Starbucks: A Coffee Giant or Tech Company?

Zenoti works with large brands in the beauty and wellness world. Naturally, we think about what leads businesses to successful expansion and success. In this article, Sudheer Koneru, CEO at Zenoti, shares Starbucks' journey and their most critical aspect of success to scaling the business.

Starbucks: A Coffee Giant or Tech Company

As I sit here at Starbucks, very close to the original cafe in Seattle, I can’t help but be amazed at the transformation of Starbucks.  From a single store selling coffee beans, to a giant lifestyle brand and ultimately, a technology company.

20 years ago, Starbucks wasn’t any different from the many cafes that catered to Seattle’s coffee culture. The brand’s leader, Howard Schultz, broke away from his competitors and did the unthinkable - built an $80 billion company. How was he, of all the contenders, able to scale his business and why do they continue to be wildly successful today?

Strategy, certainly played a significant role in Starbucks’ wild success and there are obvious reasons why consumers love Starbucks, like their free wi-fi and warm ambiance. However, I’d like to focus on the infrastructure that is core to Starbucks as a business. The thing that makes it possible for them to execute so efficiently and make decisions that build deep customer loyalty. And in doing this, I’ll also make the case as to how spa and salon chains can follow a similar path to be wildly successful with their expansion goals.

The Starbucks’ digital transformation

Starbucks’ growth today is all about the effortless customer experience.  This keeps customers coming back frequently and spending more. As a regular customer, I know what keeps me coming back. Quite simply, they’ve made it incredibly easy for me to:

• Find a location nearby, wherever I am. I use their app to do this.
• Pre-order my drink. With a Starbucks in walking distance from my office, I’m able to place my regular order with 3 quick clicks while en-route. The drink is ready when I step up to the counter; it’s perfect timing - a hot drink without having to stand in line. The app also saves my sons’ regular orders for that extra bit of convenience when we’re out on weekends.
• Customize my drink. I’m not fussy, but I’m not a purist either - and I like my coffee with soy milk. It’s personalization that really works.
• Preload money into my sons’ account. My sons, a college freshman and high school freshman, have struck out on their own and along with their independence, I occasionally add money to their Starbucks apps. I’m sure there are a number of reasons why Starbucks enabled pre-paid amounts on their app, but for my sons, it means they can get their fix at the cafe close to their school just as easily as the ones near home.
• Receive perks as part of the rewards program. This program works so well because of how effortless it is to earn and redeem benefits. The app maintains a complete digital record and automates every aspect of the process; for example, I always have full transparency to my reward level. The other aspect that makes this rewards program appealing is that I can earn and redeem rewards across the network of Starbucks locations. These seem so basic, but very few spa and salon chains do this today - largely because their IT infrastructure doesn’t offer the sophistication that is required to elegantly solve for this.

Any Starbucks customers would have the same assessment as above. As a business head, it’s clear to me that Starbucks also benefits from an elegant business model and it’s streamlined, consistent processes in the back-end. For example, their consistency in processes makes for a mobile workforce. Employees can move between locations without missing a beat. I’m certain the talent acquisition team at Starbucks certainly appreciates this aspect!

How is this relevant to you?

In order to achieve success at scale, Starbucks became a technology company. I’ve shared examples of how software impacts the customer experience as these examples are easy to appreciate by any reader. But, at the core Starbucks relies on a solid IT infrastructure. This is true for all large-scale businesses from retail giants like Walmart to service companies like FedEx.  These companies understood early in their expansion that they could not create, deliver and market their products and services effectively without enterprise-class technology.

At Zenoti, we serve the enterprise beauty and wellness market. In the last few years, we’ve seen these companies waking up to the importance of tech investments. Similar to the Starbucks customer experience, we see technology transforming our industry's customer experience, whether it’s through things like:

• Effortless bookings with personalized requests that are automated or made through a mobile app or online capability
• Mobile payment capabilities that create a quick, effortless check-in and check-out experience
• Loyalty programs that work across the network and seamless enough to actually excite and engage the customer

The technology backbone also redefines business operations with things like:

• Complete transparency of business metrics across the network that combine the power of real-time analysis with rich data sources. This enables a business to not only monitor unit-level performance but do so down to individual employee performance.
• Transparency into what retail products are moving fast, that are less popular, trending in each region, etc…
• Understanding consumer behavior patterns to make actionable decisions that have a wide-spread effect. The Starbucks reward program, as simple as it is, shows their deep understanding of their customer.

I see an opportunity in every market segment, and certainly in the spa and salon market, for a new competitor to surprise the industry by redefining the customer experience. And, in doing so winning big in the market.

The key, I believe, is that companies need to think and act in equal parts a technology company and wellness company. Starbucks serves as a good role model. Business owners looking to expand their brand must recognize that they need true enterprise-class technology solutions and be willing to take a step back and challenge themselves on what they can do to enable their business for true success.