Starbucks Creativity Profile

Featuring: Michael Calo, Berket Nega and Brendan Rogers

HISTORY AND BACKGROUND

Starbucks was founded in 1971 by Jerry Baldwin, Zev Siegl, and Gordon Bowker in

Seattle, Washington. It started a place that strictly sold gourmet coffee beans, based on the idea

of Peet’s coffee already established in California. Jerry Baldwin actually worked at Peet's. When

they opened up their own coffee shop in Seattle in 1971, they bought all their raw beans from

Peet. The Starbuck’s name comes from Captain Ahab's first mate in the classic novel Moby

Dick. The startup ended up doing well and has continued to grow.

In 1980, Zev Siegl sold his stake in Starbucks, when Starbucks had six retail outlets. A

year later, Howard Schultz noticed the number of thermoses that Starbucks was buying from

Hammarplast, his employer. Impressed with Starbucks’ knowledge of coffee, Howard Schultz

asserted his interest in working with them in hopes of providing a new vision for the growing

brand. In 1982 Schultz was hired as their head of marketing. From there he was sent to attend an

international show in Italy. Schultz found himself enthralled with the coffee culture. He noticed

things beyond the gourmet coffee; the customers were talking and enjoying each other’s

company. Inspiration struck and Schultz wanted to provide that same elegant environment in

America. "Why not create community gathering places like the great coffee house of Italy in the

United States?" Could the Old World meet the New World? If it succeeded, it would be

marketing genius.” (Garza, 2015) By 1983 Schultz wanted to imitate the magic behind the Italian

coffee shop and wanted to try selling gourmet drinks rather than just gourmet beans

Schultz's vision did not agree with with Baldwin’s. Baldwin was not ready to get into the

restaurant business and did not want to stray from his original plan based on the Peets business

model. Since Schultz couldn't convince Baldwin and the other owner’s, he went his own way to

start the Il Giornale chain of coffee shops in 1986, which was named after the biggest Italian

newspaper. Two months later, the new store was serving more than 700 customers a day, and it

was selling 300% more than the Starbucks locations.

In 1987 the owners of Starbucks Coffee Company decided to sell the business to a group

of local investors for $3.7 million. After Baldwin sold his stake in Starbucks, he later became the

chairman of Peet's and eventual director when the company went public.

Schultz raised the money by convincing investors of his vision that they could open 125

new shops in the next five years. He also changed the Il Giornale bare-breasted mermaid logo

into a more “appropriate” one. The company name surprisingly changed from Il Giornale to

Starbucks and changed the existing locations into elegant, comfortable coffee houses. After

conquering Seattle, the chain expanded across the United States and then internationally. The

first location outside of North America was in Tokyo, Japan where they have an even bigger

presence today. Over the course of its history, Starbucks has bought or acquired companies like

their inspiration Peet's, Seattle's Best Coffee, etc.

In 1992 the company went public and Starbucks continued to grow at an exponential rate

that the coffee industry had not seen before. By 1997 the number of Starbucks Coffee stores

grew 10 times more than before the IPO, with locations internationally. In the late 1990’s the

company was opening a new location almost every workday.

Starbucks' growing success was largely accredited to word of mouth advertising. “In

2004, Starbucks reached a record 1,344 stores worldwide and later having more than 9,000

locations in 34 countries serving 20 million customers or more a week. Today, Starbucks has

expanded to more than 17,000 stores in 55 countries around the world. Their biggest presence is

still in the United States, with 11,000 locations.” (Catalog, 2015)

Although very successful, Starbuck's received a lot of criticism. Their reputation of

taking over smaller businesses and forcing out competitors had caused some to think of

Starbucks being too corporate and too powerful for the relaxed lifestyle of the coffeehouse

demographic. At the same time, Starbucks does promote Fair Trade coffee products and have

been well known for endorsing the green movement by recycling and making eco-friendly

locations. Fair Trade meaning that the goal is to empower farmers by getting them fair prices for

their harvest, help create safe working conditions, and provide a decent living wage for workers

by paying “above market” prices for coffee produce. They are eco-friendly by promoting

renewable energy to power their operations and re-usable products such as containers. If

customers are not using the reusable containers then at least their disposable products are partly

made of recyclable materials.

