David Palmer (UBS): You wanted to cut through the bureaucracy and increase the effectiveness and turnaround time on the innovation. Could you give us some examples of how your innovation process is perhaps changing in this environment?
Howard Schultz: I’ve said in the past that I thought that in the early entrepreneurial years of our company the creative spirit and how that related to innovation was one of our core strengths and with the specifics of the facts that we were able to be extremely nimble and go to market very quickly. As the company has grown and the scale of the operation, it becomes harder and harder to respond quicker to opportunities and get it to market in a timely fashion just because of the backroom issues of operations and product selections.
If you just take Vivanno as an example, we rushed Vivanno to market but then we had to find regional suppliers for bananas for thousands of stores. You would think that would be an easy thing to solve for but when the banana supplier heard the order on a daily basis he almost had a heart attack. It’s that kind of thing.
However, to put it in to precise terms, first and foremost innovation, creativity and our ability to create separation in the market place with regard to differentiating products and platforms is really key to the future. I am intimately involved in all aspects of that from the ground up. What we have also learned is that in this environment, it’s very important to be decisive but you’re not going to have perfect information.
It’s important in view of that to have the courage to go to market without perfect information but realizing that there’s going to be issues that perhaps you have to solve on the fly. It’s really important to maintain your core customers and do everything you can to ignite your base. However, please don’t make any mistake about innovation, the success of the company in the past and today and in the future is reliant on our ability to lead with regard to coffee.
The coffee experience, how we go to market with coffee, the aspect of sustainability and what we talked about today with regard to fair trade is that the innovation in terms of other platforms which are complimentary to the experience. We have to innovate with our people and provide them new ways to participate in the success of the company as we did in New Orleans.
This is a time at Starbucks where nobody wants to go through something like this but having gone through this year we are a much stronger organization for having gone through it with a galvanized common purpose. The optimism and enthusiasm that we have as a company has never been higher about the purpose that we have, the willingness to drive innovation and most importantly to exceed the expectations of the customers.
We think we are better positioned to win today than we were a year ago when we were just beginning to face the downturn in the economy, the strong headwinds. We got after it early and we are in a position to win in fiscal 2009 despite the economic condition.
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