In The Loop - Chapter 23: Starbucks

21 min read

The big change began on January 7, 2008. That was the day Howard Schultz reclaimed his seat as CEO of Starbucks. He had departed in 2000 after thirteen years as CEO, moving into the chairman role. Now, eight years later, he had returned.

It was an act of necessity. At the time, Starbucks was in a world of hurt. The great recession had hit hard, and it caught Starbucks ill prepared. By the end of 2007, traffic had slowed markedly at the company’s 15,000 stores. Competitors such as McDonald’s and Dunkin Donuts were on the rise. The quality of the in-store experience had declined, and the unique Starbucks culture was weakening. In 2007 the company’s stock fell 42%.

On the day of Schultz’s return, many in the media were predicting Starbucks inevitable demise. It didn’t seem conceivable that within a few short years he would transform Starbucks into one of the most successful technology companies in the world. And yet he — along with other leaders he selected — did just that.

By the Spring of 2017, the company was in such a solid position that Schultz felt comfortable once again handing the torch to a new CEO — this time, to technology executive Kevin Johnson. Since then, the company’s comeback story has continued unabated. As of March 2019, Starbucks boasted 29,000 stores worldwide, with annual revenues at $25.5B — almost three times 2007 revenue ($9.4B). As for the stock price, the following chart shows the progress since 2007¹:

Upon his return, Schultz got right down to work. In his letter to shareholders accompanying the 2007 annual report, he said:

“ I assure you that we are taking dramatic steps to address this and transform our business to ensure that Starbucks continues to be the “third place” that our customers make part of their daily lives…. I know that, together, we will transform Starbucks for the future by embracing our rich heritage and renewing our focus on coffee as our core. We are committed to making our stores welcoming and distinctive places that are a true part of their communities all around the world…We will reignite our emotional attachment to our customers and restore their connections with our coffee, brand, partners and stores. And we are building for the long-term…²”

He later told the Harvard Business Review:

“When I returned in January of ’08, things were actually worse than I thought. The decisions we had to make were very difficult. But before we had to make those decisions, there had to be a time when we stood up in front of the entire company, as leaders, and admitted, almost a confession, that the leadership of the company had failed the 180,000 Starbucks people and their families…. I’m responsible. And so we had to admit to ourselves, and to the people of this company, that we owned the self-induced mistakes that were made… And we had to do it in front of a lot of people. Highly emotional.

Once we did that, though, it’s like– when you have a secret, and once you get it out, it’s relieving and it unleashes you, in a way, because the burden is off your shoulders³.”

To stabilize the business, Schultz had to make some hard business decisions. He executed $581M in cost cuts — mostly to the central bureaucracy. He also decided what not to cut. At the time, the company was spending $300M on employee health care. When a key investor called to demand he stop providing health care to store employees, he told the investor he wouldn’t do it — and furthermore, if he didn’t like that decision he could sell his shares. Schultz recalls telling the investor, “…do you want to just kill the company, and kill the trust people have in what it stands for? There’s no way we can cut health care⁴.”

It was an early example of Schultz’s core leadership philosophy: the marketplace rewards companies who do the right thing — who lead first with values and then with a quality product.

The cuts to the bureaucracy funded investments in innovation. He knew he needed to reimagine the customer experience, and invested accordingly. He also took the first steps down the path of digital transformation. At the time it was just modest steps — hiring the company’s first chief technology officer, experimenting with mobile and rethinking the digital footprint inside stores. But these were the foundation for what became one of the most impressive digital transformations of a historically non-technology company in the annals of business history.

By 2009, Schwartz had created an internal incubator to breed new ideas — a great example of a product discovery system in action. It was called Starbucks Digital Ventures. One of the first products to come out of the incubator was a mobile app. The app quickly became the starting point for a new digital ecosystem.

Since that first mobile app, Starbucks has built out a comprehensive mobile ecosystem. Today, its mobile app supports ordering and payment, and is synced up with the Starbucks rewards program. Mobile payments began in 2011. The Mobile Order & Pay (MOP) app, introduced in 2015, now processes over 6 million transactions per month. The order feature enables a customer to place an order outside of the store, and then simply come by to pick it up. Eleven percent of all Starbucks transactions are now executed via this mobile feature. The app also boasts a store locator feature, and even provides access to a music library. By the end of 2018, fourteen percent of all Starbucks transactions were being processed via the app (as compared to 3% for Dunkin Donuts).

