The feedback I heard was, you know, we've made the job more complicated than necessary. And then I heard from the customers, a little bit of the Starbucks experience feels like it's getting taken away from me. So, it was a little bit like, how do we just get back to the basics of Starbucks?
Today on CEO Signal, we're talking to Brian Niccol, CEO of Starbucks, one of the most high-profile brands and one of the biggest turnaround challenges in global business. He came to Starbucks after leading a successful turnaround at Chipotle. Now he's applying that playbook at a global scale.
At this scale, leadership shows up not just in the big picture strategy, but in the details from Semaphore. This is the CEO Signal.
Hello, Edge. It's good to be starting with our first episode of CEO Signal.
Great to be with you, Penny. And it feels very appropriate to be starting off with a real iconic case study of one of the most interesting turnaround challenges in global business right now. So Starbucks, everybody knows, I've followed it as a journalist for many, many years. And one of the things you realize when you spend any time at Starbucks headquarters is that everybody is deeply, deeply caffeinated. So, I remember one trip a couple of years ago where I met a senior executive who told me that she was nine shots of espresso into her day by the time we sat down. What about you? What's your engagement with Starbucks been over the years?
Well, I'm a huge customer of Starbucks. I go frequently, but I hate to disappoint you. I'm a decaf girl, so I like my coffee straight, but no caffeine.
Very wise. One of the things that interests me most about this story is he has really anchored his strategy in frontline customer service. And you grew up in this world. You grew up in a customer-facing business, the high hotels world. What have you learned from that about what it takes to do great customer service at scale, which is really the challenge that Brian faces here?
I think one of the challenges is to be able to first of all motivate and excite your frontline workforce to recognize how important their engagement with the customer is, how impactful it is about the experience. And so that's something that has to come very personally from the CEO and the leadership. I think another challenge is how do you make changes at scale and how do you do it today in a day when social media is everywhere and you're experimenting in your stores. Do you get a chance to try things and adjust or are you held accountable from moment one?
It's a lot of pressure, a lot of scrutiny. Let's bring Brian in to see how he answers those questions.
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So, Brian, thanks for having us to Starbucks offices. It's great to be here.
Yeah, it's great to have you guys here.
How's your coffee order changed since taking this job?
You know, it has, although one piece has stayed the same. I still always get an Americano, but now I definitely in the afternoon bounce around a little bit more between matchas and cortados and cold brew.
So, you spent your career in businesses where the front line is the brand. Was there an early frontline job you did that gave you a feel for that?
Yeah. So, you know, early in your life, you don't realize some of the jobs you take and how they ultimately kind of stay with you, but you know, I had a couple jobs as a teenager. You know, I worked with a couple guys doing a lawnmowing business. And also when I was a younger kid, we used to live in Philadelphia and so it would snow. I'd grab my snow shovel, go knock door to door to shovel, you know, driveways and sidewalks, you know, for $10, which at the time, now that I'm thinking about it, I way undercharged.
You learned more about pricing.
I learned more about pricing.
And so, you got to experience firsthand what providing customer service is like.
I know for me, early on in my life, I was in high school, I worked at the front desk of a hotel.
You learn so much when you're face to face with a customer. And back then the front desk was kind of the nerve center of the hotel. That's where you went to, you know, either check in, check out, complain, whatever. That's where the phone calls came to. And you learned a lot about people and how to help people who are frustrated.
Yeah. You saw when people are in a good mood and not a great mood, right?
Exactly. Exactly. But I think it really informs so much about then how at least for me I think about engaging with people even, you know, throughout my career. I don't know if that's true for you.
No, 100%. And you know, one of the jobs I didn't mention, I think I was probably 15 or not quite 16 yet and I worked in like the bag room of a golf shop and you know, and I also picked the range balls up, you know, driving the cart. And what was fascinating, you just meet all kinds of people, right? And the customer service business is tough, but in the end, you know, you can have a real influence on people, on, you know, the experience you ultimately provide and how you choose to react to the situation. You know, and I think that's just something I've carried on throughout my whole career where it's like, it really matters.
Yep. I think it's great training. So, you've had a habit of stepping into roles that maybe a lot of people might have actively avoided. You know, you took over Chipotle after food poisoning or came to Starbucks when investors were not so happy with how the company was performing. My husband often says I'm a kind of person who runs towards a fire. It feels to me like you have somewhat of a similar bent. Where's that instinct come from?
