🍕 Domino's Pizza is the most innovative company in the world
🍕 Domino's Pizza is the most innovative company in the world
The best reminder to take a long view
A Lesson in History
Around 15 years ago, Domino's had a quality problem. While they were innovating in one part of the business (they were the first to introduce mobile ordering), they were also cutting costs and lowering the quality of their core product: pizza people actually wanted to eat. Unsurprisingly, people noticed and bad press followed. However, what happened next was incredible.
Domino's took ownership of the problem. They even shared negative reviews publicly and, in a relatively short amount of time, managed to turn things around. Once they regained their footing and refocused on their core product, they moved into a new phase.
"Failure Is an Option"
For Domino's, the mid-2010s were a period of experimentation and foundational investment in technology. They tried to expand into Italy but ultimately failed. They also experimented with specialty chicken, which was a major success and still a part of the menu today.
I think the lesson that this reminds us all of is to take reasonably sized bets, to test into markets and products but to fail fast and know when enough is enough. Domino’s closed its Italy business after 7 years and realized a roughly $10 Million loss…which is .02% of the company’s 2022 revenue. For those allocating capital to experiments, just consider how big a loss your business can take comfortably.
Investing and Taking the Long View
Not all investments pan out, but they don't have to. Domino's invests in emerging technology with the hope that some will impact their growth and profitability prospects. Time will tell which of those investments have a material impact. In addition to technology, Domino's buys and stores stockpiles of ingredients or futures contracts for tomatoes, wheat, dairy products, and more.
Domino's also invests in its people and tries to automate dangerous and error-prone jobs. However, they haven't lost sight of what they do at the end of the day: make pizza. Humans make pizza, while robots help along the way for worker safety and job fulfillment.
The Biggest Lessons
You have to earn the right to experiment. Once you're doing something well, then you can step outside of your comfort zone. If you get distracted and lose sight of what your customers care about, you risk losing the plot.
Don't be afraid to fail. Failure means you're trying new things, and without it, you probably aren't stretching enough.
Take a long-term view. What may be time-consuming, expensive, scary, or ambitious today could be the reason for your success in the future. Making decisions that have long-term consequences and short-term rewards will hurt you in the end.
Working this way has generated venture-capital-esque returns for Domino's. The stock bottomed in 2009 around $3/share and as of 2019 exceeded $300/share. That's a 100x or over 54% IRR, which is pretty impressive for a pizza company.