Starbucks has received criticism because its operations are not truly green, but they claim

they are working toward that goal of being 100% green. Starbucks’ history has its pros and cons,

but either way it is a household name that most people love. For example, here are quotes from

customers that show loyalty to this very successful brand:

"I've been a Starbucks fan since I lived in Portland in the late 80's and I've been in Mississippi

for the past 11 years enjoying Starbucks." (CNN, 2011)

"I have been a big supporter of Starbucks since the early days, taken expensive rides in taxis to

get my morning coffee, even waded through two feet of snow in my business suit.” (CNN, 2011)

This unwavering dedication from a large consumer base throughout the United States and

internationally is due in large part to the creative efforts and innovative attempts made by

Starbucks to provide a comforting and enjoyable coffee drinking experience. Next, we will show

how Starbucks’ corporate culture, fundamental values and genuine compassion have become

integral parts of their success as one of the world’s most successful coffee houses and

identifiable brands.

CULTURE, INSPIRATION AND SOCIAL RESPONSIBILITY

Corporate culture is the common values, philosophy, policies and procedures of a

corporation. This can either be catalyst or impedance in harboring a professional atmosphere that

invigorates and supports organizational citizenship behavior (OCB). Culture affects an

employee’s actions, feelings and even their creative potential. Every organization has a different

perception about the ideal culture for their firm, Howard Schultz, CEO of Starbucks worked to

infuse strategic values and guiding philosophies into the Starbucks culture. The fundamental

value was to build a company with spirit and compassion. Schultz crafted a philosophy for

Starbucks to passionately pursue the perfect cup of coffee. Starbucks understood that the

tangible benefits of coffee like, taste and quality were not the only factors to consider in their

pursuit of the perfect cup of coffee. Starbucks focused on enhancing the intangible benefits of

their brand, chiefly the atmosphere during the coffee buying experience. Starbucks made a

concerted effort to appeal to customers on a more intimate and emotional level. The idea of

creating an intimate and romantic coffee experience mimics the traditions of the Italian coffee

culture that mesmerized Starbucks CEO during his travels to Milan, Italy. Schultz believes that

creating a warm and friendly “coffee experience” is the key to becoming the “third place” place

people go between work and home. To become an oasis where customers can come to unwind

after work, enjoy social interaction, or just relax by themselves. Starbucks was instrumental in

the proliferation and evolution of the coffee culture in America.

Starbucks employees are the soul of the company, which enables the firm to create that

warm and inviting atmosphere that Schultz’s envisioned. Well-informed and wholehearted

employees, who know the company’s brand, deliver consistently pleasing customer service and

able to convey the company’s passion for coffee. Jim Alling, Starbucks Senior VP of Retail

said, “our goal it so create an uplifting customer experience every time you walk through our

door.” (the dieline.com, 2013) When asked what the design philosophy of Starbucks was,

director of brand strategy Jean-Marie Shields said, “ It’s about nurturing and inspiring the human

spirit. It’s really through that lens that we do everything—with that warmth.” (thedieline.com,

2013) When designing the “coffee experience” an emphasis is put on providing a feeling of

intimacy with customers that can form connections thus leading to customer satisfaction and

loyalty. Jean-Marie Shields describes the Starbucks brand, “ The brand is almost like a friend—a

unique, well-traveled, cultured friend you know well but who always manages to surprise you.

That’s always our focus. I think the design aesthetics reflect that. But it’s not that friend who is

always the same. It’s the friend who leaves you feeling energized and who you always can count

on to have a great exchange with. A friend with warmth.” (dieline.com, 2013)

Starbucks attempts to stay connected with its customers not only through face-to-face

interactions, but also through a digital medium. As the social media landscape continues to

evolve, Starbucks identified this as an opportunity to enrich and create intimate connections with

customers through online interactions. Starbucks digital initiatives incorporate “expanding and

enhancing their core web platform globally, creating world class mobile applications for iOS and

Android, as well as developing an in-house eCommerce platform and business, a branded and

differentiated Wi-Fi strategy (which includes the Starbucks Digital Network), a social media

engagement platform, and building the Starbucks card and loyalty programs globally”3. The

Starbucks Digital Network (SDN) is a system that enables customers who connect with the free

Wi-Fi in Starbucks stores to have access to a “rich blend of great things to read, watch and listen

to – making our customers’ coffeehouse experience even more enjoyable.”(Kanani, 2012) These

digital initiatives are an example of creative and innovative methods that Starbucks utilized to

endorse and uphold the perception of being brand that’s “almost like a friend “1 to its customers.

This understanding of the expanding role that technology will play in the future has allowed

Starbucks to be at the cutting edge, creating a multitude of platforms and applications that will

extend the relationship that Starbucks has with its customers beyond the front door of each

coffee shop.

