Onward (53 page)

During the previous holiday season, for example, we had used our
then nascent Facebook page to tell our Facebook friends about (STARBUCKS) RED, exposure that helped boost Starbucks’ (PRODUCT) RED sales to provide the equivalent of more than 3.4 million days of antiretroviral medicine for people with HIV or AIDS in Africa. The next month, on January 20, 2009, when Barack Obama was inaugurated as the 44
^th
president of the United States, Starbucks encouraged its online fans to come into our stores and pledge volunteer time. All told, our stores recorded 1.2 million hours of pledged service.

With the understanding that digital and social media would continue to play a role in how we engaged with customers and went to market, we invited Facebook's chief operating officer, and one of Google's first 300 employees, Sheryl Sandberg, to join our board of directors. At the same time, I was pleased to also recruit Kevin Johnson to join the board. I had gotten to know Kevin when he was with Microsoft, where he was president of the group running the Windows and online services businesses. He had recently become the chief executive of Juniper Networks; his presence on the board would give us another active CEO point of view. And both Sheryl's and Kevin's combination of technology, business, and leadership skills would add more depth to our board.

In the spring of 2009, I felt confident that few other companies were leveraging social and digital media as we would continue to do, and each day brought new possibilities.

Yet we had to tread carefully.

The wrong tone, message, or association risked diluting our brand or harming our customer relationships. We had to be incredibly selective in how and where Starbucks showed up digitally—stay open to innovative ideas, definitely, but act deliberately.

Standing in front of the leadership team in our boardroom, Starbucks’ chief information officer Stephen Gillett was explaining how Starbucks could significantly increase monthly comps almost immediately.

I had asked the team to think big and then think bigger. Even with VIA on its way to market, there was never a silver bullet and we needed to continue to challenge ourselves: What else could we do to add value for our customers as well as shareholders? How could we make better
use of all the assets Starbucks had? Stephen, almost one year into his role, not only was overhauling our IT systems, but also had come up with something no one else at the table could have imagined.

“How many of you know GameStop?” Stephen asked. No hands went up. GameStop, he informed us, is the world's largest retailer of new and used video games. And while the rest of the retail world was suffering, GameStop's comp sales at its 6,000-plus locations had been up 10 percent in the last quarter. Starbucks had been down 10 percent. Then Stephen posed another question. “Does anyone know the number-one–selling online game of all time?” Again, no hands.

Stephen smiled. “World of Warcraft.”

The name could not have been more foreign to me. Stephen went on to explain to the equally bemused Starbucks leadership team that World of Warcraft is an online, interactive, multiplayer fantasy game where—in a make-believe world akin to that in the
Lord of the Rings
tales—human players create their own digital characters that embark on adventures and quests, acquiring points along the way. Apparently, almost 12 million people around the globe play World of Warcraft, and Stephen was not only one of them, we would soon learn, but also among the most successful and renowned players, a star within the gaming community. And that community, Stephen said, consists mostly of males ages 18 to 34, a demographic that Starbucks had yet to capture.

Stephen was suggesting that Starbucks explore the GameStop business model—clearly they were doing something right—as well as a possible relationship with World of Warcraft's parent company, Blizzard Entertainment. Maybe we could sell video games in our stores. Maybe a virtual Starbucks “pet” could become part of the Warcraft world of coveted characters. How about a Starbucks–World of War-craft Rewards Card?

At first blush, such a relationship seemed unlikely. But the numbers Stephen had pulled together should such a relationship succeed were extremely compelling. A Starbucks partnership with Blizzard, he projected, could quite possibly usher millions of new customers into our stores around the world, leading to much-needed comp sales growth.

I sat back in my chair. I'd asked for big, out-of-the-box ideas, and Stephen, who is not a merchant but an information technology professional, had certainly delivered. Although it was obvious that “war-craft” did not fit with Starbucks’ values, I resisted jumping to
conclusions as people had with VIA when they had assumed without much knowledge that the idea would fail. I wanted to give Stephen the benefit of at least exploring the idea. So, in April 2009, a small group of us flew to Blizzard Entertainment's headquarters in Irvine, California.

The only sign that Blizzard is not a staid software outfit but a fantasy gaming producer is a 12-foot-tall bronze statue of an Orc warrior, one of the types of characters in World of Warcraft, riding a menacing wolf at the building's entrance. I shook my head, but Stephen was smiling from ear to ear. He was in his element. After meeting with Blizzard's executives and discussing their business model and intensely passionate customer base, I was impressed. Rarely had I seen such devotion to a product! In many respects, Blizzard's customers are a lot like ours.

