In every industry, companies want to be tech companies. Citibank loves quoting John Reed, CEO from the 1990s who said, “Citibank is not a bank with technology. It’s a technology company with a banking license.” Even McDonald’s and Chipotle are now saying they’re technology companies. Technology companies are cool. Technology drives efficiency, innovation, and customer engagement. But there’s one person who doesn’t want his company to be a technology company: Howard Schultz, founder of Starbucks. It’s because he knows what it means for technology to take over a company.
Starbucks has been a breakout success for mobile technology. Its mobile app has transformed the business. The app allows customers to order and pay ahead, skip the line, and earn rewards. It drove significant growth, increased customer loyalty, and even created a new revenue stream through gift card balances that act like interest-free loans to the company. As of late 2023, the app accounted for 31% of all transactions at U.S. company-operated stores. The Starbucks Rewards program, integrated with the app, now boasts over 34 million active members in the U.S., contributing to nearly 60% of the company’s sales in these stores.
But, Schultz says on the Acquired podcast, Starbucks is not in the technology business. It is in the “people business serving coffee.” Starbucks’ success comes from creating a unique experience centered around high-quality coffee and a welcoming environment. For Schultz, technology should support and enhance this mission, not redefine it. He says that the mobile app is Starbucks’ Achilles heel, threatening to to replace the core values that have defined Starbucks from the beginning.
He says that while technology is a disruptor, Starbucks itself has been a disruptor by transforming a commodity business—selling coffee—into an experience business. But he argues that technology disruption can be damaging. As more customers opt for mobile orders, issues like longer wait times and confusion at pick-up counters have emerged, shifting the focus from the in-store experience to the speed and efficiency of transactions. This threatens to turn Starbucks into just another coffee shop, eroding the community-focused, third-place experience that the brand was built on .
Starbucks could fix its mobile experience by finding a balance between convenience and experience. Schultz suggests that limiting the availability of the mobile app or slowing its rollout could have given the company more time to understand and mitigate its impact. Starbucks could also invest in refining the in-store experience for mobile order customers, ensuring that the technology enhances rather than detracts from the overall Starbucks experience. By prioritizing the human element and the sensory experience of visiting a Starbucks, the company can use technology to support its mission rather than allowing it to take over.
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