Leadership Changes at Starbucks: Troy Alstead Promoted. Howard to Lead Innovation.
On January 29, 2014, Starbucks announced major changes in their leadership structure. The official Starbucks newsroom article is here. I don’t usually just reiterate Starbucks newsroom information but this one is particularly interesting and significant.
Starbucks provided more details at a conference call on January 29, 2014, which can be streamed at the Starbucks investor relations page. Troy Alstead, who previously was the Chief Financial Officer, will become the Chief Operating Officer effective February 3, 2014. This means that he will be responsible for all the day-to-day operations at Starbucks.
Howard Schultz moves into a new position shifting his focus to innovation. He described it as such:
“Let me briefly highlight the moves that we are making today with specificity with regards to the organization. In partnership with our senior leadership team, including Starbucks Chief Digital Officer Adam Brotman, and Chief Strategy Officer Matt Ryan, I will expand my day-to-day focus on all things innovation, including coffee and tea, but with an emphasis on the Starbucks Experience that will really thread into all things digital: digital payments, areas of digital, mobile card, loyalty, and e-commerce. I think I spoke at length last week about the seismic shift in consumer behavior. That was not a December anomaly. That is going to happen, and happen quickly. And we believe strongly that any and all bricks-and-mortar retailers must understand, and must embrace this. And we are sitting with a set of assets that is unparallelled. The investments have been made, and now we’re going to ladder that up in ways that I think will add significant value not only to a new stream of revenue, but in doing so create more stickiness, more loyalty and more frequency inside our core business, as we really leverage the flywheel of Starbucks. I will also continue to work closely with our senior leadership team to continue to drive disciplined growth and operational excellence around the world, while ensuring that our next wave of growth is achieved through demonstration of our mission and values. With regard to Troy, first and foremost, let me personally congratulate on the promotion of Chief Operating Officer. With my focus on the next wave of growth, it is my pleasure to announce the promotion of Starbucks Chief Financial Officer Troy Alstead to the newly-created position of Chief Operating Officer. The addition of a COO will provide me more time to focus on innovation and strategic initiatives, while at the same time enable us to continuing sharpening our day-to-day operational focus and elevating Starbucks’ unique customer experience. In his new role, Troy will continue to report to me and will be responsible for aligning and prioritizing company investments across business units. The group presidents, Cliff Burrows who leads the U.S., Americas, and Teavana, and John Culver, who leads China, Asia, Pacific, and Channel Development and Emerging Brands, will now report to Troy along with EMEA president Kris Engskov. The company’s new CFO, who I will discuss next, will also report to Troy, as well as his existing senior direct reports who lead the company’s global technology and global supply chain organizations. I couldn’t be more grateful of, or proud of Troy for his significant contributions to Starbucks over the past 22 years. And I look forward to working with him for many more. I would also like to thank Cliff and John for all they’ve done to make Starbucks record fiscal ’13 and Q1 possible. I look forward to continue partnering with John and Cliff as trusted members of our senior leadership team.”
This is not “about succession planning, and it is definitely not about me leaving, or planning to leave the company,” said Howard Schultz at an investor’s conference.
So the shift appears to be all about innovation. What innovation do you envision in the future of Starbucks?
@DadCooks in what way? I’m not calling you out, but this is really news to me..
Shayne k. Sodetani
I would also like to know
@dad…you have to be kidding. Respectfully, with 20,184 stores selling coffee and food items across the counter and through the windows – a physical commodity that you consume in person one cup at a time, Starbucks does not look like a follower to me. Over 7 million members, customers loading $1.4 Billion onto Starbucks cards in the last 90 days alone from all over the world… Net revenues up 12%, EPS up 25%, income up 29%…a follower? Who exactly are they following? They know its more than all about money too. These results from a company who grew “too fast” once upon a time and purposely scaled back to improve…. For a company whose employees don’t want a union because they receive respect (with benefits)… A company that intends to invest over a billion $$ next year to explore new ways to connect with customers? Following? Okay. I’m sure there are some state of the art whizz bang technology companies out there, but guess what? They don’t sell coffee.
I agree with you sentiment GM. I recently watched the show, Dangerous Grounds. I was handcrafting some beautiful beverages today when I realized the big mural in our Ewa Beach, Hi store is still shots from the show. I shared my story with my partners & customers. The last 10 feet is in my hands and the beautiful woman tending to the coffee in our art piece probably carefully took care of 25 coffee cherries to make us just enough for one shot of espresso. Sharing the journey of farm to cup was awesome.
This is going to be fun to read in the morning! Hopefully before we get too far we can define what we mean by innovation. I think the definition is still “something new” or along those lines.
