company was in trouble. Not only was Domino’s a dismal second to its archrival Pizza Hut in revenues, profits, and market share—and slipping further—but its reputation among pizza lovers was crummy. As one company executive ruefully recalls, customers viewed Domino’s as “fast food” and “cheap food”—but never as “good food.”¹

Today, a little more than a decade later, all of that has changed.

Domino’s journey from worst to first began with a dramatic public commitment by the company’s top leaders. In 2010, they launched an ad campaign that confessed to consumers that Domino’s pizza had been subpar. The ads even included actual footage from focus groups showing customers saying that Domino’s crust “tastes like cardboard” and calling the product “the worst excuse for pizza I’ve ever eaten.” Having eaten a plateful of crow, the company then introduced a new recipe that improved the flavor and texture of the company’s crust, sauce, toppings, and cheese.

This act of radical honesty not only captured the attention of customers; it also sent a signal to every Domino’s employee. In the words of Dennis Maloney, the company’s chief digital officer, “From that point forward, a couple of things started to change. . . . One, I think we became a much more honest and transparent brand both to our customers and internally. Two, we started asking ourselves: Is what we’re working on something that would make our customers stop and say, ‘Did Domino’s really just do that?’”²

In other words, the ad officially signaled the launch at Domino’s of an era of innovation.

In this chapter, I’ll look at the Domino’s saga of innovating, reframing, and reinvention. Along the way, we’ll tease out a series of lessons that other companies can learn from what the pizza masters did. Domino’s story shows how a company that’s facing tough competition in a mature industry can transform its fortunes by pulling together all the elements needed to make its everyday innovating engine run at full speed and peak efficiency—not just in the C-suite but at every level and in every department of the organization.

How Domino’s Put Innovating at the Heart of Its DNA

Domino’s groundbreaking 2010 ad campaign, which introduced its improved pizza recipe under the cheeky tagline “Oh Yes We Did,” was only the first step in a lengthy campaign to transform the business. In the years since then, Domino’s has followed up with a stream of customer-centered innovations, developed not by outside consultants or a centralized team of experts but by frontline innovators and midlevel coaches in departments across the company.

Realizing that a whole-of-company effort was needed to lift Domino’s out of its business doldrums, the organization’s leadership proselytized about the importance of cross-company collaboration. This led to the forging of some unlikely internal alliances. For example, when company leaders realized that one of the central arenas for service improvement would be the use of digital technology to make pizza deliveries faster and easier, they mandated regular biweekly working sessions between the IT and marketing departments. Their goal was to avoid the common problem of cool-sounding tech innovations that actually provide little or no value for customers.

It worked. Domino’s marketing team mined its insights into customer behavior and preferences to begin generating a stream of ideas for new services that could be implemented through digital technologies. The IT people appreciated the opportunity to learn exactly how their work would impact Domino’s customers and to participate in the creative process alongside their colleagues, rather than simply being handed a coding assignment to execute. The result was an unusual partnership. As CDO Maloney explains, “The connection between our IT organization and the marketing organization is probably the best relationship between any two groups in the entire company, which is a really unusual thing to say. . . . Our organization’s structure ensures these two groups are working completely in lockstep.”³

This partnership helped generate a remarkable series of innovative moves, many of them technology-based, that would shake up the pizza industry. They included:

The first pizza-buying app that let customer monitor the progress of their order (2010)

The first voice-activated pizza delivery assistant, an app nicknamed “Dom” (2013)

The first Twitter-based pizza-ordering system (2015)

The first fleet of purpose-built pizza-delivery cars with warming stations designed to keep up to 80 pizzas hot and fresh (2015)

The first experimental pizza-delivery drone (2016)

The first experiments (partnering with Ford) in the use of autonomous, driverless vehicles for pizza deliveries (2018)

The first “geo-fencing” program for digital food ordering, which empowers pizza delivery to over 200,000 outdoor locations (such as local parks) without the need for a street address (2018)

The first GPS tracking system to let customers and store managers map the progress of a pizza delivery in real time (2019)

The 2010s were an era when large swathes of business were being transformed by digital technologies. But few companies—especially in traditional low-tech industries like food service—were as aggressive in pursuing digital innovation as Domino’s. By 2019, more than half of Domino’s 1,000 corporate employees were working in IT, and the digital reframing of the company was having a major impact on the company’s daily operations.⁴ Hungry customers could order a Domino’s pizza via any device—computer, phone, smartwatch, tablet, digital assistant, even a Samsung TV remote—using clicks, characters, Tweets, Facebook messages, or voice commands. Domino’s trumpeted this versatility in another ad campaign, this one with the hashtag #AnyWare.

