Insights and War stories: Starbucks, Kraft & Hyatt

By Scott Kirsner |  December 30, 2013


Calpino offers his perspective on exactly how you earn the return call in the audio and panel highlights below. Calpino’s fellow panelists included Rachel Antalek, Vice President of Concept Innovation at Starbucks and Jeff Semenchuk, Chief Innovation Officer at Hyatt. The moderator was author and investor Whitney Johnson

  • Semenchuk says he has dotted line reporting relationships to both Hyatt’s CEO and its Chief Marketing Officer. When Semenchuk arrived in 2011, “Our CEO said, ‘Jeff, you’re going to need a sherpa who helps you navigate through this organization — and he was absolutely right.” Chief Marketing Officer John Wallis became that sherpa for Semenchuk; he has been at Hyatt for 35 years.
  • Antalek says her innovation team is 100 percent focused on disruptive innovation — and tries to avoid anything that smacks of incremental improvement to existing products and store formats. “If you’re accountable for disruptive innovation, the minute you [get pulled into] the small stuff, you’re sunk. We have a threshold. If [an idea is] under that threshold, we’re going to give that information to the business unit and let them choose whether or not its something they want to prioritize. The things we need to do are so intensive. Breakthrough [innovation] requires a lot of time — often longer time than a retailer like Starbucks is willing to be patient with. We have to make sure that our limited, scrappy, small resources stay focused on what we’re charged to do.”
  • Calpino talked about working at S.C. Johnson & Son when the consulting firm Booz Allen came in and honed in on five brands that the company “should let ride off into the sunset,” including Glade. “It was a $40 million aerosol brand, and people were using it 90 percent of the time to cover up foul odors. [The advice was that it was a] narrow brand, [and we should] let it go. I was new and junior, learning innovation. I watched the leadership team at S.C. Johnson look at Glade through a different lens. By the time I left in 2002, the brand had grown to over a billion dollars. They thought of it completely differently. They said, it’s going to be a home fragrancing brand, not just covering up odors. They came up with this new innovation, Glade Plugins. That redefined the category and the brand. It changed everything. After Plugins, it created a culture that led to candles and scented oils. Don’t ever think a brand can only do this one thing that it does today. Sometimes, you’re the one who limits it the most with your own barriers.”
  • Calpino had some very concrete advice about how to create a positive working relationship with business units: “I spent much of my career in business units. When the central innovation person would call me, I usually didn’t call them back. And I’ve been that person for the last four years at Kraft, and I get upset if they don’t call me back. You have to earn it. It’s your knowledge, your experience, your reputation, relationships. All the soft stuff matters. And you’ve got to have sponsorship from above, so that people take you seriously. There has to be some element to your role that has some teeth to it. So not only do they respect you and know you and feel like you might help them, but also your role matters. At Kraft, our CEO, Tony Vernon, set up quarterly innovation reviews with all the business units, which I run. Those meetings help create our innovation culture and process at the company. But the message is, ‘Hey, Tony’s got Barry’s back.'”
  • Antalek got the biggest laugh of the panel when she talked about her experience rolling out Starbucks Evenings, a new menu available in about 22 locations. “When was the last time you were in a Starbucks after 4 in the afternoon?” Antalek asks. “A bunch of us looked at this day-part. Not coincidentally, a lot of us were women. What happens when you’re on the road and you’re a woman and you just want to chill out at night? Or you’re with a group of friends and you just want to talk? We have this space that everybody wants to be in, but it’s empty. But you have a very stressed-out group of Gen X women — mostly moms. They’re not going to the bar down the street if they want to get out. What if they could drop their kids off at soccer and have tea, hot chocolate, or a glass of wine? There is clearly a target consumer who wants to use our space. By being open to what she wants, from an environment and a menu standpoint, that led to Starbucks Evenings. At the first store we got working, the first person who came in was a guy. I was lurking in the background. I gave it five minutes. I went up and introduced myself. I was just devastated. Maybe I got it all wrong… It turns out he was a stay-at-home dad, and he had just dropped his daughter off at soccer practice. Ever since then, it has been 95 percent women.”
  • Calpino on the importance of sharing success stories: “Storytelling in this world of innovation is super, super powerful. It’s amazing the memory people have about failures. When I started at Kraft, everyone told me the stories behind all of our big failures. I didn’t hear a lot of success stories. But when I worked at S.C. Johnson, the success stories were mythical. And those success stories created a culture where everybody wanted to be part of the next Glade Plugin. Stories are incredibly effective. As a leader, you have to spend time to learn them and practice telling them.”
  • Semenchuk talked about Hyatt’s efforts to “untether” employees from the hotel’s front desk, and handle the check-in process with iPads to “create a more personal experience. We were talking about doing it with Hyatt Regency in London, one of our oldest brands. A lot of our women front desk colleagues resented it. They didn’t feel comfortable with it. [We asked,] is it because of the technology, the iPad? A 29-year old italian woman, Simona, said she didn’t feel comfortable because of this bad, nasty uniform you make me wear. ‘I don’t feel good, it’s dark gray. At least behind the counter, I can sort of hide.’ We said, we’re going to create a fashion team, including Simona. They said, this is the fashion we want to have… It shouldn’t be a 50-year old guy in Switzerland telling you what to wear.”