If Starbucks takes an idea like “genuinely friendly service” that has been around for centuries, and applies it to coffee. Is that innovation? If they find a way to apply it to 20,000 coffee shops at once is that innovation? [Probably not, because McDonalds was doing it for years.]
Dad might mean that Starbucks is just really good at collecting and spreading other people’s great ideas. But it will be fun to read in the morning.
Rather than centering on innovation, I really wonder what changes might be made with someone new taking over the day to day operations. As good as innovation might be unless the day to day operations are streamlined and customer service is at its top best, then innovation means nothing.
I think this is a wise move. During the first attempt carving out a COO position (followed by the constant musical chairs at the senior level, once HS returned to CEO) there was too much fear and confusion at every level to make the post effective. It is a different day at SBUX and this is the right next step. The furturist element of leadership in Seattle is being heard. We’ll see long-term fruit from Troy in this role.
@Purple1 – I think you make a good point there. The hallmark of Starbucks for decades is a premium experience, like a Nordstrom. All the innovation in the world won’t mask problems if that customer service just slowly slides downhill. I don’t think that’s happening, but I think your point is well taken.
@Jeremy – You’re right about constant musical chairs. I like the book Onward, but one thing in reading it is that lots of the characters in it are now longer with Starbucks or in completely different roles. Hopefully this works. Go Troy go!! 🙂
I don’t see much changing. Howard uses a lot of superfluous language to make it sound fancy, sure. All I really care about is: when is tipping coming to the Starbucks app?
The Starbucks website needs to be revamped. It is not user friendly when adding a card, transferring a balance, checking transaction history, etcetera. They need a new I.T. department head.
To @Kurt’s point, defining innovation for purposes of our comments here, I see “innovation” as finding new (or better) ways of accomplishing something. It may be a better way to solve an existing problem – or it might mean inventing something totally new that we didn’t have before. The best innovations usually simplify things – and as an engineer, I have found that simplifying things is incredibly difficult. It is easy to add complexity to a system to increase efficiency (value) for example, but it is really hard to go the other way. Steve Jobs was an absolute master of this philosophy and frankly I believe Howard Schultz is right there as well.
Simply managing the sheer scale of something as huge as Starbucks requires constant and continuous innovation. In order to solve basically “any” problem, you first have to be able clearly define what it is. This might sound obvious, but actually this is where the hard work towards simplification and innovation starts.
An example: The use of mobile payment processing. We are seeing this is where the future is, as customers from all segments of the retail industry have begun to adopt fledging mobile apps. A couple of years ago, the company invested $25 million in Square, but customers have yet to embrace it because so far it doesn’t add “value” for them. Conceptually, it is a GREAT idea. Walk into a store, and walk out with your purchase without handling cash or credit ( or gift) cards. Initially there was no training so baristas didn’t even know what it was, then you couldn’t add a tip, and it still doesn’t link to your rewards account (I don’t think) – so no value to any one involved – no wonder it won’t work. It basically needs to start over.
Start small (one store), don’t launch nationwide until every detail is perfect. Get everyone trained. Scale it up slowly. Only then, begin marketing with a proven system that everyone loves – show the customers what they “don’t know they need”.
Fast forward: I am walking down the street and my phone asks me if I feel like a cup of coffee because a store is nearby. I say “good idea”. The phone says “what would you like to order?” I say “the usual”. I go into the store where it is ready to pick up, a barista looks at his or her screen and recognizes me from my picture, hands over the drink, and says thanks. (I say you are welcome…) I optionally add a tip, and the transaction is done. No cards, no cash, no barcodes, no scanning, no fumbling, no questions, no standing in line, my rewards account is credited, and my bank account emails me a receipt.
Then we start working on the drive-throughs….
@GM – Starbucks better not fast forward too fast. The way they are handling rewards and promotions these days, it’s more like one step forward, two steps back. They can talk innovation until they are blue in the face, but Starbucks continues to trip and fall. They may be too top heavy with that big head of theirs on their corporate shoulders. Innovation is only as good as being able to execute it. If you can’t execute it well or at all, then talking about innovation is nothing more than a figment of Howard’s imagination. But you are free to disagree. From past experience with DadCook’s, I’m thinking he might be feeling the same way. Only time will tell whether they walk the walk or talk the talk.
I apologize to the folks whose toes I stepped on by stating that Starbucks is a technology follower, not an innovator.