Today, 75 percent of the pizza orders processed by Domino’s are online orders, half of those through mobile devices. Compare this figure with the 5 to 10 percent at the average quick-service restaurant. Domino’s has also continually refined and streamlined the available array of ordering methods, steadily reducing the layers of friction that discourage customers from completing an e-commerce transaction. The ultimate solution (as of 2021): “zero-click ordering,” in which the customer merely has to open the Domino’s app. The software remembers their favorite pizza style and submits an order for it after a 10-second confirmation countdown.⁵

No wonder Domino’s likes to describe itself as an e-commerce company—or even “a technology company that delivers pizza.”⁶

Not all of Domino’s innovations are tech-based. Remember that the company’s entire saga of reinvention began with a new pizza recipe designed to simply make the core product more delicious. Domino’s continually strives to improve on those kinds of food-service basics. For example, its most recent wave of store openings in the United States focuses on upscale neighborhoods rather than the traditional strip malls, and its newest franchisees are being encouraged to install open kitchens to promote an image of fresh, wholesome food preparation.⁷ And while Domino’s deliberately avoids the practice of constantly cycling new items onto its menu as some other fast-food chains do, it selectively announces carefully pretested new products that it believes will stand the test of time—most recently, the new Chicken Taco Pizza and Cheeseburger Pizza options introduced in August 2020.

Thus, while Domino’s loves how digital technology can improve its customer service, it also respects the fundamental value of delicious, well-prepared food. Every corporate employee, including those at the C-suite level, learn the traditional basics of pizza-making at Pizza Prep School, and company chief Richard E. Allison, Jr. vows, “As long as I’m the CEO here, we will always make our pizzas by hand.”⁸

Creative ideas from frontline innovators who are not working at Domino’s headquarters are also welcomed and embraced. Some of these emanate from the franchise owners who operate the thousands of restaurants around the United States and the world. For example, one franchisee in the Seattle area came up with the idea of providing electric bikes to their delivery workers—a faster, safer, and greener alternative to cars or manual bikes. Now electric bikes are being offered to franchisees across the country.⁹

Over the past decade, each of the company’s cascading series of innovations garnered headlines for Domino’s and captured the attention of the public as well as of Domino’s thousands of employees around the world. The company does a great job of spreading the word about its latest big ideas through mainstream media as well as industry-specific channels. For this reason, you might be tempted to dismiss some of these breakthroughs as mere “publicity stunts” rather than being genuinely customer-driven.

However, the evidence strongly suggests that Domino’s innovations have actually made the company’s products significantly more attractive to pizza lovers. Individual consumers personally validate the fact that Domino’s innovations were not just cool ideas cooked up by some nerd who never wondered whether pizza lovers would give a darn. Instead, they actually made the process of getting a pizza easier, faster, and more fun. Customer Laura Khalil, speaking with a reporter for the Detroit Free Press, expressed the feelings of many other pizza lovers when she said of Domino’s, “They understand people’s desire to have things when they want it, how they want it—and get it through the channels they use. It’s genius.”¹⁰

Because Domino’s innovations generate real (rather than illusory) customer value, it makes good sense for the company to publicize them as widely as possible. The free media that they attract supplements Domino’s extensive paid advertising, generating buzz among customers and curiosity among those who haven’t already tried Domino’s products. It also boosts morale among franchisees and employees, reminding them that Domino’s is not just “any old fast-food place” but a center of creative excellence, one of Fast Company magazine’s most innovative companies in the world.¹¹

When it’s truly deserved, a widely known reputation for innovation is a powerful way to attract even more creative talent and to encourage your people to keep the innovating engine humming.

“Excellence Is a Habit”: Continuous Innovating in Good Times and Bad

No single innovation among the many that Domino’s has pioneered during the past decade was revolutionary all by itself. But their combined impact has been remarkable. Thanks to Domino’s steady stream of small, impactful innovations, the company doubled its market share, from 9 to 18 percent, within eight years. In the process, it became the world’s fastest-growing quick-service restaurant business. And in early 2018, Domino’s fulfilled CEO Doyle’s long-time dream of passing Pizza Hut as the world’s biggest pizza company, with annual sales in excess of $12 billion. (Just a few months thereafter, Doyle passed the baton to Richard Allison.) Today, Domino’s boasts more than 16,000 locations, almost 6,000 of them in the United States, the rest in 80 countries around the world.

The company is not resting on its innovative laurels. Instead, it is positioning itself to develop even more new ways to serve customers better in the years to come. In August 2019, Domino’s opened an Innovation Garage at its headquarters in Ann Arbor, Michigan—a 33,000-square-foot facility where new in-store and delivery technologies are being developed and tested. There’s room for up to 150 employees to work on projects like Domino’s R2 rover, an autonomous pizza-delivery device being developed by the robotics company Nuro.¹²

When a business makes innovating an anyone, anytime, anywhere activity, the way Domino’s Pizza has done, breakthrough performance in many forms becomes more likely. Domino’s embraced this notion of modest but continual innovation quite deliberately. Maloney explains it like this: “We don’t want people to think about [innovation] projects as long or drawn-out processes. . . . You have to think about [breaking] things into really small, fast-evolving steps and processes.”¹³ In other words, don’t worry about moon shots; instead, do a lot of good little things as quickly and well as you can. The cumulative result is that the stream of innovations becomes even more powerful.

