Starbucks is the world’s largest coffee house chain, with over 28,000 stores, serving 100,000+ customers weekly and has annual revenues of 23B and a market cap of over 82B USD .
During the financial crisis, at the annual shareholder meeting, Howard Schultz, then CEO and president of Starbucks announced a 6 point transformation agenda to offer innovative and differentiated customer experience . One such initiative included launching an online community, MyStarbucksIdea.com to engage directly with the customers and get their inputs in defining the company’s future course. The website allowed individual to share ideas for Starbucks, vote on ideas and show progress on idea implementation .
Importance of open innovation to Starbucks
Customer experience and product quality are the two key success factor for any restaurant or coffee shop. With millions of customers globally, to maintain/ improve on customer experience Starbucks needs to constantly engage with the customer to ensure it evolves according to their needs. Increasingly with global expansion at the core of its growth strategy, it is quintessential to tailor product and customer service to local markets.
The competition in the coffee business is intensifying and Starbucks is not just facing increased competition from traditional coffee shops such as Tim Hortons and Dunkin Donuts but fast food restaurant such as McDonalds are now expanding their coffee portfolio. Another potential threat to the fundamental core business is the increased adoption of espresso machines and capsules, as these machines or other such technological innovations become cheaper, smarter and are able to mimic coffee brewed by the best barista, coffee shops in general could lose large customers.
Launch of MyStarbucksIdea.com
Open innovation forums like MyStarbucksIdea.com allows Starbucks to engage with and ultimately create engaged customers. By involving customers in refining products and store experiences, the company successfully taps into the brain power of millions of it’s diverse customer. As of December 2016, the website had received over 150K product, 55k experience and 30k involvement ideas . In its first 5 years of the program, the company had implemented 277 ideas, these included digital awards on the Starbucks card and free in-store Wi-Fi. Additionally through this initiatives customers helped introduce new flavors such as skinny beverages, hazelnut macchiato and pumpkin spice flavored coffee . Having an inventory of over 200,000 ideas, which continues to grow, the management is sitting on a gold mine of short-term tactical or long-term strategic initiatives.
Last year, Starbucks eliminated the community aspects of MyStarbucksIdea.com, hence now consumers do not have complete visibility of the inventory of ideas, which ones are in progress and can no longer vote on the best ideas . The website is now only to share your ideas with company and domain was changed to ideas.starbucks.com . I believe this was done because over the years the ideas became repetitive, and customers misused commenting features. Another factor for this could be that some initiatives may gather a lot popularity among customers, for instance accepting Crypto but not feasible to implement – which might upset the community. Ultimately the goal is still to gather ideas and listen to customers, the old website was more engaging and partially gamified the experience. Ultimately, I believe the management will continue to harness the collective power of the community to identity disruptive ideas in the short to medium term.
How Starbucks can further embrace open innovation
Getting ideas from customers has allowed Starbucks to innovate and roll out new products, improve in store experience and kept the customers engaged. I would recommend the management execute three initiatives to ensure it innovates ahead of the curve. Firstly they should continue to listen to the voice of customers and implement the best ideas. As Starbucks’ strategy is now shifting towards growth in China,  rolling out similar initiatives in China and other growth markets will allow it to offer tailored experiences to its local customers. Secondly, localizing flavors is quintessential. Having lived in Qatar and UAE, the overwhelming drink of choice in the country is Karak, a traditional South Asian tea, yet despite being in the Middle East for more than a decade, Starbucks has not introduced a Karak drink. I would urge Starbucks to introduce more local flavours in each geography. Lastly, having 200k plus Baristas, Starbucks could incentivize employees to share one new idea a month and the individual with the best idea could get recognition just like an employee of the month.
I believe Starbucks is well positioned to continue to innovate but have two key concerns. First, as espresso machines become more efficient and cheaper, does it pose significant threats to Starbucks’ business model– should Starbucks look to invest in self-service coffee machines and capsule flavors? Second does Starbucks adapts products appropriately to international markets and does the franchising model inhibit it from investing resources to localize flavors?
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 Melody, “Starbucks nixes the MyStarbucksIdea community: You can still submit ideas (blog), Starbucks Melody May 31, 2017, [http://www.starbucksmelody.com/2017/05/31/starbucks-nixes-mystarbucksidea-community-can-still-submit-ideas/], accessed November 2018
 Starbucks. “Submit your idea.” https://ideas.starbucks.com/index, accessed November 2018.
[Featured Image] Starbucks. “Submit your idea.” https://ideas.starbucks.com/index, accessed November 2018.