Starbucks Mobile Pay App. Urban Tastebud.

Over the ensuing years, Schultz invested aggressively in digital transformation. In 2014, the company’s technology investments stood at $145M. By 2015 they were $250M, and in 2016 in the range of $275M⁵.

In April of 2017, Kevin Johnson became CEO of Starbucks, replacing Schultz, who returned to his role as chairman of the board. By the end of that year the company boasted 27,000 locations worldwide, and was committed to grow locations to 35,000 by 2021.

Let’s consider how the eight core ideas in this book relate to Starbucks:

1. In the face of continuous change, the fit systems enterprise relentlessly pursues a customer centric, world-improving Virtuous Vision.

Just ten months after his return, with the company under financial strain and Wall Street pressure, Schultz spent $30M to fly all 10,000 store managers and the company’s entire management team to New Orleans for a week-long leadership meeting. It was a key turning point for the company. Said Schultz: “It was the most powerful experience that any of us have had in years, because it was real, it was truthful, and it was about leadership.”

Everyone attending the meeting contributed volunteer time to the city, still recovering from the effects of Hurricane Katrina. It was a way to remind everyone that at its essence Starbucks is about uplifting others. An article in the New Orleans Times Picayune at the time said:

“The Seattle company, even as it wrestles with a business downturn, is using its first-ever annual leadership meeting away from its home base to field 10,000 volunteers. They will restore parks, schools and houses this week in a city still recovering from Hurricane Katrina. The marshaling of that many volunteers — with more than 50,000 volunteer hours expected to pile up between Monday and Thursday — represents the biggest short-term corporate volunteer effort in New Orleans’ history…⁶”

Schultz knew that before any big strategic bets could be made, he first needed to bring the company back to its roots — to its values, guiding principles and culture. Only then could he rebuild trust. The company’s only real asset is the customer experience: one great cup of coffee, one friendly barista at a time. Schultz needed everyone to recapture that purpose — and to rediscover the joy of giving to others. For Starbucks, the return to its roots began in New Orleans.

Here are the Starbucks vision, mission and value statements.

Starbucks Vision

“To establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles while we grow.”

Starbucks Mission

“To inspire and nurture the human spirit — one person, one cup and one neighborhood at a time.”

Starbucks Values

“Starbucks guiding principles are:

  • Creating a culture of warmth and belonging, where everyone is welcome.
  • Being present, connecting with transparency, dignity and respect.
  • Delivering our very best in all we do, holding ourselves accountable for results.
  • Acting with courage, challenging the status quo.
  • We are performance driven, through the lens of humanity.”

Taken as a group, these vision, mission and value statements convey a deep sense of customer centricity and respect for all employees. They also show an ambition to be a great global company. In the eleven years since Schultz’s return in 2008, a continuing series of decisions demonstrates decisively that at Starbucks, these statements are not just words — they guide everything.

2. To do this, the enterprise must advance two imperatives: to be Generative, and to be Adaptive. Being generative (continuously creating new value) is always the first priority; being adaptive (increasing resilience, scalability and efficiency) is second.

The pace of digital change has left many retailers behind. Some, such as Toys R Us and Sears, have fallen into the black hole of bankruptcy. Others are struggling to keep out of it. Still more are surviving but not thriving. It’s become clear that the winners will be those capable of embracing digital as a core competency.

On its Q3 earnings call, Starbucks CEO Johnson said:

“The evidence is clear that the pace of retail transformation is accelerating with a common theme: extending the in-store experiences to include relevant digital scenarios. It is the driving force behind combinations including Walmart’s acquisition of, the combination of PetSmart and, and last month’s announcement of Amazon’s intent to acquire Whole Foods. Each of these combinations demonstrate that pursuit of enhancing the physical retail experience with a relevant and complementary digital experience⁷.”

Schultz echoed the theme:

“We anticipated and we saw very early on that there was going to be a very, very significant disruptive, almost cataclysmic, change in the landscape of physical retailers. The number of store closures, consolidations, we’re in the nascent stage of that — and there are going to be many, many losers…. Every retailer that is going to win in this new environment must become an experiential destination. Your products and services for the most part cannot just be available online and cannot just be available on Amazon…. You have to believe that in order to win and win big, domestically and globally, in this new environment, that a company’s capability and competency as a four-wall bricks and mortar retailer must be as good digitally and on mobile in all things that make the brand as relevant outside of the store and on a mobile device as it is inside the four walls of the store.

