Why some well-established companies struggle with disruptive innovation
Discuss about the Business Model for Dominos Australia.
Lindgardt et al., (2009) has opined that a business organization without a disruptive focus are building their business model on a “me too” platform of mediocrity. A disruptive business model tend to focus on semi-intermediating, reengineering, refining or optimizing its product or service, role or function or practice, category, market, sector of industry. In this context, Massa & Tucci, (2013) advocated that a most successful organization incorporate disruptive thinking into all its business and management practices to achieve distinctive competitive value proposition. Thus, it raises a question, why some well established and well managed companies struggle with disruptive innovation? Answering the above question, Markides, (2013) proposed that it is mainly because companies are involved in doing the same thing in the same ways for the same reason for such a long time that they struggle with the concept of change. So, it becomes important that the organizations should not adopt an attitude of complacency since it kills companies. In this context, an example of Folgers can be stated that failed in recognizing the retail consumer demand for coffee and thus failed in developing a Starbucks type business model (Lambert & Davidson, 2013). The main reason for failure of Folgers can be linked to the fact that Folgers focused more on making incremental gains through process improvement and was satisfied with its business models and thus failed in visualizing the innovator coming until it was too late. Their focus was shifted from managing the opportunities to managing risk and this in turn resulted in brand decline.
Thus, it can be said that with continued rapid technological developments taking the concept of globalization is making the businesses of all size face the emerging need for adopting a disruptive business model. So, the executives and entrepreneurs should examine their current business models from a disruptive perspective. For example, Dominos Pizza experienced an all time low in its share price and was ranked last in 2009 survey of consumer tastes and preferences (Mcorpcx, 2018). Just after a few years later, it recaptured its customers’ hearts and its investors and at present is the second largest pizza chain in the world (Mcorpcx, 2018). This was possible because it embraced the disruptive technological innovations for optimizing every aspect of its business, especially online ordering and delivery transactions that can be referred to as its lifeblood.
Smart-Connected-Products offer exponentially expanding opportunities for business organizations like Dominos Pizza for new functionality, greater reliability, and higher product utilization and develop capabilities that cut across and go beyond the traditional product boundaries (Porter & Heppelmann, 2014). However, the changing nature of the products disrupts the value chains thereby force business organizations to rethink and retool everything that they do internally to adopt the change.
Smart-Connected-Products also later the industry structure together with the nature of competition that exposes the business organizations like Dominos Pizza to new competitive opportunities and threats (Porter & Heppelmann, 2015).
Smart-Connected-Products gives rise to a new set of strategic choices that are related to how value is created and captured, how the prodigious amount of new and sensitive data that is generated can be managed and utilized and how businesses can maintain their relationship with traditional business partners since the channels are redefined (Heppelmann & Porter, 2015).
Dominos Pizza: A Case Study
Thus, the opportunities and threats posed by Smart-Connected-Products for business organizations like Dominos can be listed as follows:
Opportunities
- Gain competitive advantage through product differentiation.
- Enhance customer satisfaction.
- Achieve operational efficiency.
- By gaining knowledge of how customers actually use the products can enhance the ability to segment customers.
- Set effective prices to better capture value
- Extend value added services
- Tailor product offerings to specific market segments.
Threats
- Complete business reengineering.
- Huge investments.
- Inability to maintain relationship with traditional business partners since the channels are redefined.
- Demand for highly skilled and experienced tech professionals.
- Confusion related to what data to capture, secure and analyze for maximizing the value of offerings.
