How CEO’s tech experience is helping Starbucks go digital

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Seattle, US – Mumbai, India: Starbucks, a global coffeehouse chain on Monday struck a major deal with a tech company Brightloom (formerly eatsa), which is into building digital customer experience platform for the restaurant industry.

Under this deal, Starbucks will license its proprietary digital flywheel software technology to Brightloom through equity stake and become a part of the tech company’s board.

In return, Brightloom will leverage Starbucks’ digital flywheel technology and, combine it with its technology assets and build a cloud based software solution for Starbucks partners as well as third-party entities.

Though, the financial terms and conditions of this deal are not disclosed, it does need a closer look to understand and gauge how a traditional coffeehouse company has been able to engage its business with technology.

During the 48 year existence, Starbucks has undergone many subtle changes – some are visible, others not so. Right from adding new items like ice cream, bottled cold coffee drinks, different tea varieties, wines and beers and snacks on its menu card and even selling newspapers inside the shop to bringing on board executives from outside the food industry.

These all have helped the traditional coffeehouse company not only survive the economic slowdowns and overcome business challenges but also understands and adapt technology to keep a pace with today’s digital world.

Perhaps, these subtle changes over the years including, the inclination towards technology has a lot to do with Starbucks management and current top leadership.

Certainly, Starbucks CEO Kevin Johnson‘s past work experience in the technology industry has come handy and influential in helping the coffeehouse chain make the right moves in the business and digital space.

But, well before Starbucks Chairman Howard Schultz had asked Johnson to take over the CEO’s role, he was one of the most sort after top executives in the tech industry.

The highlight of Johnson’s three decades long, illustrious career has been his in-depth work experience in the tech industry. He started his career with IBM, then spent 16 years with Microsoft and went on to become Juniper Networks‘ CEO in 2009 before he stepped down in 2014 due to personal health issues.

During this phase, Johnson served the US government led NSTAC (National Security Telecommunications Advisory Committee) and was also appointed as a member to Starbucks’ board of directors in 2009. This was for the first time, he was directly associated with Starbucks’ management.

While his health conditions forced him to stay away from the highly demanding and stressful jobs in the tech industry, he took a prolong break. Later in 2015, Johnson joined Starbucks in the role of president and COO. For this caffeine loving executive, working with Starbucks was like a homecoming but was far from an easy outing.

After some initial struggle, Johnson was very much attuned to Starbucks’ business operations, its partners, inner culture and overall the food industry. This made Starbucks’ Chairman Schultz more confident in Johnson’s business ability and technology foresight; and was appointed as Starbucks CEO and President in 2017.

Since then, Johnson has successfully led Starbucks on both fronts – business and technology. For instance, he has been instrumental in implementing a successful technology and innovation strategy in Starbucks’ operations in China.

Through a partnership, Starbucks has integrated its local China app with Alibaba‘s digital networks in order to improve and speed up delivery services in Chinese cities. This ensured that when the drinks are delivered to customers it has the temperature same as in-store. It aimed to offer a seamless customer experience (CX) to the customers whether the delivery is in-store or outside.

“The results, we’ve seen in customer loyalty and frequency within our digital ecosystem speak for themselves, and we’re excited to apply these innovations toward an industry solution that elevates the customer experience across the restaurant industry,” Starbucks CEO Kevin Johnson said in a statement.

Starbucks launched its virtual store inside Alibaba’s mobile apps that includes Taobao, Alipay and Tmall in December 2018. This partnership aimed to boost on-demand services locally. In China, Starbucks has initiated several innovative and digital led programs through partnership with local players.

In May this year, Starbucks and Microsoft entered in a tech partnership, where the coffeehouse chain will improve and enhance personalise customer experience in-store for its customers by implementing advanced technologies, ranging from cloud computing to blockchain with the help of Microsoft.

Starbuck’s mobile app is leveraging reinforcement learning technology – a type of machine learning in which a system learns to make decisions in complex, unpredictable environments based upon external feedback. It helps in providing a more personalized experience for customers using the mobile app.

“Just like their relationship with a barista, customers receive the same care and personalized recommendations when it comes from our digital platforms,” said Jon Francis, SVP – Starbucks Analytics and Market Research.

The reinforcement learning allows the app to get to know each customer better. While the recommendations are driven by a machine, the end goal is personal interaction.

Beside, cloud and machine learning, Starbucks has relied on IoT (Internet of Things) to overcome glitches of its in-store equipment. It has implemented IoT technology to lower any kind of glitches and disruptions to its devices and equipment in order to maintain a consistent customer experience for the customers.

To reduce disruptions to that experience and securely connect its devices in the cloud, Starbucks has partnered with Microsoft to deploy Azure Sphere, designed to secure the coming wave of connected internet of things (IoT) devices across its store equipment.

The IoT-enabled machines collect more than a dozen data points for every shot of espresso pulled, from the type of beans used to the coffee’s temperature and water quality, generating more than 5 megabytes of data in an eight-hour shift.

Microsoft worked with Starbucks to develop an external device called a guardian module to connect the company’s various pieces of equipment to Azure Sphere in order to securely aggregate data and proactively identify problems with the machines.

In addition, Starbuck has leveraged blockchain technology to build a feature for its mobile app that shows customers information about where their packaged coffee comes from, from where it was grown and what Starbucks is doing to support farmers in those locations, to where and when it was roasted, tasting notes and more.

Microsoft’s Azure Blockchain Service powered new transparency allows supply chain participants to trace both the movement of their coffee and its transformation from bean to final bag. Each state change is recorded to a shared, immutable ledger providing all parties a more complete view of their products’ journey.

It wants to replicate and repeat its China success story in other parts of the world including the US. Today, the coffeehouse empire operates in 80 global markets, including India, where it has partnered with the Tata Group.

However, out of these 80 global markets, not even half offers Starbucks mobile app to customers, which means that the company lacks digital and mobile initiatives. Among these markets, only eight so have mobile based ordering and payment capability. In the US, Starbucks’ mobile app brings roughly 40% of transactions to the company’s kitty.

And perhaps, this is where Johnson’s role as Starbucks CEO becomes very crucial in leveraging his strong tech industry knowledge and past experience in empowering the 48 year coffeehouse empire with more technology led initiatives and innovation.

(Image source – Starbucks)

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