Starbucks is dedicated to pursuing its generative imperative. The company is in constant search for ways to deliver new value. That’s evidence of a healthy product discovery system in action. It can be seen in its investment in Starbucks Digital Ventures, and more recently its 2019 investment of $100M in Valor Siren Ventures, an incubator for food and retail tech startups. It can also be seen in its work on experimental store design — such as its Starbucks Reserve SODO store in Seattle.

The product management system is equally healthy. There is continuous work underway to optimize the in-store experience. You can’t be sure new in-store or consumer digital enhancements will work unless you test them in real stores, with real baristas serving real customers. Says Chief Technology Officer Gerri Martin-Flickinger: “We want to be able to go at a whim. We want to sit in the store for half a day. We want to observe things. We want to get to know store managers. We want to get to know the partners behind the bar. We want to build a relationship with them, so that we become really an extension of that store experience⁸.”

Starbucks has established a network of stores that are in what they call the tech district, where new digital concepts can be tested. Similarly, the physical layout of the stores and their interior design are regularly assessed and updated. Even top executives are in on the continuous improvement, made possible by the power of virtual reality. Says Martin-Flickinger, on the subject of using VR technology:

“We can have people move through the space and do various activities, like make a beverage or move furniture and this has now become common practice,” Martin-Flickinger said. It’s kind of funny because you’ll come into the executive boardroom and people will have virtual reality headgear on and they are walking around and touching. We do this now as we’re getting ready to finalize the build-out of our stores worldwide⁹.”

For Starbucks, its generative imperative is advanced by focusing on its “digital flywheel”, which includes rewards, payment, ordering and personalization.

But the company also is at work on its adaptive imperative: to increase resilience, scalability and efficiency. On the technology side, this is expressed in its four priority domains:

  • Retail technology (technology inside stores)
  • Corporate technology (business technology)
  • Customer technology (externally facing technology such as mobile)
  • Business of the technology (underlying cloud and data infrastructure)

For example, its Workplace collaboration tool, used throughout the company, delivers rich feedback loops throughout the company: from top to bottom, from bottom to top and across functions. More than 80% of Starbucks store managers use Workplace every week. It’s a good example of how Starbucks advances its adaptive imperative by aligning people with its workflows, technology and money flows in advancement of business purpose.

3. When conceiving of the enterprise, the Systems View is primary; the functional view must be secondary.

There are any number of indicators that point to a systems view at the top. But one good example is seen in the company’s response to problems tied to the success of its mobile ordering feature. The great thing about placing a mobile order is that by the time you arrive at your local Starbucks store, your Grande Latte is sitting there waiting for you. It worked great until it didn’t.

The ordering feature was so successful, orders began to overwhelm local stores. People who had placed a remote order would show up at the store, only to find their Latte still wasn’t ready. It quickly became a big problem — so much so that Starbucks CEO Johnson had to address it on an earnings call.

Of course, the problem was a classic systems archetype: limits to growth. The popular app increased demand, up to and past the available labor supply. The resulting imbalance damaged the customer experience.

The good news is that the company mobilized a systemic response. As Johnson shared with investors, the leadership team devised three waves of remediation. He described it as follows:

  • Wave One — additional training and reallocation of staff roles to Mobile Order & Pay during peak, testing of additional labor at peak in select stores, implementation of new approaches to order consolidation at the hand-off plane, and new tools and processes to support beverage and food production.
  • Wave Two — the introduction of a new Digital Order Manager. This is a tablet-based device that provides baristas with visibility on all incoming orders and enables better tracking and real-time order production management. It also enables a digital notification to a customer’s mobile app when their order is ready, reducing congestion at the hand-off plane.
  • Wave Three — sharpening focus on the selection and addition of in-store equipment and pursuing improvements in overall store layout and design, all with the goal of delivering a great customer experience and further increasing throughput¹⁰.

When a leader embraces the systems view of the enterprise, she thinks differently. She takes into account the integrated nature of things. She balances now, near and far. She understands that cause and effect can be separated in time and space. She seeks to address the needs of all stakeholders — particularly customers, employees and investors. And in implementing changes, she takes into account the interactions between people, workflows, technology and money flows.