According to Business Model Framework by osterwalder and Pigneur (2010), there are nine elements of the business model canvas framework that belong to four pillars like product, infrastructure management, customer interface and financial aspects (Luoma, 2014). This can be illustrated with the help of the following figure:
Table 1: [Source: Al-Debei & Avison, 2010]
|
Pillar |
Business Model Elements |
Description |
|
Product |
Value Proposition |
Domino’s mainly offers pizza but also offers pasta, salads and other dishes together with die rage of deserts to choose from (Dominos, 2018). |
|
Customer Segments |
Domino’s emphasizes on offering value to customers of all age groups and especially to younger generations in the age group of 20-40 years. |
|
|
Customer Integface |
Channels |
Online ordering, ordering through Twitter, Voice ordering, easy order button, delivering products through high-tech and efficient pizza oven delivery car, robots to deliver pizza, drone delivery, Xbox ordering, partnership between Domino’s and Ford for in car fast food app for simple hands free pizza ordering |
|
Customer relationships |
real time customer reviews, partnering with third party platforms to offer rewards to customers, the iconic logo is the main focus of new pizza delivery boxes, Domino’s also sponsors the X-factor’s app that offers users rewards at the pizza chain (Lin et al., 2010) |
|
|
Key Resources |
Digitalization of pizza ordering and delivery transactions, tech savvy employees, app and ways ways to order pizza that include via text message, voice recognition, emojis, and Sync system of Ford, drone delivery and robot deliveries (Buss, 2018). |
|
|
Key Activities |
Listening carefully to the customers, rewarding the customers, embracing the power of social influence, recognizing the value of transparency in whatever they do through Pizza turnaround ad campaign, Pizza tracker app, improving the existing and designing new experiences on the basis of the customers’ needs (Dominos, 2018). |
|
|
Key partners |
Australia Schweppes, VISY, KAGOME, MAURI anz, INGHAM, LEPRINO FOODS, JBS, PRIMO, TIBALDI, COMGROUP, local communities through Giving for Good program, partnership with Rural and Regional Renewal and The Smith Family, Monash University, Australian Volunteer Coast Guard, Youth on the Air, Australian Centre for Rural Entrepreneurship and Drought Angels (Dominos, 2018) |
|
|
Financial Aspects |
revenue Streams |
making sales through 670 Domino’s Pizza restaurants in Australia, franchising fees (Statista, 2018) |
|
Cost Structure |
Food production costs, labour costs, occupancy costs, salary to employees, development of infrastructure, costs involved in adopting new technologies, costs involved in partnering with third parties. |
Resources and capabilities are important for the business organizations to deliver the Customer Value proposition. So, the resources include the equipments, financing, people, skills, facilities that needed to manufacture products and the deliver the services. Thus, in this context the resources on the part of Domino’s have been presented in the table below:
|
Resources |
Description |
|
Financial |
The share price of Domino’s has soared from the bottom of the barrel price $8 in the year 2009 to $160 in 2016 (Mcorpcx, 2018). The firm has a market capitalization of $10254.22 million (Mcorpcx, 2018). |
|
Physical |
Domino’s has been successful in enhancing its presence in the global market and it operates through franchise model. In Australia, Domino’s has 670 restaurants and this proves to be beneficial to reach the customers (Statista, 2018). |
|
Technological |
The company has completely digitalized its business model by employing digital technology to optimize every aspect of the business especially the online ordering and delivery transactions (Mcorpcx, 2018). It also has an app and other easy ways to order pizza that include text messaging, voice recognition, emojis and Sync system of a Ford. Domino’s also turned to global franchises to assist with tech focused delivery methods. Domino’s in New Zealand first tested the drone and robot deliveries (Buss, 2018). |
|
Organizational |
Domino’s is characterized with multilevel organizational structure where the directors and the CEO are regulatory authorities. It has adopted a people culture and also promotes teamwork and effective communication for smooth operations (Yukl, 2013). |
|
Human resource |
Domino’s emphasizes on recruiting tech savvy employees to support its disruptive business model (Buss, 2018). |
|
Innovation |
The company has completely digitalized its business model by employing digital technology to optimize every aspect of the business especially the online ordering and delivery transactions. It also has an app and other easy ways to order pizza that include text messaging, voice recognition, emojis and Sync system of a Ford (Buss, 2018). Domino’s also turned to global franchises to assist with tech focused delivery methods. Domino’s in New Zealand first tested the drone and robot deliveries. |
|
Reputation |
Domino’s possesses huge reputation in terms of enhanced quality of products and services. It emphasizes on maintaining uniform service and product quality across all its locations. This has made it a favourite brand across the globe (Mcorpcx, 2018). |
|
Organizational Capabilities |
|
|
Domino’s possesses the ability to combine both its tangible and intangible resources to conduct its business operations smoothly and has emerged as a disruptive tech savvy fast pizza company leaving behind its competitors to occupy the second position in the market. The business has efficiently utilized its capital and human resources through its effective leadership skills to cater to understand its customers and cater to their specific needs. |
Conclusion
Thus, it can be concluded that in the recent times, it is important to embrace change as per the changing trends and market situations. So, it is suggested that Domino’s should keep operating through its disruptive business model to remain competitive and should prevent being self-contained since complacency can kill a business.
