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How Starbucks Is Using Artificial Intelligence

By Jon Quast - Nov 8, 2019 at 12:25PM

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Using Deep Brew, the coffee chain is aiming for an improved experience for both customers and employees.

Starbucks ( SBUX -0.48% ) CEO Kevin Johnson is determined to deliver a company culture centered around meaningful human interaction. This month, he announced a new "brew" that figures to be a big part of this culture.

Called Deep Brew, this isn't about a flavor of coffee or tea. Deep Brew is the company's artificial intelligence (AI) program, and it's all about "nurturing humanity," as Johnson put it.

A cup of coffee and a laptop sit on a table against a sunrise backdrop.

Image source: Getty Images.

The AI coffee shop?

If this sounds really strange, maybe rethinking AI would be helpful. At its core, it's about teaching computers to find patterns in data sets too big for humans to analyze. For example, AI company Atomwise looks for new compounds to be used in drugs to better treat diseases. Its AI system goes through 100 million compounds every day looking for solutions, something obviously beyond human ability.

For Starbucks, AI will be going through the mounds of data it already has in areas like scheduling, inventory, and restaurant traffic. It will automate scheduling and inventory, and it will be tailored to each restaurant. Scheduling and inventory are necessary tasks, but monotonous and uncreative, which is why Starbucks wants to free employees from having to focus attention on them.

In this light, Deep Brew isn't so much about improved technology as it's about Starbucks delivering a better experience -- or "nurturing humanity." In an article he published on Microsoft-owned LinkedIn, Johnson said we are living in "the age of unprecedented human disconnection" brought about by the time we spend interfacing with technology and not with other people. 

The Deep Brew plan looks to flip this narrative. Instead of technology robbing us of human interaction, Starbucks will use it to automate menial machine interactions, freeing employees to engage with their job craft and interact with the customer. 

It's the brand

Starbucks had a stellar year in 2019. It was already the third-largest restaurant chain in the world, but even at that size, it managed to add 1,900 locations in fiscal 2019 for 7% unit growth. But it's not enough to just grow geographically. A brand's popularity must grow as well, and the best barometer for that is comparable-restaurant sales. In the fourth quarter, Starbucks reported 5% global comps growth for the year.

Starbucks is a lifestyle brand, meaning that consumers connect with the brand image as much as the product. If it were just about coffee, then Starbucks' competitors should have similar results. Dunkin' Brands has a similar menu, and McDonald's is cheaper. And it's probably more convenient and cheaper to just buy Starbucks' ground coffee to brew at home. Yet Dunkin' only had 1.5% comps growth in its third quarter, compared with 7% for Starbucks in the third quarter. And McDonald's -- though larger than Starbucks -- only grew its store count 2% over the past 12 months. 

Starbucks is doing something right, and I think it's the brand. If the chain's mission statement is to "inspire and nurture the human spirit," and that's what customers connect with, then anything the company does to cultivate that (like the Deep Brew project) makes perfect sense. 

But will Deep Brew work?

Johnson mentioned that one of the goals of Deep Brew is to free up employees to interact more with the customer. I'm not convinced that customers want this. In a world where we text instead of call, and use self-checkout instead of a cashier, it seems the human disconnect Johnson spoke to is largely voluntary. I don't know of any empirical data that would suggest a person wants to have more meaningful conversations with a barista at Starbucks.

But from a customer perspective, if Deep Brew AI is better at scheduling and inventory than its human co-workers, that will undoubtedly be positive. Proper staffing means faster service at peak times, and a well-stocked store means customers can get what they want. 

There is another reason to believe Deep Brew is a good idea for Starbucks and its employees. AI, despite what dystopian futuristic movies show us, isn't innovative or creative. Those are distinctly human pursuits and are crucial for a business to be successful. An employee not suffering from boring tasks is more satisfied. And happy employees are more productive.

In the end, the exact benefit of investing in a workforce's "humanity" is impossible to tangibly measure. But as long as Starbucks is making that investment, I expect we will continue to see the brand expand and grow. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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