4. The enterprise is comprised of Operating Systems (such as the revenue engine system and the product management system) that create results; and Meta Systems (such as the governance system and culture system) that exist to elevate the performance of operating systems.

I mentioned above some examples of work the company has done to uplift its operating systems — particularly its product discovery system (Starbucks Digital Ventures, its investment in Valor Siren Ventures and its experimental store Starbucks Reserve SODO in Seattle); product management system (the continuous work to improve the in-store experience, plus its work on the digital flywheel of rewards, ordering, payments and personalization); and so forth. More could be said about its revenue engine system — such as the unit economics of prepaid cards, or its expansion into the grocery channel with its line of cold drinks and Starbucks at Home coffee beans. But it’s perhaps most interesting to focus on the Starbucks meta systems.

The Governance System

Stories abound about dysfunctional public company boards. For instance, the board of Hewlett Packard comes to mind — its handling of the merger with Compaq, the Mark Hurd departure and other misfortunes.

While the internal operations of any company’s board are opaque, one gets the sense that the Starbucks board functions well. The board includes Satya Nadella, Microsoft CEO. This choice reflects the importance of technology to Starbucks, and the two-decade technology partnership between the two companies. Another board member is Jorgen Vig Knudstrop, the legendary former CEO (now brand chairman) of Lego, who turned around that company’s fortunes by devising and executing a bold digital transformation. Three other independent board members are from retail and consumer packaged goods backgrounds. The quality of board membership hints at a healthy governance system.

One can sense the discipline of the governance system in its committee structure and associated charters and policies:

Johnson is now fully out from under the shadow of his predecessor. He has established a strong team at the top. By every indication, the governance system is healthy.

The Strategy, Planning and Architecture System

Johnson has been crystal clear about strategy: it’s about happy, caring and productive employees (called partners), innovation in beverage, a great retail experience and the Digital Flywheel. That’s how Starbucks brings brick and mortar together with digital into a seamless, “high touch” customer experience.

The digital flywheel doesn’t stand alone. Its success depends on the quality of the coffee and an efficient, warm barista experience delivered in a relaxing, comfortable, welcoming store. Technology exists to enable that experience. All are important. To make them happen with every transaction every day across 27.000 stores requires a tight strategy that guides thoughtful plans. Then plans need to flow into the company’s various architectures (organizational, compensation, communications, technical and so forth). In turn, these enable domain teams to align with their unique business purposes and with adjacent domains, expressed through the coordination of people, workflows, technology and money flows.

For instance, consider how technology strategy has been built to support the overarching enterprise strategy. Technology has been broken down into four segments: retail, corporate, consumer and infrastructure. Martin-Flickinger has mobilized segment teams that meet weekly with both technical and non-technical leaders to ensure alignment. She notes that when technical leaders talk with others in the business, it’s important to talk in business language, not tech speak: “When you do that, the business immediately gains confidence that you know why what you’re doing matters¹¹,” Martin-Flickinger said.

The work to align strategy to plans to architectures to leaders to teams is the work of this system. By all indications, Starbucks is dedicated to maintaining a healthy strategy, planning and architecture system.

The Culture System

The trip to New Orleans reset the focus on a values-driven culture. It continues to this day. Starbucks culture is reflected in its values, but emphasizes such attributes as belonging, inclusion and diversity — with an expectation for excellence. It is reinforced in hiring practices, performance management, the voices of leaders, corporate communications, and open feedback loops (such as the Workplace collaboration platform).

DataOps System

With 90 million transactions a week, Starbucks accumulates a lot of data. Today, its data infrastructure is industrial strength, supporting real-time data throughout the enterprise. The data Starbucks receives is rising steadily, as it begins to implement IoT solutions inside the stores (for instance to measure the status of food in refrigerators, the performance of ovens).

Data is used to drive a diverse array of decisions, such as the personalization of offers, optimize scheduling of workers and select store locations.

Engineering System

Cross-functional technical domain teams support microservices architected systems resident on the cloud. The partnership with Microsoft is strong, with a strong technical commitment to Azure Cloud. By reading the LinkedIn profile of Tal Saraf, who until January 2019 was SVP Engineering and Architecture at Starbucks (he left to head up people engineering at Facebook), we get a peek into the company’s engineering system as it pertains to customer-facing technology:

“Hired developers, managers and directors to add to our engineering teams responsible for bringing the Digital Flywheel to life, extended customer digital engagement through world class web and mobile experiences supported by modern scalable cloud platforms and integrated services. The organization also includes the enterprise architecture teams, which play a pivotal role, side by side with our engineering functions, as we build innovative solutions and enable business capabilities across the global Starbucks enterprise.