References
Lindgardt, Z., Reeves, M., Stalk Jr, G., & Deimler, M. (2009). Business model innovation: When the game gets tough, change the game. Own the future: 50 ways to win from The Boston Consulting Group, 291-298.
Massa, L., & Tucci, C. L. (2013). Business model innovation. The Oxford Handbook of Innovation Management, Oxford University Press, Oxford, 420-441.
Markides, C. C. (2013). Business model innovation: What can the ambidexterity literature teach us?. The Academy of Management Perspectives, 27(4), 313-323.
Lambert, S. C., & Davidson, R. A. (2013). Applications of the business model in studies of enterprise success, innovation and classification: An analysis of empirical research from 1996 to 2010. European Management Journal, 31(6), 668-681.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64-88.
Heppelmann, J., & Porter, M. (2015). How smart, connected products are transforming companies,“. Harvard Business Review”, October.
Porter, M. E., & Heppelmann, J. E. (2015). How smart, connected products are transforming companies. Harvard Business Review, 93(10), 96-114.
Luoma, O. (2014). A Contextual Business Model Framework: Business Model Development in a Product-Service Systems Context.
Al-Debei, M. M., & Avison, D. (2010). Developing a unified framework of the business model concept. European Journal of Information Systems, 19(3), 359-376.
Lin, R. J., Chen, R. H., & Kuan-Shun Chiu, K. (2010). Customer relationship management and innovation capability: an empirical study. Industrial Management & Data Systems, 110(1), 111-133.
Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design: How to create products and services customers want. John Wiley & Sons.
Yukl, G. A. (2013). Leadership in organizations. Pearson Education India.
Buss, D. (2018). Domino’s vs. Ford: Two Tales of Integrating Disruptive Tech. [online] ChiefExecutive.net. Available at: https://chiefexecutive.net/dominos-vs-ford-two-tales-integrating-disruptive-tech/ [Accessed 18 Apr. 2018].
Dominos. (2018). Business Partners – Domino’s Pizza. [online] Available at: https://www.dominos.com.au/inside-dominos/corporate/business-partners [Accessed 18 Apr. 2018].
Dominos. (2018). Community Initiatives – Domino’s Pizza. [online] Available at: https://www.dominos.com.au/inside-dominos/corporate/give-for-good [Accessed 18 Apr. 2018].
Mcorpcx. (2018). Lessons from the Upper Crust: How Domino’s Pizza Disrupted the Delivery Game and Became a Leader in Customer Delight. [online] Available at: https://www.mcorpcx.com/articles/lessons-upper-crust-dominos-pizza-disrupted-delivery-game-became-leader-customer-delight [Accessed 18 Apr. 2018].
Statista. (2018). Domino’s Pizza: number of stores Australia 2017 | Statistic. [online] Available at: https://www.statista.com/statistics/277408/number-of-dominos-pizza-stores-australia/ [Accessed 18 Apr. 2018].
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