Starbucks compassion for its customers stretch’s beyond the interactions during the

“coffee experience”. Being that “ friend” having an intimate connection with customers,

encompasses embracing their burdens and concerns as well. Starbucks viewed the recent

economic downturn and increased awareness of global warming as opportunity to revive the

economy and focus on renewable energy and energy. To enact change Starbucks became a

founding member of Business for Innovative Climate and Energy Policy (BICEP), which is an

advocacy coalition within the business community that partners with “policy makers to pass

meaningful energy and climate legislation”. 4 “BICEP members believe that climate change will

impact all sectors of the economy and that various business perspectives are needed to provide a

full spectrum of viewpoints for solving the climate and energy challenges facing

America.”(Ceres.org, 2015) Starbucks planned to improve its environmental stewardship by

focusing on the firm’s water and energy conservation, incorporation of renewable energy and

achievement of the LEED certification.

Starting in 2008, Starbuck set a goal of decreasing its water and energy consumption by

25% by the year 2015. In regards to the water consumption, the goal was realized through the

installation of efficient fixtures, improved filtration systems, and monitoring consumption to

swiftly identify leaks. In ordinance with Coffee and Farmer Equity (C.A.F.E.), Starbucks is

“working with non-profit organizations to help improve livelihoods and quality of life in many

coffee growing regions by investing in programs addressing critical community needs such as

water access, sanitation and hygiene.”(Ceres.org) In regards to energy reduction, the goal was

realized through new energy management systems that reduced energy requirements for stores

Heating, Ventilation, and Air Conditioning (HVAC), which is the single largest source of energy

consumption in buildings. Another method of reducing energy consumption is by utilizing more

energy efficient LED lighting, replacing incandescent and halogen lights in over 7000 stores

around the world. This well-rounded approach to reducing utility usage and improving access

and conditions of the water supply in many coffee growing regions shows Starbucks’ concerted

effort to not only reduce their footprint on our environment but also work to improve the quality

of life and unsanitary water conditions that many people are subject to in coffee growing regions

throughout the world.

On top of reducing its energy use, Starbucks partnered with Green Power Partnership, “a

voluntary program that encourages organizations to use green power as a way to reduce the

environmental impacts associated with conventional electricity use.”(EPA.gov, 2014) Starbucks

set a goal to purchase renewable energy credit certificates (RECs) equivalent to 50 percent of the

electricity used in our U.S. and Canada company-owned stores by 2010. RECs “represent 1

Megawatt-hour of renewable energy generation on the electricity grid. RECs are the sole means

to claim usage of grid-connected renewable electricity in the United States. Renewable

electricity generation and use are tracked through RECs, and so by matching RECs with your

electricity service you are using renewable electricity. A REC represents the environmental

benefits of 1 megawatt-hour of renewable electricity that can be paired with electricity. “Through

the Green Power partnership, purchases of RECs help advance renewable energy by subsidizing

wind farm owners, which successively enables farmers to sell electricity at a more competitive

price. Starbucks not only achieved their goal in 2010, they also established a new protocol that

calls for the purchase of RECs 100% equivalent of the energy used. For their efforts, Starbucks

was honored by the U.S. Environmental Protection Agency as one of the top ten private sector

green power purchasers.” (Starbucks.com/responsibility, 2015) Starbucks partnered with the U.S

Green Building Council (USGBC), to implement LEED certification as a requirement when

constructing new company –owned buildings. LEED stands for Leadership in Energy and

Environment Design. LEED is a certificate program thru the USGBC that certifies buildings that

are built according to specific methods and guidelines throughout the design and construction

process that are proven to save money and resources while simultaneously promoting the use of

renewable energy. “Businesses and organizations across the globe use LEED to increase the

efficiency of their buildings, freeing up valuable resources that can be used to create new jobs,

attract and retain top talent, expand operations and invest in emerging technologies.”(usgbc.gov,

2015)

The recurring ideal ingrained in all of Starbucks business practices is that, Starbucks

strives not only to be the “the third place” people can go within a community but to have a

meaningful and positive effect on the surrounding communities. Forging strong intimate

relationship with customers and neighbors that create an environment conducive to collaboration

and innovation. They constantly look to provide opportunity and assistance to those in need and

continuously look to create value for customers, partners, suppliers one cup of coffee at a time.

These methods, values, and ideals first established by Starbucks CEO have profoundly affected

the lens in which the company views its interaction between stakeholders and surrounding

community members. Striving to cultivate the perfect cup of coffee through planting seeds of

warmth and compassion embedded in every strategic decision. Ultimately, spawning a corporate

culture that allows for a professional environment where organizational citizenship behaviors,

intense focus on the future and innovative ideas are common occurrences.