Team building and running a performant, multi-tenant cloud commerce engine that is used by hundreds of millions of customers and partners daily across over 28,000 stores across over 78 countries. The team builds and operates the largest and most robust mobile ecosystem of any retailer in the world, serving over 90 million customers per week with more than 14 million Starbucks Rewards members, eight million mobile paying customers, with one out of three now using Mobile Order & Pay, and more than $6 billion loaded onto prepaid Starbucks Cards in North America during 2016 alone¹².”

There are also technical teams dedicated to various domains inside the business itself. Here is the profile of Janet Landers, SVP Business Technology, as shown on the Starbucks website:

Janet is responsible for managing and providing strategic direction for the technology supporting Channel Development, Global Supply Chain, Partner Resources, Store Development and Finance & Accounting. She also oversees Enterprise QA for Global Technology and leads the technology team for Starbucks Europe, Middle East and Africa region.

Janet joined Starbucks in December 2001 as a project manager for Supply Chain Technology. She was one of the leaders responsible for deploying technology at Starbucks roasting plants in Nevada, South Carolina, and Amsterdam. Subsequently, as director of Supply Chain Technology, she was responsible for the development and execution of the technology strategy supporting Global Supply Chain Planning and Manufacturing.

In June 2008, Janet was promoted to the role of vice president of Supply Chain Technology and was responsible for the strategic roadmap and delivery of technology to the Global Supply Chain. Shortly thereafter her responsibilities were expanded to include the technology for Finance & Accounting, Store Development, Partner Resources (human resources) and the newly established Channel Development business unit. Responsible for deploying technology to all regions of the world, Janet has a strong global understanding of the business¹³.

5. The fit systems enterprise features Domain Driven Design — both in its technology design and in its organizational design. All systems in the enterprise are made up of domains; these domains integrate people, workflows, technology and money flows to achieve business outcome objectives.

As the two senior executive profiles in the previous section imply, technical teams at Starbucks have adopted domain driven design. But what about the rest of Starbucks? The organization is definitely matrixed — incorporating functional, geographic and product-based considerations. Given the permutations this implies, it is likely that most teams exhibit at least some of the attributes of domain teams. A domain team is cross-functional, self-organized and charged with a business purpose. At the team level, a matrixed organizational structure looks a lot like a domain team.

In her article, “Starbucks Coffee’s Organizational Structure and Its Characteristics”, Pauline Meyer writes the following:

“Starbucks has a matrix organizational structure, which is a hybrid mixture of different features from the basic types of organizational structure. In this case, the structural design involves intersections among various components of the business. For example, the company’s product-based divisions intersect with functional groups and geographic divisions, which in turn intersect with other parts of the organization¹⁴.”

6. In the fit systems enterprise, data access is democratized; there are Feedback Loops Everywhere.

Starbucks is a data driven company. With 17 million active users of its mobile app, resulting in seven million orders a month (27% of all transactions) and Starbucks Rewards boasting 13 million active members, the repository of data is rich — and it’s not going unused. Jon Francis, SVP Enterprise Analytics, says the following on his LinkedIn profile:

“Think about the relationship you have with your barista in your favorite store — as soon as they see you, they immediately start your favorite order, ask about how work is going, how kids’ soccer game went, etc…. Starbucks has taken those same principles of powering personalized relationships with our customers using data science and machine learning algorithms to drive product recommendations and customized interactions at scale in our digital platforms, as well as our more traditional communication channels such as email. We are leveraging transaction data, customer preferences, weather, and other behavioral data generated by our customers to provide incredibly rich, engaging personalized experiences back to those same customers¹⁵.”

From its Workspace collaboration tool to IoT data streaming in from stores, feedback loops are everywhere. For instance, Martin-Flickinger praised the Workspace platform as a companywide feedback tool:

“One of the things that’s very exciting is (Workplace) has given us the opportunity to have the people who use our technical solutions give us feedback in a more direct way. Almost immediately when we opened up Workplace, we had store managers and partners telling us about the technology in their stores and ideas they had about how we could make it better, or what we could do differently¹⁶.”

