When J. Patrick Doyle took over as CEO of Domino's Pizza in 2010, the company's shares had been stuck at around $9 for three years. It was time to shake up the business.
Change started with accepting a simple fact: A tasty pie would take Domino’s only so far without a seamless delivery experience. Domino's would need to rapidly expand its technological know-how—and fast. To get there, the company increased its software and analytics staff, which now accounts for half of the 800 employees at the company's headquarters. It set out to create a best-in-class mobile app that would allow users to order pizza with a simple text message or tweet and track their orders in real time. And it used new tools to improve two fundamentals of reliable pizza delivery: driver efficiency and order accuracy.
With a stock price that tops $170 and US same-store sales that outstrip those of its biggest rivals, Domino's has become proof that you don't need to be a digital native to harness the full potential of technology. That's because truly disruptive change, such as Domino's, takes more than data and coding. It requires companies to not only set their digital ambition and strategy, but also develop the right operating model, culture and IT systems—what we call the "inner game."
Agile Innovation techniques are spreading beyond software development to a wide range of industries and functions. Bain's Agile Insights explore how companies can adopt scrum thinking.
While efforts to boost a company's digital competence are widespread, they tend to be long on enthusiasm and short on results. Companies tend to focus on what we call the "outer game" of digital strategy—where to play, which products to pursue and how to bring digital technology to bear. While the outer game is critical, these initiatives generally fail if the company lacks the culture to innovate.
In contrast, companies thriving in this age of unpredictable, high-magnitude change invest in their inner games to support their outer games. Rather than treat digital competence as an end goal that they achieve simply by upgrading their website, they focus on building a more agile, responsive organization that can react quickly to market shifts. They make their cultures more adaptive and innovative, and bring in technology systems that can help them advance their strategies. Digital savvy is important, but technology is the means, not the end.
Leading technology companies such as Google, Amazon, Facebook and Apple have successfully balanced their outer games and inner games. They have created cultures of innovation that generate strong financial results, with annual revenue growth that outpaces the five-year average for companies in the Nasdaq Composite Index. Their senior leaders commit to multiyear technology roadmaps that guide their investment and resource plans, and keep them focused on long-term goals.
That's hard enough for an insurgent company with a risk-taking culture, let alone a large incumbent with a traditional corporate mindset. But as the Domino's story demonstrates, companies need not be digital natives to build a strong inner game.
The first step is to recognize that both the inner and outer games are crucial to making change stick. Having a clear and winning vision for where the company is headed will help prioritize the highest-impact digital initiatives and focus a company's scarce resources on the changes that really matter. Creating an agile operating model and culture helps a company learn from customers, embrace change and adapt quickly as markets and technologies shift.
Most corporate leaders have long since embraced the notion that if you aren't finding ways to disrupt your industry, others will disrupt it for you. But even for companies like Domino's that are willing to take risks and play the role of disrupter, wholesale change can pose a daunting challenge. However, the results are worth it: Mobile devices now account for more than 60% of Domino's sales, allowing it to narrow the gap with its biggest rival, Pizza Hut.
What's next for Domino's? Perhaps new ways to delight customers using chatbot ordering and drone delivery.
In this series of blog posts, we'll take a closer look at the elements that companies need to compete in a digital world:
- a digital strategy that points to the future;
- a technology function that's built for speed;
- a culture that tests new ideas to get answers faster; and
- a nimble organization that can pivot to harness new opportunities.
Elizabeth Spaulding coleads Bain & Company's Global Digital practice, while Greg Caimi leads the practice in the Americas. They are based in San Francisco.