INNOVATIVE PRODUCTS/SERVICES AND THE DESIGN PROCESS

As mentioned previously, Starbucks understood that there was more to coffee than the

products sensory qualities. Beyond the tangible product received by the customer, the Starbucks

in-house design teams realized that a more holistic approach was necessary if they were to

differentiate their brand in a saturated and competitive coffee drinking market. Thus, Starbucks

laid out its entire value chain of activities and analyzed every possible way they could creatively

adjust their product, the experience for customers or the process of developing new ideas and

business practices. Starbucks knew that due to their status as a premium priced product, they

would need original innovations and improvements to differentiate their product from the

national competitors such as Dunkin Brands, McDonald’s, Caribou Coffee, Nestle and Panera

Bread.

Within their value chain, Starbucks has initiated a multitude of adjustments that separate them

from all other main players in the American coffee industry. First and most profound is

Starbucks interest in purchasing, running and improving many of the coffee farms throughout

Costa Rica. Their involvement in the very first link of the value chain ensures that they can have

the greatest impact possible on the quality, hygiene and sanitation of the Costa Rican

environment and the coffee farm ecosystem. As discussed earlier, Starbucks is committed to

improving their C.A.F.E. sustainability practices while also opting to use the open-source

approach. They share this insight with competitors in a hope to provide the best tools, practices

and resources available to ensure improvements for the long-term sustainability of the Costa

Rican coffee farms. Being the first company to go to such lengths to improve the sustainability

of these regions, focusing on the source of their product, Starbucks has set the standard and

paved the way for numerous competitors looking to replicate the commendable practices that

Starbucks has incorporated into their efforts in the coffee growing regions of Costa Rica. Their

choice to make all of their tools and ideas on long-term sustainability available to competitors

demonstrates the care and compassion that Starbucks was founded on. Their ability to

acknowledge the bigger picture and see that everyone’s inclusion in these efforts allows the best

chance for the world’s long term sustainability and success is key to the culture of the Starbucks

brand and is a primary reason why their brand is so revered in the coffee drinking industry.

Working our way down the value chain, the next facet of Starbucks chain that

incorporates a high level of creativity is the step-by-step design process employed by starbucks

award winning in-house design team. Jennifer Quotson, director of visual presentation

commented on responsibilities of the in-house design team, “ set every product and sign in store,

consider the customer journey, and feel insanely passionate about the retail space. We also

support and consult on many other things, as we own the holistic retail experience.”

(brandautopsy.com, 2004) Regardless of the project, the first step of their design process is to

conduct a project briefing in which a cross-functional team meets collectively, establishing key

objectives, ideas, time frame and general course of action. In this cross-functional design,

collaboration often occurs “between the packaging team, the in-store retail promotions 2D team,

the writers and the visual presentation team.” (thedieline.com, 2013) Regardless of the project’s

specifications, the team always builds a tangible, dimensional idea of the end result through the

exorbitant use of duct tape and toothpicks. In addition, their design process is centered on

learning from the past, improving the present and focusing on the future. Each project that is

orchestrated is attacked in a tiered approach, contemplating how each decision builds on the past,

improves present operations and expands opportunities in the future. Starbucks’ conscious ability

to look itself in the mirror and honestly critique their successes and failures is a key component

to their success as innovators in the industry.

Within the value chain, there are several tangible examples of how the Starbucks design

team and specific step-by-step approach to the design process has created innovative new aspects

to their business model and an emotional appeal that is used to attract and comfort customers.

For example, this design process was a crucial aspect of Starbucks’ initiative to individualize

each shop’s layout and storefront. Specifically, the store Design team works to constantly

renovate store designs, pushing the notion of local relevance. Through intense market research,

testing, consumer insight teams and constant interviewing, the design teams are able to truly

respond to their customer’s preferences without being presumptuous. The individuality used with

this approach guarantees that Starbucks adheres to their goal of providing an intimate and

tranquil atmosphere to all its patrons.

A prime example of this relatable atmosphere and comfort created is exemplified by the

efforts made within the coffee shops throughout Seattle, Washington, the birthplace of

Starbucks. The large influence that the shipping industry has had on the city of Seattle has led

Starbucks’ creative team to incorporate shipping containers into each store's design. Through the

use of these containers, the design limits the use of unnecessary resources while giving the

location an attractive atmosphere to the local Seattle population. By using this process, each

Starbucks location targets a specific demographic and works to create an atmosphere indicative

of the surrounding area. This design process and individual store design approach is even taken

to the media level, with each specific Starbucks location playing its own playlist and assortment

of music genres that are indicative of the surrounding demographic. By doing this extensive

market research and catering media playlists to each individual coffee shop, Starbucks support

structure, customer involvement and exposure has expanded across social media platforms and

adds additional value to the coffee buying experience. Their conscious efforts to understand

customer preferences and genuinely strive to constantly improve and expand current capabilities

has given Starbucks the reputation for appealing to their customers on a more intimate and

personal level, something never employed by other national competitors.