As one who has been involved at the engineering, testing, and implementation level of technology innovation/development since the 1960s, I have a perspective that would take a lot of explaining. The technology that you and businesses are using today is stuff I have been involved with for many many years. Working with private industry, the military, and the government. In many cases starting at a conceptual level waiting for developments in hardware and software: examples (Universal Product Codes (UPC), Point of Sale Systems (POS), personal computers, SmartCards, the Internet, cell phones, WiFi, Radio-Frequency Identification (RFID), Near Field Communication (NFC), and things you will not see or use for 10 to 20 years.
I don’t want to turn Melody’s blog into argument, so I’ll get no more specific. If you feel different fine.
I wish Howard and his team good luck, but they are going to have to partner with real forward thinking companies and beware of short lived social media fads and websites that may “sizzle” but have no meat.
Well said DadCooks!
@DadCooks and @Chgo. — I don’t see any harm in a spirited discussion on this site. It’s a fine thing. Feel free to expand your thoughts! (Actually, I click the “approve” button on many comments where I don’t really agree with what’s being said, but there’s no personal attack, flaming, or mud throwing. I have to say, the comments in these threads tend to be great discussion. When I read comments on sometimes major newssites, I’m surprised how quickly they devolve into really childish behavior. I have to commend the readers here – that doesn’t hardly ever happen).
@GM Butler – I think what you describe could be awesome or could be disaster, all at the same time. The more moving parts you add to the order-a-beverage and pick-up-a-beverage process, the more something can breakdown. What I mean is problems like, “I’ll have my usual Tall Hazelnut Latte” only to go pick it up and be told, “We’re out of Hazelnut but your phone charged you? Do you want a different syrup or a refund?” or people who try to guesstimate when their drink will be ready, (“I app-ordered it ten minutes ago…”) only to walk in and realize their drink has been sitting, and that Tall Latte is now lukewarm, or their Frappuccino is melting and separating. “I know you app-ordered that breakfast sandwich but our oven is already off for cleaning/broken down … do you want a refund?”
I know Starbucks wants to develop some kind of technology to order by app. I know many people want this. I just can’t quite get behind it myself. Too many variables that can go wrong.
@Kristen – I want to know that too! If anyone reading this has some inside scoop, please contact me! Starbucks has been talking about tipping on the app for months and months and months!
@Melody – I know good things come out of these sort of discussions. Well usually…. Personally I would appreciate a little more innovation where it is needed now before they decide to move on to newer things. How about a little innovation fixing all the problems with the Gold Card and promotions and stars. How about fixing what’s wrong with the La Boulange products. I have no problem for the most part with La Boulange, but I’m starting to believe I am in the minority. I actually like most of the stuff, but love very little of it. But I’m thinking of all the other people who think differently than myself. I see too many things that I believe need fixing. I just don’t want to see them get to far ahead of themselves, because regarding some of the current things Starbucks is doing, there is some major room for improvement. Maybe these are things they plan to innovate. I don’t know! We’ll see.
Yes…wholeheartedly agree we don’t need or want the cart in front of the horse. Vision is one thing, execution is another – all very true. This is exactly what I was attempting to say with words like “basically needs to start over” and “scale up slowly”. We know there are a myriad of problems to work out with all this, and there is no shortage of ideas to explore arriving there. If anyone knows the consequences of “too much, too fast”, it is Howard, and the announcement of this realignment is no doubt precisely why it is occurring. Even with the uncertainty, I’m still a happy shareholder, and I’m willing to wait.
I totally agree with @ Chgo and @ DadC…. I see too many things every day that are definitely steps backward, and I’m not in the minority on this opinion. I think the very young folks or the McD..’s converts may not see anything this way but as someone who has been ‘with’ them for a long time, there’s not a lot of ‘good’. There are a lot of good parnters and sms and dms etc……kind and generous and I’m sure, doing their best. But Sbux is starting, I feel, to tie their hands behind their backs.
Personally, they can keep the VIA ‘lattes’, and really, the pastry is lacking! There are one or three things I like and will get when I’m really in need of a bite of something with my coffee…IF there is anything left! and this would be early afternoon! cases way bare. Many of the cafes need so much more attention….more help, more time for cleaning etc. It’s a shame, I think. But, we’ll see! (I AM enjoying the Yergacheffe however! 😉
@Denise – Rarely if ever do I buy a half pound of beans, but my wife loves the Yirgacheffe so much we bought a bag.They ran out at PR, so I picked some up at Harlem & Lake. The problem is that they aren’t restocking in stores. When it’s gone it’s gone.
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Sorry @Melody, but Starbucks has been shown to be a follower rather than an innovator. The tech companies that Starbucks has worked with are also followers. So I don’t not expect much.