You know, that's a good question. And I'd be curious to hear why you maybe chosen the paths you've chosen. For myself, it was interesting. When I started my career at Procter and Gamble, probably the first time I had that opportunity was on the Pringles brand. I became the brand manager of Pringles and Pringles was struggling. But the gentleman that was the general manager was this guy Jamie Agassi. And you know, one, I thought he was terrific. And two, I thought I could make a difference. You know, I was like, it's one thing to go in a business that's performing and kind of, you know, just hold on to the steering wheel kind of thing versus, well, we got to turn this around. And that was my first opportunity. When you roll up your shirt sleeves with people you respect and you're really trying to sort out how do I improve this situation and get to the right answer, it's such a fulfilling thing.
It really is. And you know, that's the thing that I've learned over time is in all these businesses where you have a turnaround, you got to get the right people at the table with you and they just have to be truly, you know, people that are excited about the challenge.
So, you've built this, you know, energized core team, but you've been very clear as well that what's going to make this strategy stick is how the brand shows up at the frontline level when Penny goes in five times a week for her coffee. How do you build that kind of connection, credibility with the frontline employees when they're going to be so partners, as you call them, when they're going to be so critical to the expression of that strategy?
Yeah, look, I think one of the things when I got to Starbucks that I realized is I feel like we'd lost connection from the corporate office to the actual store and with the partner and the customer experience. And so even before I started the job, you know, I had about a month, month and a half where I literally just went to our Starbucks multiple times a day. Because I wanted to see what was happening in the morning, afternoon, close, open, and you know, I could bounce around a couple stores before people realized I was the CEO kind of thing. And it was really illuminating because you can talk to customers in that environment and you can also talk to the partners in that environment and you know, the feedback I heard was, you know, we've made the job more complicated than necessary. And then I heard from the customers, a little bit of the Starbucks experience feels like it's getting taken away from me. And you know, when you start to dig into it, it's like, what do you mean by that? They're like, well, you know, the seats used to be more comfortable. You know, there used to be more outlets. You know, the partners used to have time to recognize me. And then when you talk to the partners, you know, they were like, look, you know, it's simple things like, why haven't we put the condiment bar back out for people to do their own kind of cream and sugar? You know, why are we making some of these things harder than they need to be? And then there was also this element of I think we got really focused on trying to be efficient and run it like a manufacturing facility as opposed to recognizing, no, no, this is actually a customer service experience where we do great craft and create great drinks for people on time. And so, you know, it was one of those things where it's like we got to get back to focusing decisions that actually show up in the store and then you got to understand how those decisions actually are executed in the store.
So, you encapsulated what was needed in this very simply articulated strategy that you had to get back to Starbucks.
I felt like we had stopped focusing on those constants in the business and those core elements that make Starbucks. So, it was a little bit of like how do we just get back to the basics of Starbucks? And you know, I kind of came up with the catchphrase of hey, we need to get back to Starbucks so that ultimately people experience the best of Starbucks. And really what that is saying is like it's a back to basics strategy. The thing that I did not anticipate is how quickly that was understood by our partners in the store because once I said to them like back to Starbucks, they're like, 'Oh, I know what you mean by that.' It almost resonated faster with our store level employee than it did in our corporate office. Because I think for some people in the corporate office, it challenged a lot of work that they were doing because they realized it was in conflict with creating a great coffee house experience. And if you aren't working on initiatives that ultimately make the store experience better for our customer and our partner, we're probably working on the wrong things.
So, can you bring us up to speed? You know, where are we in the execution of that strategy now? What do you see?
Yeah, look, we are in the phase of scaling some key components. Our Green Apron Service program is probably the most critical piece. There's also a technology program called Smart Q which is all about queuing production between all the channels that we operate in. And then obviously the marketing and menu innovation, we're also scaling as well. And then when you layer on top of that the ability to service the drive-thru, mobile order pickup, delivery as well as the cafe through this production technology behind the scenes. You know, it looks like we've got the right flywheel moving.
So when you walk in and you're like okay we have to get back to our core. Where did you start?
Yeah, that's a great question. You know, one of the things I've done in all these businesses and if hopefully if you talk to folks that work with me is I like to keep it simple. You know, you can solve complex problems with really simple solutions. And the thing that's important is you got to figure out what are the simple things we can actually address and we can control. And so, you know, I wanted some things that were very visible and tangible quickly to signal things are changing. So, like putting the condiment bar back, letting people have for here where, you know, we changed the code of conduct so that the store was for customers. I said, 'Turn on all the outlets.' Like, these were just simple things to say, 'We're going to be a coffee house.' So, that was a decision. I was like, 'I'm not debating that. We're going to be a coffee house. Go put all those elements in as fast as we can.' Then the other things where it's like the Smart Q, the Green Apron Service, you know, that ended up being close to a $600 million investment. We had to walk our way into that to make sure we were doing it correctly. But this is where I love the idea of learning. Like, I think keep it simple. Be committed to the idea of the learning process and then take action. Like, and maybe that's what people are saying like once I get the feedback I'm like stop debating. Let's do it.
