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Tim Green

Starbucks CEO Switch Boosts Tech Transformation

by Tim Green | Dun & Bradstreet Editor

December 2, 2016 | No Comments »

As Howard Schultz prepares to step down as chief executive of Starbucks, investors might call it “The Second Leaving.” After all, sales faltered when Schultz gave up the CEO post in 2000. Growth resumed after he returned to the top job in 2008.

Investors might feel better after a cup of coffee and as they recognize that Starbucks’ continuing transformation into a digital delivery system for coffee is likely to move even faster with the change at the top.

The new CEO is Kevin Johnson, Starbucks’ president and COO, who had been an executive at Microsoft and CEO of Juniper Networks. He has been on the Starbucks board of directors since 2009. Schultz will be executive chairman and focus on developing the company’s higher-end Reserve Roasteries and Starbucks Reserve retail format.

In recent years Starbucks has rolled out technology-based initiatives that have helped boost sales (up 11% to $21.3 billion in 2016) and make operations more efficient. Development of mobile applications and payments has been a part of that drive, accounting for about a quarter of revenue in the company’s most recent quarter.

Technology not only reduces the friction of buying a cup of coffee, it helps make employees more efficient in ringing up sales and smooths the supply chain that gets coffee from farms around the world to the company’s 25,000 stores in 75 countries.

Schultz has hired a series of executives that have made technology a crucial part of Starbucks’ operations.

About a year ago Gerri Martin-Flickinger joined Starbucks as its CTO. She had led large-scale global IT organizations such as Adobe (where she was CTO), VeriSign, Network Associates, and McAfee Associates. At the time of her hire, Starbucks said Martin-Flickinger’s experience in cloud, big-data analytics, mobile, and security would help the company invest in and use technology to improve its operations. She leads a technology team of more than 650 employees.

Curt Garner, who preceded Martin-Flickinger as CIO, led the development of systems that connect the company with customers and partners and maintain the critical core systems essential to running the business.

Starbucks’ chief digital officer Adam Brotman manages the company’s core digital businesses, including mobile, social media, web, loyalty programs, e-commerce, and the Starbucks Digital Network, as well as in-store digital and entertainment departments.

Over the past several years, customers have noticed Starbucks’ aggressive technology moves.

The company has more than 13 million active mobile app users in the US and over 7 million mobile transactions per week (more than any other traditional brick-and-mortar retailer).

The company’s Mobile Order & Pay went national in the US, the UK, and Canada in 2015. The system, which is integrated into the company’s primary mobile application and its My Starbucks Rewards loyalty program, allows customers to place an order and pay for it prior to arriving at a store for pickup.

Starbucks integrated its customer loyalty program, My Starbucks Rewards (MSR), with its mobile app. Customers receive free drinks and food after spending a certain dollar amount. Purchases can be tracked on their phones. Starbucks has some 20 million active MSR members.

Technology is so baked into the Starbucks operations that the coffee machines and ovens in its stores are connected through internet-enabled devices. They can be updated from a central location so that each store meets the company’s standards.

Martin-Flickinger, speaking at Starbucks’ annual shareholders meeting in 2016, said that the company gets data from about 90 million transactions per week. It intends to combine information about what people buy, where they buy, and how they buy with data about weather, promotions, inventory, and local events to provide better, more personalized service for customers.

That’s all fine. But how about an express line for those of us who just want a cup of coffee?

Tim Green has covered business, technology and science at newspapers and in higher education. At Hoover’s he covers computers and telecommunications. Follow him on Twitter.

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Photo by Jason Howie, used here under a Creative Commons license.

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