Learnings from the Domino's Pizza Turnaround Strategy for Startup Founders?
Source: Romeen Sheth
The Domino’s pizza turnaround is one for the ages:
2008: Hits record low $2.83/share
2023: Current stock at $391/share (3,000% gain)
Its 100X growth story in part by listening and responding to its customers is filled with a bunch of lessons for startups today.
Domino’s was started by 23-year-old Tom Monaghan in 1960. He was maniacally focused on fast delivery and great service from Day 1. He spent the early days taking every action required to:
Reduce delivery time
Reduce cooking time
Tom's emphasis on speed and service led to groundbreaking moves that competitors found difficult to compete with. A catchy slogan with some skin in the game (“A Half Hour or Half Dollar Off”) escalated to a full-blown guarantee:
"30 Minutes or It's Free"
By 2008, Domino’s scaled to a multi-billion dollar business, but subsequently, the growth completely stalled with dim prospects of recovery:
Competitive threats from Pizza Hut (and others) loomed
$1Bn of debt sat on its balance sheet
Domino’s was excellent at everything, BUT the pizza, and the feedback was alarming:
Pizza tastes like cardboard.
Totally devoid of flavor.
Sauce tastes like ketchup.
Doyle (then CEO) leaned in hard to the feedback and launched a legendary ad campaign: "Our Pizza Sucks"
Focus groups shared harsh comments, and Doyle sat front and center and took it. He accepted the criticism and promised to "work days, nights, and weekends" to get better.
Doyle just committed that a $5B+ global pizza company was going to radically reinvent its…. Pizza. The culinary team began the project to rebuild the recipe from the ground up.
They tested 7,500+ combinations: Crust (10) * Sauce (15) * Cheese (50)
Many Execs were fearful that this would lead to a new and (even) bigger problem than what they had set out to solve.
What if our pizza didn't improve AND we lost our speed advantage?
Doyle had 2 mental barriers to break through with his team:
Omission Bias: Worrying more about doing something than not doing something.
Loss Aversion: Playing not to lose rather than playing to win.
Simply put, leaders who want to shake things up have to be comfortable with the idea that failure is an option.
Playing it safe is the riskiest course of all.
This was a huge success!
Doyle’s move was transformational, it created 2 other shockwaves that will have long-lasting effects:
Internally - broke the false dilemma (speed OR quality)
Externally - showed customers they cared (responded to feedback and built-in public)
Domino’s went back to focusing on its core strength and has since fired on all cylinders:
More distribution channels
Less order friction
More delivery technology
So what are the lessons here for the startup founders?
Leadership is about showing up
Don't lose sight of the core product
Find mental barriers and break them
Compounding advantages/disadvantages are slow to accumulate and then fast to impact
Show (don't tell) customers you care.