Stephen Gillett was 32 years old when he took on the CIO job at Starbucks in 2008. Starbucks had gone from high-growth superstar to a company whose same-store sales were in decline--its stock price was down nearly 50% in less than two years. Gillett, with no retail experience, was now in charge of IT that supported a global supply chain and stores worldwide. The guy didn't even drink coffee until he started interviewing there.
Starbucks faced what Gillett now describes as a "technology debt." In racing to add about 2,300 stores over the previous three years, the company hadn't invested enough in in-store IT infrastructure. Its cash register system ran on DOS, so it took six weeks to train a new barista to get proficient on it. Store managers couldn't get email, because the one computer in each store processed credit cards, so it was locked down for regulatory compliance reasons. Starbucks had started work on its first global ERP system, and Gillett had to decide whether to push ahead.
Despite having all that work on his plate, Gillett made a pitch in early 2009 for even more responsibility. Howard Schultz, who returned as CEO in 2008 to turn things around, had told company executives after the 2008 holiday season to come back in the new year with some big ideas. He had urged them to think beyond their own corporate functions.
Gillett pitched the Starbucks executive council on what he called startup funding--a "series A" venture capital investment in a new business unit called Digital Ventures. It wouldn't live in either IT or marketing, Gillett said, but would work closely with both to bring new services to Starbucks customers through smartphones, tablets, and laptops.
Gillett got the go-ahead, and to run Digital Ventures, he hired Adam Brotman, his former co-worker and an entrepreneur who ran several e-commerce businesses. Since creating Digital Ventures, Starbucks has become a retail leader in mobile payments. Gillett's digital and IT teams also have improved the company's loyalty card system, in part by developing smartphone apps that complement the loyalty cards. They created a digital network in the U.S. that offers free in-store Wi-Fi, as well as content that customers would normally have to pay for.
Starbucks' marketing and IT organizations work closely on all of those efforts--it was the digital marketing team, for example, that came up with the idea to do a smartphone app that, when the camera's pointed at one of the retailer's iconic red holiday cups, shows a character that looks like it's skating or otherwise moving on the cup (How Starbucks Blends Marketing And Tech). But Digital Ventures is meant to drive the company's broader Web and mobile strategies.
(click image for slideshow: How Starbucks Taps 7 Tech Trends)
"If I take the digital capability and put it under engineering or IT, even with the best of intentions, it becomes heavily influenced by the technology initiatives," Gillett says. "And if I take the same function and put it under a marketing function, it will inherently be dictated by the cadence of a marketing campaign. We needed it to have the autonomy of its own destiny, of its own vision."
For making technology a much bigger part of the Starbucks customer experience, while also helping the company improve its operations and processes, Stephen Gillett has earned recognition as InformationWeek's 2011 Chief of the Year.
His work isn't done. Starbucks still needs to roll out many of its tech implementations globally. It just last month launched an IT support operation that looks like an Apple Store, which Gillett hopes will draw out new IT ideas from employees (Starbucks' Help Desk Secret: Model An Apple Store). The company needs deeper digital relationships with its customers. But Starbucks has paid down a lot of that "technology debt" it had built up during its growth surge and is embarking on some bold IT-driven initiatives.
Join InformationWeek’s Lorna Garey and Mike Healey, president of Yeoman Technology Group, an engineering and research firm focused on maximizing technology investments, to discuss the right way to go digital.