Starbucks is turning its eye to the digital world for part of its recovery strategy, according to an email Howard Schultz sent to partners on Friday. Shultz wrote that Stephen Gillett, who has been the company's CIO, will take on a new line of business, Digital Ventures, to "expand Starbucks reach in the digital space in a way that is profitable in the current business climate – organizationally nimble, small and focused on creating new revenue streams for the company." Gillett's new title will be senior vice president, Chief Information Officer & GM, Digital Ventures.
The move makes a lot of sense, since Starbucks is a hub of human activity that can become the anchor for virtual activities, as well. This is not the first time Starbucks has gone digital, having partnered with hyper-local physical goods distribution company Kosmo.com during the bubble years. That partnership relegated Starbucks to a drop-off location for Kosmos customers. The stores are much more than that to customers. Now that technology has matured and screens and WiFi are a normal and accepted part of the retail environment for customers, the stores can tap a vital role in social and virtual markets.
Starbucks has been a fascination of mine for many years, and not just because I am slowly replacing my blood with espresso. They've successfully created a "third place" that is an active community and a vital part of many of my neighbors' lives. It's the place I go more often during the month, other than home. Last fall, I wrote about the social efforts Starbucks has been working on, including V2V (volunteer-to-volunteer), MyStabucksIdea.com, and their then-nascent Twitter presence.
I met CEO Howard Schultz at a town hall meeting a couple months ago and had a brief conversation with him, in which he wholeheartedly endorsed the idea that Starbucks' new role is to fill the local organizational and informational hole left, in part, by vanishing newspapers. Unfortunately, I punctuated that conversation with a boneheaded reply to the question, "what do you do for a living?" I said, "It's hard to explain," rather than "I make media and the teams that make great media," "I help CEOs with digital challenges" or something equally pithy and clever. Maybe I'd have a job in the Digital Ventures group if I'd not been thinking about my daughter running out into the night while I spoke to Schultz. Alas, such is life.
This expansion of the digital effort into a separate line of business is the basis for a lot of right moves by Starbucks. They will need to partner judiciously, focusing on projects that use the stores as a lens for customers' concerns about their community or, conversely, their opportunities to connect and act globally (and commercially) beyond the Starbucks relationship.
Starbucks has thrived as a provider of selective presentation of quality food and a leisure experience, earning their customers' trust over many years. Each new Digital Ventures business relationship has to honor that customer relationship more than the initial business opportunity. On that foundation, of the importance of the customer, Starbucks can build a range of profitable partnerships. But if they think in terms of piling offers on the customer, which Schultz clearly wants to avoid based on his comments to the customer town hall meeting I attended, each new digital venture could put the main line of business at risk.