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Starbucks - The Next Frontier of Innovation

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What could be the next frontier for Starbucks?
Store roll-out innovation to create a competitive advantage.

Starbucks has opened on average two new stores every day
The prototypical store model & the configuration is adaptable to a variety of uses
- Average time to market per store is about a few months
- Financial cost associated with delivery of stores
- Loss of revenue while new store is under construction
- Building and deploying stores non Core Competency of Starbucks
- Competitive Advantage through earlier store opening
- Outsourcing of non Core Competency leads to increased profits
- Reduced financial cost enable returns saved monies to fuel growth

Starbucks needs to create a new Store delivery Ecosystem to:
- Transforming the Supply Chain Infrastructure
- Product development mindset
- Repetitive Manufacturing & Modularization
- Store Role as Assembling vs Construction

Published in: Retail
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Starbucks - The Next Frontier of Innovation

  1. 1. Starbucks The next frontier of Innovation Strategic & Integrated Store Roll-out Philip Thomas Optumplus philip.thomas@optumplus.com
  2. 2. Context -Mission & Timeline 01 table of contents Roll out -Connection & Reach; Growth plans 02 WHAT -State of Affairs –Current store roll-out: Method & Weakness 03 HOW -Creation of value - Competitive Advantage 04 WHY -Next Frontier of Innovation –Strategic Store Roll-out; New Time to market 05 Snapshot –Next frontier of Innovation at Starbucks 06
  3. 3. 3 Mission & Timeline Mission To inspire and nurture the human spirit, Oneperson, onecup and oneneighborhood at a time Timeline 1971 Starbucks opens first store in Seattle’s Pike Place Market 1989 Total stores: 55 1999 Total stores: 2,498 2012 Total stores: 17,651 (as of July 1, 2012) context A Duarte-Slidedocstemplate section 01 "What Starbucks has created around coffee is an extension of the front porch……..Our stores have become a gathering and meeting place in addition to the coffee." Howard Schultz, CEO of Starbucks, About Building the World Class Starbucks Brand
  4. 4. 4 Connection & Reach Connection Connect with millions of customers every day 18,000 retail stores in 60 countries. 13,000 are in the North America 255 are in New York City Reach Stepped up growth across Indonesia and Thailand Added two new markets -India and Vietnam 2012 More to come roll out A Duarte-Slidedocstemplate section 02 "While we are a coffee company at heart, Starbucks provides much more than the best cup of coffee—we offer a community gathering place where people come together to connect and discovernew things." Howard Schultz, CEO of Starbucks, About Building the World Class Starbucks Brand
  5. 5. State of Affairs Current store roll-out: Method & Weakness what
  6. 6. 6 Current Store Roll-0ut -Method Observation Starbuck have a standard store program Adaptable to various and method delivery Starbucks has opened on average two new stores every day Store Role Out Based on a Traditional Design & Construction Project Delivery method The prototypical store model & the configuration is adaptable to a variety of uses Use of Starbucks store design and specification Myriad of Local firms are contracted out locally for AEC services Involves a large number of internal resources and related cost Takes a couple of months -an educated guess is 4-6 months+ state of affairs A Duarte-Slidedocstemplate section 03 "We look at the brand not as a piece of advertising but everything we do communicates who Starbucks is. The place, the physical environment really has become an extension of the brandand it's very important to the success of the company." Howard Schultz, CEO of Starbucks, About Building the World Class Starbucks Brand
  7. 7. 7 Current Store Roll-Out -Weakness Current Store Role out results in: Average time to market per store is about a few months Financial cost associated with delivery of stores Loss of revenue while new store is under construction Financial cost of store delivery affecting bottom line Building and deploying stores is not a core competency of Starbucks State of affairs A Duarte-Slidedocstemplate section 03 "There’s a natural tension between effectiveness and cost…and, if we find the right solution between the two, we’ll improve the company’s overall competitive position." - Mark Hutchins, Intel’s Strategic Planning manager
  8. 8. Creation of value Competitive Advantage & Integrated Store Roll-out how
  9. 9. 9 For a Competitive Advantage Creation of value for a competitive advantage Through earlier store opening Outsourcing of non Core Competency leads to increased profits Reduced financial cost enable returns saved monies to fuel growth Creating Efficiencies Reduce dependences on myriad of AEC Local firms are contracted out globally Lower financial cost per store role out Reduce cost per store as the quantity increases Reduce work at each store location form the 4-6+ months to just 1 month Once Ecosystem is establish Leverage to bring it 1 week per store creation of value A Duarte-Slidedocstemplate section 04 "Creating valueis an inherently cooperative process, capturing value is inherently competitive.” Barry J. Nalebuff Milton Steinbach Professor of Management Yale School of Management
  10. 10. Next Frontier of Innovation Strategic Store rollout; New Time to market why
  11. 11. 11 Strategic Store Roll-out Converting AEC delivery to a Packaged Product Translating the Starbucks Brand Design & Specification into a Kit of Parts -(Think Product development) The Kit of Parts to fit into a store as building blocks -(Think Lego) Elements of the store manufactured as an individual components level –millwork + equipment. -(Think Manufacturing) Component level items > modularized into individual skids (Barista area + washrooms) for delivery to store -(Think Modularization) Prep work activities at each store focused on providing hooks up to the various skids -(Think 1800 Wow 1 day PAINT) Final assembling of the store building blocks (not construction) - (Think Packaging Assembly line) next frontier of innovation A Duarte-Slidedocstemplate section 05 "Left unchecked, market forces continually conspire to deplete profits. Powerful business strategies can counteract those tendencies, but good strategy is difficult to formulate.” Mastering the building blocks of strategy. Mckinsey Quarterly October 2013
  12. 12. 12 New Time to Market Initially New Stores Start with a reduction to 1 month To evolve to just a week Aim to possibly just a weekend Existing Store Renovation Start of a new cycle of program & Delivery Leverage global locations START Nationwide NEXT Continent wide FINALLY Globally next frontier of innovation A Duarte-Slidedocstemplate section 05 "It is easiest to measure those things that can be measured most easily. But it is not always true that the most measurable things are the most valuable”. –David Seedhouse
  13. 13. Next Frontier of Innovation Create a new Store delivery Ecosystem to create value through innovation snapshot
  14. 14. 14 Summary Starbucks has opened on average two new stores every day The prototypical store model & the configuration is adaptable to a variety of uses Average time to market per store is about a few months Financial cost associated with delivery of stores Loss of revenue while new store is under construction Building and deploying stores non Core Competency of Starbucks Competitive Advantage through earlier store opening Outsourcing of non Core Competency leads to increased profits Reduced financial cost enable returns saved monies to fuel growth Create a new Store delivery Ecosystem to: Transforming the Supply Chain Infrastructure Product development mindset Repetitive Manufacturing & Modularization Store Role as Assembling vs Construction next frontier of innovation A Duarte-Slidedocstemplate section 06 "It is easiest to measure those things that can be measured most easily. But it is not always true that the most measurable things are the most valuable”. –David Seedhouse
  15. 15. Please attribute SmartWerke with a link to: www.smartwerke.com This work is licensed under the Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/
  16. 16. coordinates For more info & consulting based on the content, please contact us at info@ optumplus.com 1 778 724 0233 www.optumplus.com www.smartwerke.com thank you

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