In other interviews she has underscored the power of IoT to drive even richer feedback loops:

“One of the things we are so incredibly excited about as an engineering and technology organization is using data to continuously improve the experience for our customers and partners. We have the opportunity in this new age of IoT [Internet of Things] to actually monitor equipment at an incredibly detailed level of telemetry and recognize when a machine needs preventative maintenance, for example. We can do this without having to bother the teams in the stores, who want to be focused on the customer. Through the Internet of Things, we are taking that next leap of telemetry from many, many pieces of equipment and ensuring a consistent experience for each customer¹⁷.”

Aaron Schaffer is VP of Analytics and Insights. His profile hints at a company in which data is used everywhere:

  • “Lead the analytics and insights org discovering insights that deliver stakeholder outcomes for marketing, product, digital, pricing, finance, partner, and store. Our team embeds this data driven strength through the organization, allowing analytics, data science, and market insights to serve as the connective tissue and decision engine for goal oriented outcomes¹⁸.”

7. The fit systems enterprise exhibits rising Digital Leverage: its systems are built via reactive microservices architecture; its data infrastructure is modern and cloud-based; and its technical domain teams pursue disciplined agile delivery methods to build powerful solutions.

The movement to modern data infrastructure and cloud-based, microservices architected systems has been ongoing for some time, powered by technology investments averaging well over $200M a year. In July of 2017, Matt Ryan, Chief Strategy Officer at the time, said:

“Today, we are enabling a new generation of digital innovation that will begin rolling out in waves starting this fall. This fundamental modernization of our technology stack will replace legacy rewards and ordering functionality with the new scalable cloud-based platform for rewards and ordering, improved customer data organization, and tighter integration with store-based operating systems, including inventory and production management¹⁹.”

Martin-Flickinger has been at the forefront of the shift to the cloud. Her early SVP level hires, such as Tal Saraf and Jeff Wile (SVP Cloud and Infrastructure) put in place the leadership necessary to execute the shift. Says Wile:

“We believe that technology is the enabler at Starbucks to spread that experience everywhere. We’re looking to use technologies like blockchain to track our coffee around the world from bean to cup. We’re using data and modeling to share best practices with our coffee farmers around the world. We’re developing systems to optimize inventory so we are delivering the right products to every store at the right time, while at the same time reducing waste…..

Every one of these projects leverages cloud platforms like Microsoft Azure, which enables us to move faster and build better solutions…another benefit we see from the cloud is our ability to deploy these solutions globally. We can build it once and leverage it anywhere around the world that Azure may be. It really is helping transform our business²⁰.”

The organization design cited earlier by Saraf (the enterprise architecture teams, working side by side with engineering functions, building a multi-tenant cloud commerce engine) provide further evidence of a company that has built significant digital leverage.

8. The fit systems enterprise exhibits a key foundational asset: “In The Loop Leaders”. They are ethically grounded, digitally literate systems thinkers. These leaders focus most of their attention on advancing a virtuous vision, improving the meta systems, ensuring domain team autonomy and increasing the density of 10Xers in high variation domains.

An In The Loop leader is an ethically grounded, digitally literate systems thinker. In The Loop leaders abound at Starbucks. We can see them on the board (which includes such luminaries as Microsoft CEO Satya Nadella and Jorgen Vig Knudstrop of Lego fame). CEO Johnson spent his life in technology (after a career at Microsoft, he was the CEO of Juniper Networks) before joining Starbucks. And the senior executive team is loaded with them. Similarly, CTO Martin-Flickinger, CMO Matt Ryan, SVP Enterprise Analytics Jon Francis, and Luigi Bonini, SVP Global Product Innovation are other examples of top team members that “get it.”

Notice the digital literacy of Ryan, Chief Marketing Officer, who in his previous role as Chief Strategy Officer said, “Today, we are enabling a new generation of digital innovation that will begin rolling out in waves starting this fall. This fundamental modernization of our technology stack will replace legacy rewards and ordering functionality with the new scalable cloud-based platform…²¹”

CTO Martin-Flickinger said, “We’ve established a five-year technology strategy that’s tightly coupled with our corporate business strategy. It starts to look at those disruptive technology themes that are going to become mainstream over the next two, three, four or five years. How do we start capitalizing on those and exploring those? How are we working those into our future thinking²²?”

