Domino's CEO's parting shot - we're going to be 100% digital

As a parting shot from outgoing Domino’s Pizza CEO Patrick Doyle, it’s a statement that tells a powerful story of digital transformation in action:

Fundamentally, we are on a path to take all orders digitally.

We’ve noted before that the so-called disruptive food delivery firms, like Just Eat and Deliveroo, have a business model that can, at its most elemental, be tracked back to U.S. pizza firms that made delivery a differentiator from their beginnings.

What’s changed has the underlying technology, most notably mobile platforms, that’s added both ease of ordering and greater order control to both the provider and the end user. It’s no longer just a case of phoning in an order and wondering where it’s got to an hour later!

That’s why Doyle has driven a major digital transformation program over the past few years, to keep Domino’s ahead of the pack. At present, around 60% of all orders are transacted digitally, but this has potential to grow further over time, says Doyle:

[Digital is] north of 60%, but the key is, it's going to be 100%…it continues to grow, but now we've figured out a way that we can get this to be in a fully digital business.  I can't give a timeframe on when that's going to happen, but I can tell you it's going to happen. What I'd say from a timing perspective, it's still going to take a little bit of time, but the team is working fast.

This month saw the latest iteration of this digital activity with the roll out of the firm’s Hotspots initiative. This involves creating 200,000 new delivery locations in spaces that don’t have traditional address, such as a beach or a park. Customers place their order and pre-pay for it, then select one of the new locations for delivery. They’re also able to add instructions/information that will help the drivers to identify the customer at the location chosen.

Doyle thinks that this is “a game changer within our space” and something that “could redefine delivery convenience’:

The ability to now deliver to spots without a traditional address and other rather unexpected sites will not only continue to drive incremental orders in the near term, but it is yet another meaningful step on our mission of industry-leading convenience; and the ability to order from us anywhere, anytime.

This is thanks to outstanding technology helped by continued aggressive investment, sound operations, which are vital to making the Hotspots process work and proper execution participation at the store level, a nod to our terrific franchisees, managers and drivers. 

There are some limitations in force, essentially to keep delivery drivers safe from harm. So stores can, for example, control the time that Hotspot deliveries can be made, so that drivers aren’t sent to a dark place in the woods at 3am. But overall, the basic idea is to be able to deliver anywhere that’s handy for customers:

It does open up a lot of exciting things. The fact that we can target specific spots and make deliveries fundamentally anywhere plays into kind of providing ultimate convenience for our customers…We think you should fundamentally be able to get a Domino's pizza delivered to any location where you're going to want it.

DOM

Another big initiative underway is to take voice ordering to a new level. Customers can already use Amazon’s Alexa to place orders. The next step is extend this capability, says Doyle:

Enabled by our investments in proprietary artificial intelligence, we are developing the ability to take all phone orders via DOM, our virtual assistant.

Originally developed in 2014 as a voice recognition app, DOM is now being tested on the hones in 20 pilot stores in the U.S. It’s intended to deal with customers who still want to phone in their order in the ‘traditional’ manner, but freeing up in-store staff to focus on more important matters, like making pizzas! Doyle explains that this remains a key need to be fulfilled:

If you figure today we are north of 60% on our digital orders and about 10% of our orders are walk-in orders -people just walking into the store and somebody takes the order there - and those can be handled with kiosks, so that's how those are going to be digital. But you're looking at, today, 25% or maybe slightly more that are still old-fashioned phone orders. And think maybe three minutes average on the phone for somebody to take a phone order.

But that's ultimately not the big thing. The big thing is all of the calls are getting answered. They're going to get answered in the same way. They will all be upsold, kind of to your point around ticket. But from a labor perspective, what we think is maybe most important is the fact that people are able to focus then in the stores, fundamentally, on two things; on making pizzas and on getting them out the door and taking care of customers who are coming into our stores.

So it is ultimately about driving sales through better customer satisfaction. And if you're able to get an activity like taking orders entirely out of a store, it's kind of the second order effects of that, that are more important, I think, than the direct minutes saved in taking those orders.

It’s work in progress, admits Doyle, but could be another of his ‘game changers’ he reckons:

We are still developing this. We're in about 20 stores and it gets better every day. It's the way that you iterate on this, but to accelerate the pace of improvement in this, we need more and more data points. more and more experience, finding out more different ways that customers would order, and so it continues to get better.

We've been working on this for quite a while, but there is only so much progress you can make kind of in a lab setting inside the organization. We've had it in a couple of stores for a while now. But Artificial Intelligence allows you to learn faster and faster, the more iterations, the more reps you can get on it. Moving it into more stores, and that number is going to continue to increase, is going to increase the pace of learning and the pace of improvement.

Doyle adds that DOM is not setting out to be an all-encompassing AI-enabled voice platform:

If you think about Siri or Amazon Alexa or any of the natural voice platforms out there, they are covering very, very broad activity. We're talking about taking a pizza order. It's a pretty small area for them to deal with. So if you call one of these stores and you start talking about politics or something completely off, they're going to be very confused. But if you call in and all you're trying to do is place an order for two large pepperoni pizzas and a two-liter Diet Coke, it's going to be really good and really efficient at doing that.

All of which brings us back to that 100% digital ambition that Doyle leaves Domino’s with within its sights:

Fundamentally, we are on a path to take all orders digitally. Doing so will mean not only a better customer experience, which should generate continued sales and store-level profit growth, it allows our store-level teams to focus all their efforts on making great pizzas and giving great service to our customers….we can become a 100% digital business. Don't underestimate what a big deal that could be for store-level profitability and for customer convenience.

In such a fully-digital business, the source of orders will be invisible in-store, he says:

In terms of how it comes into the store, it looks like any other digital order coming into our store. So, the order just comes up on the make line screen automatically and they won't know whether or not that came from voice, or from a tweet, or a laptop, or an app, or anything else. It just drops straight into the store.

There is no handoff that has to happen where mistakes can be made. It just drops straight into our one point of sale system. So all of these foundational things that we've been doing, having one point of sale system, one online ordering system that is able to funnel all of these things in, this funnels into that exactly the same way, so the order just drops on to the make line and the people making great pizzas get to work on fulfilling that order.

It is, as noted previously, about another ‘d’ than just digital:

It is all about our execution on delivery - and we do that extraordinarily well.

My take

Doyle leaves an impressive digital foundation upon which his successor can build. A good example of putting in the early spade work on digital transformation and playing this as a long game.