Design teams often initiate their own projects because, “we want to challenge an aesthetic, or

we really want to up-level a certain piece of the journey.” (thedieline.com, 2013) For example, in

an attempt to modify the Starbucks brand identity, a project design team decided to take a look at

the Starbucks logo, breaking down its four basic components and thinking of ways to improve its

image and reflect the current state and feeling behind the Starbucks brand. Once contemplating

hundreds of ideas, the answer was simplicity. Removing the words, bringing in the green and

removing the Siren from her ring, created an emboldened new look with the siren as the focal

point. After 20 years of keeping the status quo, the slight alteration in the logo created a mark

that “ celebrates the Siren in a much bolderway—it’s more expressive and energetic and still

uses the same vibrant green circle that is so well recognized by our customers around the world.”

(Starbucks.com/blog, 2015)

At the end of the value chain, Starbucks has also sought to create a playful and enjoyable

relationship between their customers and employees during their face-to-face interaction. This

has been achieved through their purposeful ploy to misspell customer names on their cups. The

tendency for these customers to express their feelings, good or bad, about the misspelling

through social media only increases Starbucks’ word of mouth and additional related sales.

Despite the occasional agitated customer, the majority of customers find the personalization of a

hand written name, spelled correctly or not, to be a beneficial, added touch to the coffee shop

experience found at Starbucks. In addition to simply receiving your order, each visit comes with

the promise of a laugh and the possibility of an Instagram or Twitter-worthy post that increases

social media traffic and potential for attracting additional customers. Although this small facet of

the experience doesn't actually impact the product’s quality or improve resource allocation, the

subtle personalization and use of humor is an creative tactic that continues to differentiate the

Starbucks Coffee experience from competitors who simply provided a numbered receipt and a

generic coffee-drinking experience.

Last but not least is Starbucks attempts to innovate their business model through the

extension of the value chain. In a partnership with Pepsi, Starbucks aspired to revamp the hot

coffee vending experience by creating a convenient, superior, hot drink in comparison to the

current alternatives such as the Nestle machines found on campus. Unlike coffee vending

machines that are currently on the market and operational, the Starbucks vending platform

utilizes proprietary heat-on-demand technology, developed by Pepsi, which will offer customers

yet another convenient way to access Starbucks on the go. “With a simple swipe of a payment

card (or with cash), a high-quality, hot latte or hot cocoa is served up in a ready-to-drink package

in less than a minute. Utilizing proprietary packaging, each hot beverage will come in a

convenient 9 fluid ounce recyclable steel can with an insulating label, designed to keep the

beverage warm, enjoyable, and still comfortable to the touch." (Wyss, investor.starbucks.com ,

2015) Starbucks focus on providing an additional channel for customers with minimal free time

to still access their product is critical to their attempts to continuously innovate and improve their

relationship with customers. By creating an environmentally conscious, high quality, dependable

product to a market of consumers that was previously untapped by Starbucks, the brand will be

further extend its reach and receive more exposure in relation to competitors. Due to the brand

loyalty that Starbucks has been able to gather, their attempts to become more mobile friendly and

technologically savvy will go great lengths towards ensuring that they will remain on the cutting

edge of innovative technologies and methods within the coffee industry.

In conclusion, Starbucks’ adherence to their CEO’s belief, that creating a warm and

friendly “coffee experience” is the key to becoming the “third place” place people go between

work and home, is fully demonstrated by their use of innovation throughout each part of the

business’ value chain. Whether it is improving worldwide quality, sustainability, hygiene and

sanitation for coffee farms through the creation of sustainability standards or creating a holistic,

step-by-step design process that ensures each project fully reflects the needs and preferences of

consumers at each individual location. Starbucks continuously looks to improve, refine and

create new ways for their brand to reach, impact and serve their customers. Their resolute focus

on expanding the Starbucks brand beyond the coffee shop experience, into the world of social

media and on-the-go products serves to exemplify their unwavering efforts to remain at the

forefront of high quality coffee shop experiences and maintaining its reputation as the elite

coffee brand and culture in America.

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