How Starbucks Is Using AI and More to Better Serve Its Customers

Like others in the space, changing market conditions are requiring the coffee giant Starbucks to make a shift in roles from pure beverage supplier to a tech company that sells coffee. External investments in technology and internal developments of new tech at its own innovation center now make it possible for the brand to use AI and other innovations to enhance the customer experience and streamline its operations. Here are some of the ways how.

Putting Ideas into Practice at The Starbucks Innovation Hub

Starbucks CEO Kevin Johnson believes that innovation should be measured in days, rather than in years or months. One hundred days, to be exact — which is the timeframe he imposes for putting new ideas into action. In this way, innovation can improve the customer experience and the day-to-day lives of partners working in Starbucks stores around the globe.

As an incubator for new ideas and techniques, the brand maintains an innovation hub on the ground floor of its Seattle headquarters. The Tryer Center is a bright, airy, 20,000 square-foot space. It looks like a cross between a science lab, a design studio, and a dot-com startup with its 3D printer, prototype sketches, and neon signs.

Starbucks senior leaders, partners, and baristas work there in small, cross-functional teams, on projects aimed at making day-to-day life easier and better for partners, and elevating every aspect of the customer experience. Since its initial opening in November 2018, over 130 projects have been developed and tested at the Tryer Center, with dozens of them already being implemented in stores.

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Kevin Johnson makes regular tours of the facility, where Starbucks partners can tell him about how they've created a new pomegranate-flavored iced beverage or developed a new system for customers to pick up their mobile orders.

As Johnson proudly testifies: "We've gone from large teams working in silos to smaller, cross-functional teams and from evaluating every idea as pass-fail to rapid iteration. We're using data science and machine learning to inform process and product development. We're listening to customers like never before, both quantitatively and qualitatively. We're empowering partners, all partners, unlocking energy from them to help us carve the path forward for the company."

Using Artificial Intelligence (AI) In the Deep Brew Initiative

One of Starbucks' major initiatives is Deep Brew, a project harnessing artificial intelligence (AI) to drive the brand's personalization engine, optimize store labor allocations, and drive inventory management in stores.

Deep Brew is working in tandem with IoT (Internet of Things) technologies, in what some might see as a counter-intuitive flip where data-driven AI is not only streamlining operations, but actually helping to humanize the customer experience.

An example of the operational aspect is the integration of Deep Brew AI in a new range of Mastrena super-automatic espresso machines, fitted with sensors that centrally log and analyze every shot delivered. Predictive analytics enables Starbucks to assess potential areas for tuning and preventative maintenance of the machines.

Deep Brew is also being applied to the Starbucks Rewards loyalty program, enabling deeper insights into consumer preference, and increased levels of personalization in service delivery. The result has seen a 15% growth in US membership to 17.6 million members in the last quarter of 2019, up 15% year-over-year.

Starbucks is investigating new use cases for Deep Brew which can free up its partners so they can spend more time connecting with customers.

Harnessing the Power of Mobile Apps for Customer Convenience

In China, digital orders made up 10% of the company's business this past quarter, with 7% coming from delivery and 3% from Mobile Order & Pay, Starbucks' app-based order-ahead feature.

Historically, the Starbucks mobile app allowed coffee lovers to place their orders in advance and collect them through a store window or by walking inside. Now, in line with its success in China, the brand is extending Mobile Order & Pay functionality to consumers in New York, where the beverage company has built Starbucks Pickup inside Penn Station.

It's a space devoted entirely to mobile orders with, as the company puts it, "a streamlined store experience for Starbucks Rewards members who order and pay with our app."

Customers with the Starbucks mobile app on their phones select Pickup-Penn Station as the location, then place their order. An order status board at Starbucks Pickup tells the customer where their coffee is. Baristas are on hand to help if needed, but their primary focus is to make drinks as orders come in on the app.

Starbucks Is Expanding Its Delivery Networks

As part of a drive to grow its network, Starbucks has been working to expand delivery through Uber Eats to nearly a quarter of its US locations. This will enable consumers to have their favorite coffee and breakfast sandwich delivered to their doors, rather than having to visit a Starbucks outlet.

Starbucks already delivers via Uber Eats in Miami, Seattle, Boston, Chicago, New York, Washington, D.C., San Francisco, Los Angeles, Orange County, Houston, and Dallas. Set to launch nationwide in 2020, Starbucks Delivers enables customers to place their orders via the Uber Eats app and track them in real time.

Starbucks Is Investing in the Technology of the Future

In July 2019, Starbucks announced it was taking an equity stake in restaurant tech company Brightloom — a startup that previously operated a chain of restaurants where customers ordered via kiosk and didn't need to interact with any employees.

Fulfilling the brand's need for a robust digital platform, Brightloom's initial work with Starbucks will focus on providing software for the company's license partners around the world.

And in what it calls an attempt to focus on "new ideas and technologies that are relevant to customers, inspiring to partners (employees), and meaningful to Starbucks business," the brand has made a $100 million cash commitment to anchor a new food-focused fund called Valor Siren Ventures, in partnership with the consumer and tech-focused private equity firm Valor Equity Partners.

These moves are fully in line with the Starbucks commitment to a technology-driven future. As CEO Kevin Johnson puts it: "We believe that innovative ideas are fuel for the future, and we continue to build on this heritage inside our company across beverage, experiential retail, and our digital flywheel."

Personalization, loyalty programs, investment initiatives, and the use of innovative technologies like AI are all set to be hot topics at Future Stores West 2020, which takes place between June 16 - 18, 2020, at The Sheraton, Seattle.

Download the agenda today for more information and insights.

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