An In The Loop leader is constantly at work on the fit systems enterprise. Such a leader articulates a bold vision, and work towards it with confidence. Here’s Johnson on a Q3 2017 earnings call: “No traditional brick-and-mortar retailer is better positioned to navigate and flourish in the global retail industry of today or better positioned to lead in the digital retail world of tomorrow,” Starbucks CEO Kevin Johnson said. “And we will do so with speed, agility, and a focus on creating long-term shareholder value²³.”

But the work of an In The Loop Leader is never done. Here is Johnson again in June of 2018, commenting on a quarterly earnings call: “I think we’ve got to be much more disciplined in setting our priorities. We’ve got to be more data driven in terms of how we’re allocating resources and tuning the model. We have to be more agile as innovators. We set the stage for that transition to a company that is focused on growth and scale²⁴.”


Starbucks is a shining example of the fit systems enterprise. Thanks to the legendary leadership of Howard Schultz, the company stepped back from the abyss in 2008 and began an epic transformation. Today, under Johnson’s leadership, the company continues on its transformation journey. It has become a technology company that is also a retailer. It is well stocked with In The Loop leaders. Feedback loops are everywhere, and teams are acting on the data to continuously improve. It continues to invest in product innovation. In its pursuit of the generative and adaptive imperatives, it marks steady progress but is never satisfied. That’s a fit systems enterprise.

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  1. “Starbucks — 27 Year Stock Price History: SBUX.” Macrotrends, July 3, 2019.
  2. Schultz, Howard. “Starbucks Corporation Fiscal 2007 Annual Report: Letter to Shareholders.”, n.d.
  3. Ignatius, Adi, and Howard Schultz. “Howard Schultz on Starbucks’ Turnaround.” Harvard Business Review, June 7, 2018.
  4. Ibid.
  5. Dignan, Larry. “Starbucks’ Digital Transformation: The Takeaways Every Enterprise Needs to Know.” ZDNet. ZDNet, November 2, 2015.
  6. Kamenitz, Eliot. “10,000 Starbucks Employees Volunteer While in Town for Convention.”, October 28, 2008.
  7. Lindner, Matt. “Starbucks Will Shutter Its e‑Commerce Site to Focus on Its Mobile App and Stores.” Digital Commerce 360, September 8, 2017.
  8. McCracken, Harry. “Starbucks Brews A Tech-Infused Future, With Help From Microsoft.” Fast Company. Fast Company, May 7, 2018.
  9. Troy, Mike. “The Social Solution.” Retail Leader, March 1, 2018.
  10. Soper, Taylor. “Starbucks Gives Baristas New Tablets to Manage Congestion Caused by Mobile Order-Ahead Service.” GeekWire, April 28, 2017.
  11. Eide, Naomi. “Inside Starbuck’s Push to Brew Technology Reinvention.” CIO Dive, October 19, 2017.
  12. “Tal Saraf’s LinkedIn Profile.” LinkedIn.
  13. “Janet Landers — Starbucks Stories.” Starbucks, n.d.
  14. Meyer, Pauline. “Starbucks Coffee’s Organizational Structure & Its Characteristics.” Panmore Institute, February 14, 2019.
  15. “Jon Francis’ LinkedIn Profile.” LinkedIn.
  16. Troy, Mike. “The Social Solution.” Retail Leader, March 1, 2018.
  17. “A Q&A With Starbucks CTO Gerri Martin-Flickinger.” Transform, May 14, 2018.
  18. “Aaron Schaffer’s LinkedIn Profile.” LinkedIn.
  19. Soper, Taylor. “Starbucks Is a Tech Company: Why the Coffee Giant Is Investing Heavily in Digital Innovation.” GeekWire, August 1, 2017.
  20. Lauchlan, Stuart. “Microsoft Build 2018 — Starbucks Tech Team Brews up Digital Transformation with Azure.” diginomica. diginomica, May 8, 2018.
  21. Soper, Taylor. “Starbucks Is a Tech Company: Why the Coffee Giant Is Investing Heavily in Digital Innovation.” GeekWire, August 1, 2017.
  22. “A Q&A With Starbucks CTO Gerri Martin-Flickinger.” Transform, May 14, 2018.
  23. Garnick, Coral. “Starbucks CEO: A Digital Deal Could Be in the Cards.”, August 4, 2017.
  24. Whitten, Sarah. “Starbucks Shares Plunge 10% as CEO Johnson Says the Company Needs to Be More Disciplined.” CNBC. CNBC, June 20, 2018.
Tom Mohr

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