Companies in every industry would do well to emulate Domino’s embrace of continuous innovating. Innovating should become a habit, an activity everyone engages in on a periodic, regular basis as part of a natural routine, just as health-conscious people incorporate an exercise routine into their daily lives. Innovating is a process, not a result. Over time, the constant practice of innovating generates a kind of muscle memory by which the habit of innovating becomes continuous and instinctual rather than relying on random bursts of creativity.

Many organizations feel the sudden urge to jump-start their innovating engine in times of crisis—when profits have dwindled, costs are out of control, customers are complaining about quality, or competitors have seized market share. But the most effective leaders don’t wait for a panic situation to flex the company’s innovating muscle. Instead, they make sure that all employees train their innovating muscles on a regular basis. Each employee, for instance, should participate in a regular routine of exercises that involve talking with customers (and noncustomers) and sharing their findings with colleagues. The Seven-Step Innovating Process presented in Chapter 10 offers a practical vehicle for organizing activities like these.

When the habit of innovating has permeated an organization, its people find methods to improve their operations every day, in ways big and small, even when everything is going smoothly and the business seems to have no urgent need for reframing. At the same time, they are also ready to respond quickly and creatively when a crisis does hit.

In 2020, restaurants everywhere—including fast-food servers like Domino’s—were devastated by the onset of the COVID-19 pandemic. In cities, states, and countries around the world, complete lockdowns or severe restrictions were imposed on public eateries, often with little advance notice and according to unpredictable, seemingly arbitrary protocols. Thousands of restaurants went out of business; thousands more struggled to survive. Two of Domino’s major competitors—California Pizza Kitchen and NPC International, the parent company of Pizza Hut—were forced to file for bankruptcy.

Domino’s was a huge exception to this pattern. Its decade-long campaign of innovation had already prepared it to respond to the bewildering new demands of customers who could no longer order and enjoy pizza with the freedom and flexibility they were accustomed to. Because Domino’s had developed 15 different ways to let people order its products, it was ready to serve customers no matter which channel they gravitated to in the strange new world of COVID.

The company was also primed to deliver new innovations in response to the specific challenges created by the pandemic. For example, to facilitate and enhance the new practice of “contactless delivery” that COVID-shy customers demanded, frontline innovators at many of Domino’s 6,000 US locations began offering carside delivery, which allowed customers to receive their pizzas without leaving their vehicles. To make contactless home deliveries more palatable, one frontline innovator fashioned a cardboard Pizza Pedestal to hold the box containing a hot pizza off the ground. (Customers hate finding their pizza box lying on the front step like a discarded newspaper.) The Domino’s driver can display the pizza in this way while remaining six feet away when the customer emerges from the front door to accept the delivery. Within weeks, pizza pedestals were in use by Domino’s stores around the country.

The pandemic also highlighted another, more subtle benefit derived from Domino’s commitment to continuous innovating. Back in 2015, third-party food-delivery businesses like Grubhub and DoorDash had begun to emerge, offering their services to restaurants that didn’t have the resources to build their own delivery systems. Domino’s competitors like Pizza Hut and Papa John’s started making use of these third-party services—but Domino’s had no need to do so because it was able to deliver its products more quickly and profitably than any third-party operation could have done. This remained true even when the pandemic exerted additional stress on food-delivery systems. Providing its own delivery services enabled Domino’s to retain control of all the information generated by the chain’s estimated 85 million active customers as well as the 23 million members of its loyalty program.

CEO Allison says, “We have a tremendous customer base data set. I just can’t understand why I’d want to give that to a competitor.”¹⁴ Because Domino’s innovation has kept it several steps ahead of the market, the company remains in control of its information—which helps it remain in control of its destiny.

In all these ways, the flexibility and creativity that Domino’s people developed through years of continuous innovating have paid off. During the pandemic, the company’s business has boomed, even as patterns of consumption have shifted. While weekend and late-night pizza orders dwindled—partly because of the decline in parties and gatherings organized around big sporting events—lunch and dinner orders from families stuck at home exploded. Average order sizes also grew, as homebound people weary of cooking bought extra pizza and other items to stock their refrigerators.

Company data reflected these positive trends. During the first quarter of 2020, even as a worldwide recession hit, Domino’s global sales actually increased by 4.4 percent, and US same-store sales grew by 1.6 percent as compared with the previous year. (That marked Domino’s thirty-sixth consecutive quarter of same-store sales growth in the United States.¹⁵) By June 2020, three months into the pandemic, Domino’s reported that it was hoping to recruit up to 10,000 more delivery drivers—this at a time when other food-service companies were shutting their doors, contributing to a massive worldwide unemployment problem.¹⁶

The Greek philosopher Aristotle wrote, “We are what we repeatedly do. Excellence, therefore, is not an act, but a habit.” As the Domino’s story vividly illustrates, the same is true of innovating. It, too, must become a habit rather than a mere act. When your entire organization plays a role in keeping the innovating engine humming, then innovating becomes an everyday activity—one that can help to ensure that your company remains ahead of the curve in a rapidly changing world.