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Digital Transformation

Starbucks serves up wise words on digital transformation

Starbucks LogoStarbucks did not invent the coffeehouse. It only appears that way.

The 44-year-old retailer and cultural touchstone that turned ordering a latte into a social statement grew fastest between 1987 and 2007, when it averaged two new stores daily. Then the Great Recession hit, people started cutting cappuccinos from their budgets as a first line of fiscal defense, and the Starbucks mermaid logo seemed destined to sink down to where other mermaids live.

But a funny thing happened: it didn’t. In fact, during fiscal 2015, Starbucks expanded by 7 percent in the United States, and global revenue surged 17 percent to $19.2 billion.

So, what happened?

According to a recent article in ZDNet, the green mermaid kept swimming due to its commitment to digital transformation.

“By anticipating and beginning to invest many years ahead of the mobile technology curve, Starbucks today is defining … mobile and retail experiences of the future,” Starbucks CEO Howard Schultz said during the company’s fourth-quarter earnings conference call.

ZDNet reviewed Starbucks’ recent transformation efforts and compiled a brief list of key takeaways every company should consider in their own digital transformations. Among them:

A customer-first mentality – For example, Starbucks raised its sales velocity by introducing Mobile Order and Pay, which allows customers to place orders in advance and pick them up at a nearby store, thus avoiding lines at the counter.

Devotion to one-to-one marketing – Before Starbucks went mobile, it had a loyalty program allowing the company to remember customers’ favorite orders. By merging the program with the mobile app, Starbucks laid the foundation for an omnichannel approach that helps the company know almost as much about their customers as Facebook and Google do.

Never understating tranformation’s cost – Starbucks realized there is no low-cost, quick-fix alternative to an effective, value-added digital transformation. The company invested $145 million in 2015 on technology upgrades and expects to spend an additional $250 million to $275 million next year, emphasizing at the same time to all departments that they still must hit their budgets quarterly and annually.

“The technology innovations we are introducing are further strengthening our brand, improving our efficiency and in-store execution, increasing our profitability, enabling us to further extend our lead over competitors and, most importantly, enabling us to deliver an elevated Starbucks experience to our customers,” Schultz said.

That is how mermaids go from fantasy to reality, and stay there.

Thoughts on “Starbucks serves up wise words on digital transformation”

  1. Hey David,

    Great post! These are definitely three very important takeaways every business going through digital transformation should keep in mind. Starbucks commitment to digital transformation has earn them the reputation of having the most successful mobile payment platform in the U.S. by Business Insider.

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David Sheets

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