Starbucks - The Next Frontier of Innovation

Starbucks The next frontier of Innovation Strategic & Integrated Store Roll-out

Philip ThomasOptumplus

[email protected]

Context - Mission & Timeline

01

table of contents

Roll out - Connection & Reach;

Growth plans02WHAT - State of Affairs – Current

store roll-out: Method &

Weakness03

HOW - Creation of value -

Competitive Advantage 04WHY - Next Frontier of Innovation

– Strategic Store Roll-out; New

Time to market05Snapshot – Next frontier of

Innovation at Starbucks06

3

Mission & Timeline

Mission

To inspire and nurture the human spirit,

One person, one cup and one neighborhood at a time

Timeline

1971

Starbucks opens first store in Seattle’s Pike Place Market

1989

Total stores: 55

1999

Total stores: 2,498

2012

Total stores: 17,651 (as of July 1, 2012)

context

A Duarte-Slidedocs template

section 01

"What Starbucks has

created around coffee is an

extension of the front

porch……..Our stores have

become a gathering and

meeting place in addition to

the coffee."

Howard Schultz, CEO of

Starbucks, About Building

the World Class Starbucks

Brand

4

Connection & Reach

Connection

Connect with millions of customers every day

18,000 retail stores in 60 countries.

13,000 are in the North America

255 are in New York City

Reach

Stepped up growth across Indonesia and Thailand

Added two new markets -India and Vietnam 2012

More to come

roll out


section 02

"While we are a coffee

company at heart, Starbucks

provides much more than the

best cup of coffee—we offer

a community gathering

place where people come

together to connect and

discover new things."




Brand

State of Affairs

Current store roll-out:

Method & Weaknesswhat

6

Current Store Roll-0ut - Method

Observation

Starbuck have a standard store program

Adaptable to various and method delivery

Starbucks has opened on average two new stores every day

Store Role Out

Based on a Traditional Design & Construction Project Delivery method

The prototypical store model & the configuration is adaptable to a variety of uses

Use of Starbucks store design and specification

Myriad of Local firms are contracted out locally for AEC services

Involves a large number of internal resources and related cost

Takes a couple of months - an educated guess is 4-6 months+

state of affairs


section 03

"We look at the brand not as

a piece of advertising but

everything we do

communicates who

Starbucks is. The place, the

physical environment really

has become an extension of

the brand and it's very

important to the success of

the company."




Brand

7

Current Store Roll-Out - Weakness

Current Store Role out results in:

Average time to market per store is about a few months

Financial cost associated with delivery of stores

Loss of revenue while new store is under construction

Financial cost of store delivery affecting bottom line

Building and deploying stores is not a core competency of

Starbucks

State of affairs


section 03

"There’s a natural tension

between effectiveness and

cost …and, if we find the

right solution between the

two, we’ll improve the

company’s overall

competitive position." -

Mark Hutchins, Intel’s

Strategic Planning manager

Creation of value

Competitive Advantage &

Integrated Store Roll-outhow

9

For a Competitive Advantage

Creation of value for a competitive advantage

Through earlier store opening

Outsourcing of non Core Competency leads to increased profits

Reduced financial cost enable returns saved monies to fuel growth

Creating Efficiencies

Reduce dependences on myriad of AEC Local firms are

contracted out globally

Lower financial cost per store role out

Reduce cost per store as the quantity increases

Reduce work at each store location form the 4-6+ months to just

1 month

Once Ecosystem is establish Leverage to bring it 1 week per

store

creation of value


section 04

"Creating value is an

inherently cooperative

process, capturing value is

inherently competitive.”

Barry J. Nalebuff

Milton Steinbach Professor

of Management

Yale School of Management

Next Frontier of Innovation

Strategic Store rollout; New

Time to marketwhy

11

Strategic Store Roll-out

Converting AEC delivery to a Packaged Product

Translating the Starbucks Brand Design & Specification into a Kit

of Parts - (Think Product development)

The Kit of Parts to fit into a store as building blocks - (Think Lego)

Elements of the store manufactured as an individual components

level – millwork + equipment. - (Think Manufacturing)

Component level items > modularized into individual skids (Barista

area + washrooms) for delivery to store - (Think Modularization)

Prep work activities at each store focused on providing hooks up to

the various skids - (Think 1800 Wow 1 day PAINT)

Final assembling of the store building blocks (not construction) -

(Think Packaging Assembly line)

next frontier of innovation


section 05

"Left unchecked, market

forces continually conspire

to deplete profits. Powerful

business strategies can

counteract those

tendencies, but good

strategy is difficult to

formulate.”

Mastering the building

blocks of strategy. Mckinsey

Quarterly October 2013

12

New Time to Market

Initially New Stores

Start with a reduction to 1 month

To evolve to just a week

Aim to possibly just a weekend

Existing Store Renovation

Start of a new cycle of program & Delivery

Leverage global locations

START Nationwide

NEXT Continent wide

FINALLY Globally



section 05

"It is easiest to measure

those things that can be

measured most easily. But it

is not always true that the

most measurable things are

the most valuable”. – David

Seedhouse

Next Frontier of Innovation

Create a new Store delivery

Ecosystem to create value

through innovation

snapshot

14

Summary

Starbucks has opened on average two new stores every

day

The prototypical store model & the configuration is adaptable to a

variety of uses

Average time to market per store is about a few months

Financial cost associated with delivery of stores

Loss of revenue while new store is under construction

Building and deploying stores non Core Competency of Starbucks

Competitive Advantage through earlier store opening

Outsourcing of non Core Competency leads to increased profits

Reduced financial cost enable returns saved monies to fuel growth

Create a new Store delivery Ecosystem to:

Transforming the Supply Chain Infrastructure

Product development mindset

Repetitive Manufacturing & Modularization

Store Role as Assembling vs Construction



section 06

"It is easiest to measure

those things that can be

measured most easily. But it

is not always true that the

most measurable things are

the most valuable”. – David

Seedhouse

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Starbucks - The Next Frontier of Innovation

Leadership & Management

Transcript of Starbucks - The Next Frontier of Innovation