Innovation Strategy at Starbucks: Fail Fast and Learn

Dateline: June 7, 2013

Welcome to our Friday WRAP – one thought-provoking idea to think about over the weekend.

Innovation, particularly technology-based innovation, is the lifeblood of organizational growth and therefore a critical part of the CIO’s agenda.  A recent Fast Company article, Risky Innovation: Will Starbucks’s Leap of Faith Pay Off?, by author Austin Carr, chronicles the technology-based innovation approach taken by the coffee chain.  Starbucks has been very successful with their approach; it  is credited with significantly contributing to their impressive 14% revenue growth last year.  Their secret:  an innovation approach that is more ‘typical of start ups than corporate giants,’ according to the article.

Starbucks accepts that innovation is messy, and it is willing to suffer setbacks here and there to be a disruptive force. In early 2011, when the company unveiled its mobile payments app, which lets customers buy lattes by scanning their iPhones or Android devices, the launch was marred by glitches. “For the first four to six months, we were solving one [problem] after another, and we probably had more misses than hits before we reached a tipping point,” says Ryan Records, Starbucks’s VP of payments. “But then it became seamless and flawless and an elegant way to pay.” Now Starbucks generates more than 3 million mobile transactions per week–accounting for roughly 10% of its total U.S. tender.

Not everyone agrees.  A Columbia Business School professor suggested that,

It’s a bad strategy and a bad philosophy, and I think when customers are exposed to this behavior, they’re just ripped…It diminishes your brand equity. You should do everything possible to get it right on day one. Starbucks is not a startup. To behave as a startup is completely irresponsible. Innovation is good, but unwarranted testing at the customer’s expense, even at a rather small scale, is unacceptable.

Starbucks’ chief digital officer disagrees,

You can’t move forward and be a leader and an innovator if you’re only worried about the downside, but please don’t mistake that for being cavalier.

How does your organization innovate?  How would your organization respond to a strategy similar to Starbucks?

That’s a WRAP!  Have a wonderful weekend.

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