Starbucks, Your Local Tech Company

I am not sure about anyone else, but this mid-semester slump hit a little harder this year than in years past. When that happens, I wade it out a week and then back at it adding the required third cup of coffee late in the day to make through classes. This year’s mid-semester slump I decided to take advantage of my required stop at Starbucks and start to question what other technology are they using through application and in the store? 

I will preface this with, that I know we covered Starbucks a few weeks ago with their order ahead or order in-person discussion but did you know that they use technology in every facet of your interaction with Starbucks? I am sure you have thought of it, or assumed they must have, but I will do you one better and share what they are doing every time you order and walk through the door.  

A fun fact that I learned, is that Starbucks has partnered with Microsoft to enhance the Starbucks customer experience into a more personal, seamless interaction in all its stores by implementing advanced technologies, ranging from cloud computing to blockchain. 

If you want an interesting listen that covers much of what I will highlight below, check out How Starbucks is using AI to improve the customer experience. 

Implemented Technology 

  • Reinforced Learning Technology – Artificial Intelligence 
  • Internet of Things (IoT) 
  • Blockchain 

First, we all have interreacted with the mobile application, whether us or a friend. But have you noticed that mobile application recommends items to you that compliments your original purchase? That is because they have implemented Deep Brew, an in-house artificial intelligence, that uses reinforcement learning technology that is hosted in Microsoft Azure. This technology is a type of machine learning in which the system learns to make decisions in complex, unpredictable environments based upon external feedback and then provides a more personalized experience for customers. Customers receive tailor-made order suggestions generated by the reinforcement learning platform. Members now receive thoughtful recommendations from the application for food and drinks based on local store inventory, popular selections, weather, time of day, community preferences, and the customers previous orders. The next area of expansion for this technology is their drive thru.  

The implementation of this technology in their drive thru is not as straight forward as the application. The application houses individual order histories, that feeds into Deep Brew, and they are not able to replicate individual order histories through the drive thru until a customer user the application to pay or cash in their rewards. So, you must think to yourself, how will they anticipate and make recommendation to drive thru users.? They will use different data! They will use the transaction histories of that store and more than 400 other store-level criteria to generate these real time recommendations.  

Second, they have implemented the Internet of Things (IoT) to support a seamless operation. A glitch in any device can mean service calls, repair costs, and, more significantly, equipment problems that could potentially interfere with their primary goal of providing a consistently high-quality customer experience. The IoT-enabled machines collect more than a dozen data points for every shot of espresso pulled, from the type of beans used to the coffee’s temperature and water quality, generating more than 5 megabytes of data in an eight-hour shift. This data is then aggregated to identify problems proactively and enables Starbucks to send new coffee recipes directly to machines. As they continue to refine the use of IoT Starbucks for preventive, measures they are also looking to use this in the future for managing inventory and ordering supplies. They are also looking to use their influence with the suppliers of their devices to build more robust solutions into the future versions of their products. 

Third, Starbucks uses blockchain to innovate ways to trace the coffee’s journey from farm to cup and connect the people who drink it with the people who grow it. This new feature, powered by Microsoft’s Azure Blockchain Service, allows supply chain participants to trace both the movement of their coffee and its transformation from bean to the final bag. A fun rumor that has been swirling since their announcement of using of blockchain, is that Starbucks may start accepting bitcoin payments in its U.S. locations.  

So now that you know all the technology behind your Starbucks experience, do you still only think of them as a coffee shop? Or do you start to see them as a Tech company? 

References:

10 comments

  1. Surprising to hear Starbucks is capitalizing on BlockChain! With the implementation of bitcoin and other cryptocurrencies through tracking, I wouldn’t be shocked if they start accepting Bitcoin payments directly in the next couple of years. As of right now, I know the Bakkt App allows users to convert cryptocurrency — along with “supported loyalty and rewards points”— into U.S. dollars, and then put that value onto the Starbucks card that is saved in the Starbucks app. But as for direct payment exchanges, we still have a little ways to go.

  2. Super interesting blog! I had no idea about Starbucks entering the Blockchain industry, couldn’t be more excited.
    I hope we gonna see Starbucks and other major players accepting cryptocurrencies as valid payment methods, but there is still a long path to walk.

  3. I still consider them to be a retail store in the coffee and snacks industry. To be considered a tech company, I feel like you need to contribute to an entire ecosystem of people. Though these features are sure to attract more customers towards these technologies, they are decades away from truly transforming into a tech company. Consider Tesla, which is in the automotive industry. They are one of the industry-wide leaders in vehicles, but their core differentiator is the ability of Tesla’s fleet of models to “self-drive.” Because of this one feature, Tesla is more of a tech company than a car company, solely because the driving characteristic is no longer there. So, how can a Tesla be considered a car, it’s a computer. When Starbucks gets to this staus, then I think we can call them a tech company. It’s great to see them moving away from the traditional model they’ve failed to move away from.

  4. Very interesting post! I can’t stop thinking about the fact that Starbuck collects more than a dozen data points for every shot of espresso pulled.

    Something that I am curious about is how often people actually purchase the personalized recommendations. I feel like coffee drinking is very routine. For example, my mom drinks a coffee every morning and she takes her coffee the same way. Iced, with no sugar and with a bit of skim milk. I am not sure she would respond to the suggestions. Has anyone purchased a recommended product? If so, did you purchase that product again?

  5. I find it really interesting how this story aligns with what I originally presented on in class #2, where Kroger utilizes AWS but is currently pushing us to migrate all web services to Azure. I think the Whole Foods acquisition for Amazon was obviously a big move for their e-commerce division, but really pushed all of their food/grocery oriented clients away from AWS since it is supporting direct competition. It’s also a gamble with how new Azure is as a web hosting platform, compared to AWS’s track record in the field.

    I also need to comment on the implementation of blockchain! So cool to see that hitting mainstream company architecture now… there are so many other cool potential implementations of centralized psuedo-blockchains that still require fully centralized hosting. Can’t wait to see where this goes in the future.

  6. I love this — would be so curious to see how this functions from the employee perspective and how this has either enhanced their experience as a staff member or made it more difficult. The supply chain issues have been really present at the Starbucks I frequent most often (the Brighton location on Washington Street) and you can tell that has not been the norm for those employees, speaking to a likely well-run system of ordering and supply chain. Hopefully none of the disruptions will affect the progress being made by companies like Starbucks!!

  7. I feel like Starbucks was one of the first to really integrate with a digital strategy. From payments to order, I feel like they have led the way with serving their customers with digital lattes for years. I do remember, though, how cool it was to get the gold Starbucks card in the mail when you finally achieved Venti status! I really enjoyed learning about blockchain coffee at the end. It’s a commodity and thus is susceptible to fraud and copycats.

  8. Nice. One VC I’ve heard speak says that basically all companies are tech companies, or they won’t be around for that much longer.

  9. Wow! I had no clue that Starbucks was committed to investing in technology, and it was such a big part of their business. I was aware of the mobile app, but I didn’t know that technology was a massive part of their business model. Fascinating to learn how they use their data to improve the overall current and future experience. Thanks for sharing this article and opening my eyes. I agree with you Starbucks is a tech company!

  10. I’ve always looked at Starbucks from a purely strategical point of view – their differentiation was that they have boutique style coffee shops, friendly staff, cozy atmosphere, and the variety, quality and flavors of coffee they were offering to appeal to a large customer base. I never considered them to be a tech company but just as you wrote in your blog, they have incorporated tech into all aspects of their business. This is an important move for them to be a leader in the industry, perhaps more important than the other points of differentiation created (i.e. The difference in the customer experience between Dunkin and Starbucks!)

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