Starbucks Has a Service Design Problem
And all the menu fixes in the world won’t change this fact
As you know I typically write about the emerging world of Artificial Intelligence. However, every now and then I take a break and write on topics ranging from innovation to business to strategy all the way to happiness. This week I want to talk about strategy.
Starbucks is in Trouble
It’s no secret that the world’s foremost coffee company is in trouble. While Starbucks has had its ups and downs over the last thirty years, this latest round feels a little different.
A quick news search turns up any number of negative headlines including ongoing store unionization, losing a $50 million lawsuit to a delivery driver and threats from low cost competitors. Starbucks reaction? New leadership has instituted layoffs, pushed to streamline its menu while trying to remind customers of the company’s focus on quality and product innovation. And Wall St. has responded positively. Starbucks shares are up almost 8% since the beginning of the year.
But this renewed investor optimism masks the fact that when you walk into a Starbucks you still see long lines of unhappy customers waiting for their mobile orders while other customers wait for what seems like an eternity for what they bought at the register. All the while stressed out staff run back and forth trying to keep up with the demand.
While new CEO Brian Niccol has spotlighted the need for improved operational efficiency and a more innovative corporate culture, he has yet to address the 800 lb gorilla in the room. Starbucks is still suffering at the hands of a very deliberate strategic choice it made over a decade ago and until such time as it addresses this issue, all the menu optimizations and leadership changes won’t really matter.
Starbucks Obsession With Digital Transformation Is Its Core Problem
Despite the company’s shifts in leadership it has remained deeply focused on customer experience innovation with the Starbucks Mobile app as the jewel in the company’s digital commerce crown. The Starbucks mobile app remains the de facto loyalty and mobile commerce case study for brands looking to benchmark success. The program’s ability to let customers store money in their account has reportedly led to a ~$1 Billion operational savings account it uses to help finance its business expansion. The program has been so consistently successful Forbes ran a 2014 article entitled, “Why Is The Starbucks Mobile Payment App So Successful?”
However this success would have an unintended consequence. The convenience of mobile ordering has been offset by the inconvenience of everything else at Starbucks. This is due almost exclusively to the fact Starbucks refused to adapt its customer delivery model even after there was ample evidence the traffic resulting from its mobile success was incompatible with its store design. While some talk about how high prices are a problem for customers it’s more accurate to say customers became less willing to pay the Starbucks premium based on the eroding quality of the customer experience.
The average Starbucks location is actually three revenue centers:
Traditional walk in, sit down or walk in, walk out
Drive through ordering
Mobile order ahead, in-store pick up
Yet all of this is being serviced by the exact same delivery model the company set up based on traditional retail best practices. Numbers 1 and 2 look just like any QSR restaurant, be it McDonald’s, Burger King, etc. It’s the overwhelming success of number 3 that has essentially cratered the Starbucks customer experience. This is a classic service design problem and one Starbucks could have addressed over the past decade.
What is Service Design?
Service Design is the discipline of intentionally designing how a service works—end to end—with the customer experience at its core. It’s not about shiny new features or tech. It’s about making sure that every part of the service ecosystem works together seamlessly, from front-stage interactions (what the customer sees) to back-stage operations (what makes it all happen). If there’s a breakdown in one part, the whole experience can fall apart. Think of it as designing the engine of a car, not just its sleek exterior.
At its heart, service design solves two things: customer needs and operational realities. It’s the blueprint for how you deliver a consistent, high-quality experience without burning out your people or confusing your customers. And here’s the key—when it’s done right, service design creates a system that scales. Starbucks’ mobile ordering success is a classic case where the experience grew faster than the design could support, creating friction where there should have been flow.
Most businesses miss this because they focus on products or platforms and forget the system. Service design makes you zoom out and ask: How does the whole thing work together? Where are the pain points? Where are we asking too much of our teams or customers? Starbucks doesn’t have a menu problem. It has a service design problem. And no amount of innovation will fix that until they reimagine the system they built a decade ago.
Igniting Growth Through Service Design
Starbucks introduced its mobile ordering/loyalty app in 2011. Since then the company has launched roughly 23,000 stores globally. And despite unambiguous evidence, the company has steadfastly refused to adapt its service and store design approach. While it has sporadically set up locations that are more geared towards drive through, the basic store format and service delivery approach has remained the same.
If Starbucks really wants to address its Service Design challenge it will need to do three things:
Stop shunting more and more traffic through an outdated service delivery approach.
It’s clear that the company’s current service delivery model is not up to the task. And the resulting stress this creates doesn’t just frustrate customers. The wear and tear on staff trying to keep up is noticeable. Starbucks store labor is organized according to traditional retail service and even one associate no show throws off the balance of the entire shift. Unpredictable staffing is a top complaint among employees considering unionization. Starbucks needs to update its labor assumptions relative to demand expectations and adjust its financial assumptions accordingly. But more staff hours isn’t really the solution. Starbucks also needs to rethink its customer journey assumptions.
Stop pretending every transaction is the same.
Walk in, drive through and mobile order ahead each have different customer expectations so treating each equally is a recipe for disaster. In addition, failing to understand the different signature moments in the various customer journeys also creates false assumptions about preparation and fulfillment. Starbucks needs to step back and understand how different unique customer needs evolve its assumptions about how to reframe its service blueprint and only then should it rethink its associate resourcing assumptions.
Update delivery formats according to the prioritized customer needstate.
Getting back to the idea a single Starbucks store is actually three revenue centers, there is the opportunity to redesign delivery in four different ways:
Mobile order ahead only
Drive through only
Walk in only
Hybridized to more efficiently cater to the different customer expectations for a combination.
Each of these will have different demands. Understanding those demands will allow greater focus on customer satisfaction while also reducing pressure on associates to manage the deeply-ingrained unpredictability inherent to the company’s current store design strategy. Chic Fil A is an excellent example of a brand that took a step back and revisited its delivery assumptions relative to the demand being placed on the system. You can see it in the company’s approach to drive through versus in store and you can see it in their staffing. Until such time as Starbucks takes the same approach it’s just going to keep creating its own problems.