Digital life at Starbucks after Schultz - new CEO commits to tech innovation

Despite some scepticism from my colleague Jon Reed on occasions, it’s pretty much taken for granted that Starbucks has been a text-book example of digital transformation over the past decade. That’s in large part been down to the vision of CEO Howard Schultz who saw the way the tide was turning and got the company aligned with the right technology strategy.

But as we noted earlier this year, Schultz is about to step down. So will the digital drive continue unabated? There have been examples where it almost seems that the digital innovations have overwhelmed the traditional operating model, such as the recent acknowledgment that the firm’s much-vaunted mobile-order-and-collect capability has actually resulted in too long lines in-store.

So will incoming CEO Kevin Johnson perhaps be tempted to pull back a little on the push to introduce ever-more tech-enabled features to Starbucks? It seems unlikely when he comes out with colorful declarations like:

My life’s journey has taken me to this place here today. As a young boy, the mission of sending a man to the moon captivated me. It always began with the bold aspiration and a mission to inspire and nurture the human spirit, one person, one cup, one neighborhood at a time.

OK, so maybe it’s an over-excited stretch to get from sending a man to the moon to being able to order your morning coffee via your iPhone, but Johnson’s digital enthusiasm is self-evident, as well it might be given that he’s been Schultz’s right-hand man as Chief Operating Officer for the past couple of years. This is someone who has drunk the KoolAid - or the caffe latte.

Behind the scenes

What is interesting is that Johnson is talking as much about what digital can do for Starbucks internal operations as he does about the customer-facing aspects, which has been what Schultz had become known for. Johnson is particularly interested in how to get a “real-time connection” with store managers across the Starbucks empire:

Just in US we have over 9,000 Company-operated stores. And the question was posed, how can we better connect with our store managers? How can we communicate with them in the two way vehicle and do it fast? And how can we help store managers to create community amongst one another?

The answer to those questions came in the shape of Workplace by Facebook, which Starbucks rolled out in January with a live stream to all store managers in the US. Senior management will be running similar live forums every month, while store managers are using the tech to create their own discussions and communities among themselves.

As an example of how this is working in practice, Johnson cites:

About a month-ago, a store manager posted on Workplace. He posted a post that said that they are selling more than 20 beverages a day that are not on our official beverage menu. They are beverages that were featured on Instagram. How many people use Instagram, get your beverage see all kinds of beverages on Instagram? Well they’re selling 20 a day that they [don’t] truly have the right recipe [for]. Well, within a 24-hour period, nearly 40 other store managers also posted and said I too am selling 15 of these a day, I’m selling 30 of these a day.

And then that evening, our category marketing teams saw the volume of post and how much this beverage, featured on Instagram, was selling in our stores. They made a decision that night and posted back to store managers by the next morning that they had made the decision to add this to the official beverage recipes. Something that could have taken weeks, if not months, to happen before Workplace, happened in one day. That is creating visibility with our store managers that’s enabling us to have more velocity in the way we make decisions, so we can better serve our store managers and our partners in the stores.

Customer-facing

As for customer-facing digital initiatives, Mobile-Order-and-Pay remains the poster child. Johnson says this now accounts for more than eight percent of all transactions in the US. There are the in-store line issues to be tackled, but that’s being adressed, he adds:

We are focusing on increasing throughput, improving the customer experience and reducing congestion at the hand-off plane. We have already deployed a number of these measures, and they are having a positive effect.

For example, in our busiest stores, we’ve added two new dedicated roles for partners at that peak, just for Mobile Order & Pay. We streamlined a hand-off plane in the way that beverages are consolidated and given to our customers, and we’ve deployed new tools to support the increased throughput.

The early feedback from store managers and customers has been very positive. But keep in mind, these are just the first steps of a number of things we are doing to improve capacity and throughput in our store.

My take

The digital commitment is still there - and in Venti-sized proportions. Now Starbucks needs to keep delivering on its potential, which is the job of Chief Technology Officer Gerri Martin-Flickinger, who explains what’s coming up in part two of this article.