Tech Leaders: Google, Apple, and...Starbucks?

Wednesday Jan 19th 2011 by Mike Elgan
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As its new mobile commerce initiative transforms business, Starbucks continues to be a shape shifter in consumer tech behavior.

The top three culture-shifting technology companies: Apple, Google and... Starbucks?

Starting today, you can walk into a Starbucks and use your phone to pay for your Skinny Caramel Macchiato, extra hot, extra whip with room for sugar.

Prognosticating pundits (including Yours Truly) have predicted for years the dawning age of the mobile "eWallet," where everything in your wallet, including money, goes digital and lives inside your cell phone.

Despite all our blather, most real people haven't actually been using phones to pay for much. But I think that will change, starting today, thanks to Starbucks.

This is simply the latest major cultural shift that Starbucks has effected using well-placed, well-timed technology innovation.

Sure, there are lots of technology companies that ship amazing technology without single-handedly, profoundly and directly changing the way millions of ordinary people live every day. Examples include IBM, Oracle, Intel and others.

And some tech companies change culture, but only with a single product or feature -- for example Facebook and Twitter.

But very few companies have changed global culture in several ways, several times. The short list includes Apple, Google and, yes, Starbucks.

It's also worth noting Starbucks' intimate cultural links with the technology industry.

Starbucks was initially modeled after a Silicon Valley coffee joint called Peet's, founded in Berkeley in 1966, which served as the rocket fuel for every Silicon Valley tech boom since.

The first Starbucks opened in 1971 in Seattle four years before Microsoft was established in nearby Redmond. From very early on, Starbucks served as the unofficial beverage at Microsoft, long before the chain became nationally ubiquitous in the 1990s. The two companies have also partnered on a wide range of initiatives, from co-sponsoring local events to collaborating on environmental initiatives.

Although Starbucks sells coffee, not gadgets or software, the company has long been considered something of an honorary tech company, both for its affinity and association with technology companies, and also for its culture-shifting innovations.

Starbucks is using technology to change culture in 4 major ways:

1. How People Pay

The latest innovation, of course, is today's rollout of the virtual Starbucks debit card app. The app is much better to use than the existing cards. You load them with money yourself by adding your credit card information to the app, then doing a transfer when you want more on the card.

It's better because you don't have to carry an extra card. You can see your balance without having to ask a Starbucks cashier. And it's faster to make purchases because you don't have to wait for the Starbucks cashier to process it.

On the iPhone or iPod Touch, visit the app store and download the free "Starbucks Card Mobile" app. On the BlackBerry, text GO to 70845. If you already have a card (from the days when you needed an account to use Starbucks' Wi-Fi), the app should recognize your username and password. Otherwise, set up a new one.

Just add your credit card information, then add money to the virtual card. You can also transfer money from the Starbucks card you already carry in your wallet to the app. In fact, you can add any number of cards.

The app also tells you which stores support the new scheme. Just find a store on the map, tap the pin and look under "Amenities." If it says "Mobile Payment," then that store accepts the new Mobile Card.

I believe Starbucks' popularity will mainstream the digital eWallet concept in the United States.

2. Where People Work

Even though I live in Silicon Valley, which is Peet's country, I usually go to Starbucks because the company offers free, unlimited Wi-Fi. Peet's, on the other hand, has recently reduced its Wi-Fi limit to just one hours (down from its previous limit of two hours).

Free Wi-Fi wouldn't be such a big deal, except that Starbucks really dominates the usage of free Wi-Fi worldwide. Unlike other chains with free Wi-Fi, such as McDonald's, more than half the people in most Starbucks are using the network, either with laptops or with Wi-Fi connected smart phones.

Like many people, I consider Starbucks my universal, global "field office."

At my own local Starbucks, they've recently remodeled the store to add more and bigger desks, and dozens of outlets. Rather than encourage people to pay and leave, as have many big chains, Starbucks clearly encourages loitering.

The generous invitation to use Wi-Fi and electricity for as long as you want has really changed where people work.

3. How People Discover Content

Starbucks has been a ground-breaking pioneer in integrated marketing for years. You come to satisfy your coffee addiction. But while in the store, you can buy mugs, coffee-making paraphernalia and lots and lots of media. I even noticed a lot of people doing holiday shopping while waiting in line for their lattes.

Starbucks' Hear Music brand sells music, movies and books in stores. The music playing in Starbucks locations are really marketing CDs or downloads for sale, which can be purchased via iTunes.

Starbucks’ newish Digital Network portal offers news via partnerships with the New York Times, Wall Street Journal and others, as well as games, free music and other content. The focus of the portal is what Starbucks calls "snackable" content -- fun or useful information that can be consumed quickly but that can lead to purchases.

4. How Coffee Is Made

Some Starbucks stores now offer coffee brewed by a machine called a Clover, which is an extremely precise method of brewing that has been on the market for only five years. Invented by three Stanford engineering grads, the Clover was created and sold by the Coffee Equipment Company, until Starbucks acquired it in 2008.

The Clover maintains coffee temperature during brewing to within 1 degree of the ideal using something called a proportional integral derivative controller (PID controller), which is more common to precision manufacturing. The PID controller is managed by a PID algorithm for brewing the perfect cup, which is presumably a software upgradable trade secret.

In fact, all aspects of the brewing process can be tightly controlled, including the amount of time grounds are in contact with the water. The system also uses something called VacuumPress technology, which uses a piston to create suction that controls the flow of water during brewing.

The Clover also has an Ethernet port for connecting the machine to a network that maintains precise details on every cup brewed.

Clover machines are being rolled out to all but the smallest Starbucks stores. Eventually, it's likely that all Starbucks stores -- and only Starbucks stores -- will have them.

Over time, as more coffee fans discover Clover-brewed coffee, it's likely to become a key differentiator, and a lucrative way to charge a little more for better coffee.

These are 4 examples of how Starbucks has used technology to transform how people live. And that puts it into the same rare company as tech giants Apple and Google.

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