  • At Hyatt, Semenchuk says some of his team members are spending 50 percent of their time on disruptive innovation — as opposed to sustaining innovation and improvements to the existing product. One motivation: “Airbnb has 500,000 rooms in inventory every night. We as a big hotel company have 142,000. When they go public, they’ll probably have twice the market cap that we have. They don’t own hotels, they don’t manage hotels. They just created this platform.”
  • Semenchuk had more to say about Airbnb and the sharing economy — people renting and accessing assets in new ways — and the imperative for Hyatt to explore these new business models. “What we’re trying to do is say there’s something about the sharing, collaborative economy that is very different. A new business model has to have legs for at least a 10-to-15-year span. This sharing economy is that. We’re seeing a whole generation of people who are very comfortable sharing. How can we expand how we think of ourselves as a company? How can we partner differently, as opposed to thinking we have to get into the same business and replicate? That’s what we’re exploring right now. That’s going to take a while.”
  • Calpino said that more than new business models, his team at Kraft has been focusing on new distribution channels. “ for food and beverage is a hot potential channel for our industry…How do we take our existing brands and do well in those new channels?”
  • Calpino said that executives at established brands sometimes must “hear what they don’t want to hear” in order for real change to happen. At Oscar Mayer, he says, “the brand was at the risk of becoming a poster child for an obsolete and extinct brand. They went on a mission: how do we get our products to be more real and relevant to the Gen Y and Gen X consumer? They had a five-year project to remove artificial preservatives from the meat. That led to this concept called Oscar Mayer Selects, which was a $100 million launch for us. It started with a leadership team that faced the reality.”
  • “If markets never changed, if new competitors never entered the market, if consumer behavior never changed, we wouldn’t have to innovate. But guess what? Those are always changing.” – Jeff Semenchuk.
  • Semenchuk talked about repositioning Citibank’s brand and customer experience in Singapore; he worked for Citi as Managing Director and Head of Growth Ventures & Innovation. “At Citi, a lot of our growth was coming in Asia. Citi was always viewed as the American bank. How do you completely think differently? We typically had big branches on main streets, where people had to stand in a queue, go up to a counter to encounter a teller. Of the four million people in Singapore, one million travel to and from work in the subway, the metro. Singaporeans work all the time. What if this could be about time better spent? The whole business pivoted. We created very small shops in the subway stations. We created a two-in-one card with the subway card and your debit or credit cards. You’d get free subway rides, the more you used it for payment. We were in your way in a good way, twice a day on your way to or from work. Within a year, revenue was up 22 percent over the previous year. Acquisition costs decreased by 28 percent. We were able to create more flexible staffing models. There were different peak times, so the staff at one place could hop on the subway and go to another place. A year after it launched, Citi was named Bank of the Year in Singapore.”
  • Semenchuk had a provocative take on loyalty programs. “I see a future — maybe this is a wish — where there is no such thing as a loyalty program anymore. That you enjoy your experience so much with us that you wouldn’t think of staying anywhere else, if we’re in a city where you’re traveling. We’ve discovered that our most loyal customers — we call them Diamonds — actually are not loyal at all. They stay just as much and have the same status with Marriott and Hilton. This points business — we’ve created a monster. I think an indicator that you’ve become a commoditized industry is when you have to start doing things like points to incent people to stay. Having said that, we’ve created this, so we have to perpetuate it and morph it. Part of what we’re looking at is thinking about it as currency. How can you convert things to pay in real-time for food and beverage — points plus money. Back to the Airbnb thing, how could we have partnerships where you could use Hyatt Gold Passport Points to stay at places other than Hyatt? Shocking, but that’s part of where we need to go.”
  • Semenchuk says he and the rest of Hyatt’s senior leadership are working to “elevate our whole purpose as a company. We’re not a hotel company. We’re not even a hospitality company. We’re a company that is about caring for the human spirit. Not just bodies in bed — but the ambitions, the aspirations, the fears that people bring when they travel.” And he acknowledges that that process is “wreaking havoc across the company. How do you translate that [mission] into our specific brands like Park Hyatt, Hyatt Place, Andaz?” It can be tough…Antalek: “Go find your detractors, and [let them present you with your] innovation challenges. With Starbucks Evenings, I had one senior person who said to me, we’ll never be able to do this — it’s too hard, it’s too complicated, you’re going to change the business model, we won’t be able to have the same kind of managers. I said, ‘Great, will you please embed somebody from your team? I need them from the start.’ Let’s make this our challenge. We will innovate this thing to deliver less complexity than the rest of our business. That is going to be one of our success metrics. Don’t run from your detractors. Find them and build them into your challenge.