NEW YORK ( TheStreet) --
I thought it was disgusting ... Bill Ackman has blood on his hands for being the one who brought Ron Johnson in.Via The Financial Times, that's what Starbucks ( SBUX) CEO Howard Schultz thinks of hedge fund manager Bill Ackman's role in JCPenney's ( JCP) continuing saga. And, via me, from March, in The Best Companies Can Tell Shareholders to Go to Hell, there's the fantastic exchange between Schultz and a seemingly homophobic SBUX shareholder who came off more than miffed that the company supports same-sex marriage:
Last year Starbucks announced its support for Washington's state's
sicreferendum backing gay marriage, and in response the National Organization for Marriage launched a boycott of the coffee chain.
Miffed Shareholder: "In the first full quarter after this boycott was announced, our sales and our earnings, shall we say politely, were a bit disappointing," said the shareholder, Tom Strobhar . . . the founder of the anti-gay marriage Corporate Morality Action Center.
Schultz's response: "Not every decision is an economic decision. Despite the fact that you recite statistics that are narrow in time, we did provide a 38% shareholder return over the last year . . . Having said that, it is not an economic decision to me. The lens in which we are making that decision is through the lens of our people. We employ over 200,000 people in this company, and we want to embrace diversity. Of all kinds. (Applause and cheers from the audience). If you feel, respectfully, that you can get a higher return than the 38% you got last year, it's a free country. You can sell your shares in Starbucks and buy shares in another company. Thank you very much."Once again, Schultz deserves another round of chest bumps and fist pumps for taking an important step forward on the heels of Amazon.com ( AMZN) CEO Jeff Bezos and his wife's decision to donate $2.5 million to Washington's gay marriage campaign. As I ponder potential reasons why Starbucks transcends sectors -- it's really a tech company wearing loose retail clothing -- I keep coming back to its CEO. As the two above-mentioned public incidents illustrate, Howard Schultz creates a culture at Starbucks that, even if indirectly, gives his employees the courage to step out. As abstract as it is, that's really the only explanation I have for why Starbucks has done such an amazing job leveraging mobile and digital technology, whereas other retailers, such as Best Buy ( BBY), have performed poorly. If you have been following my Best Buy coverage over the past year or two, you know that, beyond Schultz, much of the conversation regarding Starbucks' success circles back to its former CIO and former Best Buy EVP, Stephen Gillett, now COO at Symantec ( SYMC). It was Gillett who brought in Adam Brotman, now Starbucks Chief Digital Officer. That's when the magic started to happen. According to Brotman, who I spoke to late last week, when he was hired in March 2009, senior leadership, particularly Schultz and Gillett were "open to the idea" of making digital and mobile (referred to interchangeably as "technology") a central component of Starbucks' business. That's when Gillett recognized the opportunity to create the Digital Ventures group that Brotman now leads. The success has been astounding. Schultz singled out Brotman on the company's most recent earnings call. Brotman could have shouted SCOREBOARD as he updated data points related to Starbucks' otherworldly digital efforts:
In our third quarter, we saw 3% year-over-year growth in total dollars loaded on Starbucks card in retail North America and nearly 100% year-over-year growth in dollars loaded on our cards via Starbucks mobile apps and web properties ...
I'm pleased to report that now when 10% of all transactions in our U.S. stores are made with a phone ...
Starbucks, according to Schultz, has processed "more transactions on mobile than any other retail(er) in the world." But why? Of course, skeptics can point to volume of sales. Starbucks executes more transactions in a minute than many other retailers push through in a day, if not a week. But, even if you control for sales volume, you'll see that no other retailer comes close to Starbucks, particularly from a qualitative standpoint on using technology in its day-to-day relationship with customers. It's easy to assign credit to individuals -- Schultz, Gillett, Brotman -- but this doesn't tell the real story. Yes, it starts at the top. There's a reason why Gillett had to jump the sinking ship at Best Buy for Symantec: A culture of obviousness reigns at Best Buy, not one of innovation. You can thank a weak and visionless board and a string of inept suits filling the CEO chair for that. You don't have that at Starbucks. Rather you have the genius Howard Schultz. He's not afraid to be different. In fact, it's probably fair to say he's, in many ways, an opponent of conformity. He extends this level of comfort with being different -- with stepping outside of assigned roles -- to hundreds, if not thousands of people in his organization. When I talked to Brotman, aside from praising Schultz's leadership, he was reluctant to speak about individuals. In fact, he absolutely did not want to talk about himself. He gets lots of attention. He's a young guy in a high-profile spot overseeing not only one of Starbucks' fastest-growing categories, but, arguably, the world's greatest retail foray into technology. But he articulated how the magic happens at Starbucks so well that what I initially thought might have been false humility turned out to be the beginnings of an epic story still in its early stages. Brotman explains that Schultz inspired Gillett, who brought him in. From there, Brotman simply took Starbucks' various moving parts -- mobile, gift card, Web, loyalty program, WiFi, social media -- as internal departments and/or as features that consumers interact with and brought them together. If you have ever worked at a company that includes more than one employee, you understand how difficult it is get multiple people on the same -- or a similar -- page, let alone hundreds or thousands. By the looks of it, that's what the teams at Starbucks, nudged by excellent leadership at various levels, have managed to do. The results speak for themselves.
Brotman also gives the Starbucks' brand credit for the company's technology-related success. Starbucks cannot have technological success without the power of its brand. And, as technology permeates its customers' lives, it cannot have as strong of a brand without an impactful presence across digital channels. The Starbucks' brand and its digital efforts work together to enhance the physical experience its cafes provide. Simply put, Brotman and the teams at Starbucks constantly find ways to logically link their "digital touchpoints" together. For example, early on Starbucks decided to open up WiFi, make it free to its customers, but by taking physical copies of USA Today and The Wall Street Journal and making them part of the connected Starbucks experience. While I have some idea where Starbucks is going with its digital efforts, it's clear when you talk to Brotman -- he knows so much, but he's simply not saying. But just because Starbucks has a digital roadmap doesn't mean they're married to it. They're as nimble as the best startups in Silicon Valley. According to Brotman, Starbucks has a "two-year global road map," however they only know for sure what they're doing "between now and spring." The rest is fluid. Because, in tech, there's no other choice. This type of thinking simply doesn't exist in the standard retail consciousness. Their cultures, rigid structures and imaginatively dead employees do not allow for it. You don't have to opt-in -- some folks, of course, simply want their coffee, not a relationship with their coffee shop -- but the future at Starbucks involves a more personalized digital experience. Brotman and his teams want to find ways to better connect Starbucks' customers with baristas, one another and their community. The company's various and always-evolving digital initiatives will continue to make this possible while increasing the opportunities to create bonds and loyalty. Whereas Best Buy refused to seek a partnership with Amazon.com (even though a solid core of employees were in favor of one), Starbucks embraces alliances, such as the one it inked with Jack Dorsey's Square. Brotman noted that Starbucks invested in (that wasn't a "coincidence") and works with Square (Square processes all SBUX debit and credit card payments, plus you can use Square to pay at SBUX) because it's "a fabulous opportunity to work with great company." Sometimes it's just as simple as that. Follow @rocco_thestreet -- Written by Rocco Pendola in Santa Monica, Calif. and New York City