So we talked about your instinct to step into difficult situations. And one of the things that seems to have got you this job at Starbucks is the turnaround job you did in the previous role at Chipotle. You walked in there, food poisoning crisis. What did you see in that situation that maybe it was worth you taking that on?
Look, at the end of the day, I was a customer and I thought it was a great brand and I thought it had a differentiated product solution. This idea of, you know, clean, culinary-forward food done fast and affordable and I was like, that's how people want to eat. That's the trend that's got to work. So I just believed it because partly I think that's what I also thought was the right solution for where the food industry was going to be headed.
But things were going pretty well at Taco Bell and Yum. Big company. You'd had a lot of time there and a lot of experience. What when you were making the decision, what were you thinking about? What am I walking away from? What am I giving up maybe personally or professionally to run to the challenge, if you will, and how'd you think about and who helped you think about it?
You know, that's the one thing that's tough is as you get higher into these jobs, there's less and less people you can talk to when you're contemplating making a change. You know, and in that case, you know, great team at Taco Bell on a great role, frankly great company with Yum, you know, and potentially opportunity for me to even grow more there. But it was one of those things where I was like, if I didn't take that chance on Chipotle, I think I would have been watching from the sidelines kind of saying, ah, I should have done that. And so, you know, I'm pretty lucky. You know, my wife Jen, she's world class and she can always tell like, it seems like you want to do this. You should just go for it. And so, it's always helpful when you got somebody close to you saying, 'Yeah, go for it. Like, you're totally set up to be successful at this, and what's the worst case that happens? It doesn't work and we'll figure out what we do next.' And so, yeah. And so that was kind of the mentality of it.
So when you look back at that chapter, you know, we can look at the Chipotle stock price chart under your leadership. It was an extraordinary turnaround, a lot of value created. When you think back, what do you consider to have been the most important moves you made particularly early on to set that in train?
You know, not surprising. It was I think just having clarity on what was the work we need to go do. So really kind of boiled down what are the critical few things we need to go do. And oddly enough, back then we didn't have a real digital business. And I just saw that as a tremendous opportunity to create, you know, the Chipotle app, this digital business. Fortunately for us, there was an operator early days at Chipotle that realized big orders needed a separate line from the front line. So, they already had the second line that we originally was called the fax line. So then now I'm kind of dating myself. So, it was for faxing in large orders. And we were like, okay, as a team, we said, let's remove the fax machines and make these digital make lines. And oddly enough, we removed the last fax machine and I think put in the last kind of digital make line like right around December of 2019, January of 2020. So we got kind of lucky because COVID then happened March 2020 and our digital business went from four or five percent to the business. And you know...
How many faxes were still coming in in 2019?
You know, oddly enough, there were still some because it was just, you know, when your customer is trained that that's the experience. It's hard to break that behavior. And so for large orders, it was coming in that way. Not nearly the way it was before, but so they had this hidden asset that we were able to unlock into the digital business and then also we had to do some things just making sure that the supply chain was tight because we have to deliver fresh food. And then we had to do some menu innovation work. But then, you know, it was also look getting the right team in place, you know, the right folks in the right jobs to help us grow that business and you know, I think we assembled a great team. Actually one of the things that was difficult about leaving Chipotle was leaving the people to be really honest with you. It was like when you really get down to it, I'm like, 'Ah, I really like working with these people.' And so then you're like, 'Well, I think I can create another great team and it'll be equally...'
And you've mixed in people you've worked with before to this new team at Starbucks. How do you think about that kind of building the new team and what you're looking for in terms of people you've trusted in previous roles, people who understand the company you've just moved into?
Yeah, look, part of the reason why I think it's important when you're stepping into these roles, especially if you're going to be the CEO level, you got to get some people quickly on the team that are going to tell you the truth. And be just brutally honest with you on what's working, what's not working. And so I always try to get a team that's got people that have had some time with the company, but I can see they're bought into the culture and the change that we're trying to make. I like bringing in some new people that are completely new. And then I also like getting, you know, two or three people that I've got history with, that I know I instantly will have rapport with where they can be brutally honest with what's working and not working. Otherwise, you can find yourself really lonely in these jobs, and that's not where you want to be, especially when you're trying to turn something around.