I flew back to Seattle and left Stephen in Irvine to further explore options. He was joined by one of Starbucks’ newest partners, Adam Brotman, who had founded the Redmond, Washington–based PlayNetwork, which provides customized music programming and systems for Starbucks stores and other retailers. Adam possesses a natural curiosity and a knack for melding business strategy, marketing, and technology, and Stephen had asked him to help Starbucks develop a new business unit, Digital Ventures.

On their flight back to Seattle, Stephen and Adam debated the pros and cons of a Starbucks-Blizzard partnership. It had undeniable potential to make Starbucks relevant to a new demographic, young adult males, and drive massive numbers of new customers into our stores, giving us an almost overnight sales boost. So very, very tempting. But by the time the plane landed, they had agreed with what Michelle and I had also concluded: World of Warcraft simply strayed too far from Starbucks’ core.

Again, this was not an easy choice given the financial and competitive pressures Starbucks was under. Any company, when faced with adversity, would be tempted to go forward with an idea that promises to quickly erase pain. But in business as in life, people have to stay true to their guiding principles. To their cores. Whatever they may be. Pursuing short-term rewards is always shortsighted. So while on one level, Stephen Gillett would have loved nothing more than to be in business with Blizzard Entertainment, he—as well as Adam, Michelle, and I—had the intuitive sense to know that World of Warcraft, while
a fascinating product and phenomenal employee culture, was not the right fit for Starbucks at this time.

Exploring an imperfect idea can often lead to a better one, and Stephen's original vision led us to ask some important questions about how Starbucks might connect even more deeply with customers in the digital space, especially given the unique power and incomparable reach of our in-store wireless networks. Starbucks had the largest footprint of company-owned stores with Wi-Fi in the world, and millions of customers already logged on every day.

Hovering above every third place is a virtual fourth place, and the time had come for Starbucks to use it much more deliberately as a way to offer new value to our customers.

Innovation, as I had often said, is not only about rethinking products, but also rethinking the nature of relationships. When it came to our customers, connecting with them in a store and online did not have to be mutually exclusive experiences. Figuring out exactly how the retail and virtual worlds might coexist would be a matter of connecting the dots, and just as I had with Chris Bruzzo, I had given Stephen license to be disruptive, which was exactly what he and Adam tried to be after returning from Irvine.

For the next few months, Adam hit the road, meeting with people at all kinds of companies to listen and learn about their products and business models while exploring possible relationships. Almost every company, he quickly realized, wanted to strike a deal with Starbucks to introduce its products to our customers. In a way, this was surprising. Despite the pummeling the company was taking in the press and on Wall Street, we remained a brand others wanted to be associated with. Our role as a discriminating curator of music and books could extend to other things. Obviously, Starbucks was not interested in once again cluttering store shelves with irrelevant products—we had learned that lesson—but the power of our brand's affinity was yet another under-utilized asset, a subtle but important truth.

One day, in conversation with a provider of online financial services, Adam posed a question: Would the company be willing to give its content away for free, but only to customers in Starbucks stores? The answer, he was told, was yes. Dots began to connect.

Our customers were already inviting Starbucks into their digital
lives through their social networks. What if we extended that emotional connection by giving them more reason to meet us online? What if we partnered with, say, news organizations, book publishers, and music companies to offer our customers who were using the Starbucks in-store networks free access to exclusive digital content? Yes, for years we had been introducing people to new music and books in our stores, but this would be different, an even more dynamic, multifaceted way for us, as a retailer, to add another level of value to people's experiences in our stores. Someone sitting at a table using a laptop would, for instance, be able to watch an exclusive movie preview, get free access to premium services, read newspaper articles he or she otherwise might have to pay for or that others could not yet access. And, because our networks are hyperlocalized, maybe we could further connect customers to places and activities in their communities. A farmer's market. A restaurant. A play or an upcoming blood drive.

The potential was exciting. Creating a Starbucks digital network that served as a private channel for our customers could further bridge the virtual world of the Internet and the physical world of stores as well as the neighborhoods where we do business. Such an innovative tool extended the third place experience and stayed true to one of the original three pillars of the Transformation Agenda: reigniting Starbucks’ emotional attachment with its customers.