Inside Starbucks' Secret Laboratory, They Brew Change at a Caffeinated Pace

Starbucks (NASDAQ: SBUX) faces enormous pressure to innovate. Yes, its customers look forward each year to the return of seasonal favorites like the Pumpkin Spice Latte or the S'mores Frappuccino, but if the chain can't create exciting new offerings, some of those folks may spend less -- or worse, stay home.

That's why CEO Kevin Johnson sets a relentless pace when it comes to innovation. He believes in turning ideas into action in just 100 days, a level of urgency that creates both enormous opportunity and significant pressure for employees at the Tryer Center, "the company's secret sandbox for every flavor of innovation," according to a blog post.

The center, which opened quietly in November, has already played host to more than 130 projects, from which dozens have made their way into Starbucks stores. More than just test kitchen for devising new drink recipes, it's "a cross between a laboratory, a design firm and a dot-com start-up," organized in a way that lets the company innovate systematically on everything from products to processes to store designs.

What is Starbucks doing?

Johnson has made it clear that while he wants employees -- and even top management -- to try out new ideas at the Tryer Center. But he's not in favor of cleverness or change for its own sake. He wants practical ideas that can eventually be brought into the chain's stores.

"We are embracing new ideas and innovating in ways that are relevant to our customers, inspiring to our partners, and meaningful to our business," he said in the blog post.

The center's actual structure includes a far amount of innovative thinking. It has "moveable, cardboard walls and working store components on wheels" that can be rearranged quickly. It even has a working drive-through window.

"For me, the Tryer Center is sort of the physical manifestation of a new way of working at Starbucks," said Johnson. "Scale and complexity can be the enemy of speed. We realized two years ago we had to change the way we work in order to be more agile."

And while product creation is an important goal at the center, teams there also focus on process. Ideas for ways to serve customers faster and more accurately are tested alongside new beverage concoctions.

"People have said, 'How does a tech guy end up running a coffee company?'" noted Johnson, who spent 15 years as a Microsoft executive. "But in the technology industry, if you fail to innovate or reinvent, you fall behind."

Breaking the mold

By design, the Tryer Center is no walled garden, where ideas are developed in isolation from the rest of the company. Its staff comes from all across the business, and includes baristas who split their time between the innovation hub and working behind the counter in stores. And that approach has led to some ideas you may be familiar with.

For example, store employees spending time at the Tryer Center helped devise a smaller system for Starbucks' Nitro Cold Brew that could be installed in every store. Baristas also helped come up with the Cloud Macchiato, which has been a major hit drink.

And thanks to a digital component, employees from around the world can contribute too -- voting on existing projects, making suggestions, and offering up new ideas.

Test kitchens are nothing new, but Starbucks has taken the concept to a new level. And in a market where it doesn't take long for popular ideas to get copied widely, the only way to stay a step ahead is to never stop looking for the next winning concept.

So while a tech-industry veteran like Johnson might not at first glance appear to be the most natural fit to lead a coffee company, his approach is apparently just what the patrons ordered.

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Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline owns shares of Microsoft. The Motley Fool owns shares of and recommends Microsoft and Starbucks. The Motley Fool has a disclosure policy.