A recent article in the weekly periodical, Barons, suggested that Domino’s Pizza was well positioned to essentially “flip a switch” and instantly become a leader in the restaurant delivery industry that is dominated (at least in the headlines) by GrubHub and DoorDash. A great outside the box idea by this author, that made me think… When a somewhat unrelated new service/product line is introduced by a company (and successful) is this an accident or was it meant to be?
Ever since my son Benjamin’s first heart surgery at three months old, he has been taking Sildenafil, a medicine that promotes blood flow. Google “Sildenafil” and you will quickly see this blood flow drug serves another purpose for older gentlemen. Pfizer smartly realized that if this drug helped blood flow in the heart, it can also assist elsewhere in the male anatomy… and Viagra was born! Twenty years later and the little blue pill has raked in billions of dollars in sales. Somewhat accidently discovery, but was it?
Another more recent example is Amazon Web Services (AWS). While Amazon is famous for inventing solutions to any and all issues it deems valuable enough to pursue. Well, AWS is the most successful Amazon “invention” and quite frankly is the cash flow machine that allows Amazon to continue to innovate. AWS allows any organization or company or any developer to run their technology applications on top of Amazon’s technology infrastructure platform. AWS solved an internal issue that was quickly recognized as a most likely issue for other companies. Growing 40%+ and reaching over $7 billion in sales, AWS provides the bulk of Amazon’s profits. Is this another case of accidental discovery?
While it appears both Pfizer and Amazon got lucky with these blockbuster businesses, I beg to differ. Both companies have two attributes in common: 1) Great management and 2) Management that is willing to reinvest in its company for the long-term, seeking discovery of the next big thing or a goal to run their existing enterprise most effectively. Management has positioned their company for this success.
As we look to Domino’s future potential, there is no doubt if the restaurant delivery space is a business Domino’s finds promising, they will enter it and instantly be a formidable competitor. Why such certainty? Well, Domino’s management has reinvested in their business to the point they are the clear leader in the pizza industry. Not necessarily from a taste standpoint, but definitely from an operations standpoint. No other competitor has invested in technology like Domino’s nor as early as they did. Look no further than their stock appreciation over the past fifteen years for proof of management’s prowess (+2,000%) . I mean, they are selling pizza! Great management is no accident!