Why Starbucks Mobile App Has Lousy Security But Great User Experience

Why Starbucks Mobile App Has Lousy Security But Great User Experience

I left this comment on my LinkedIn feed on a piece about GE and Access Bank partnership. This connects to my Double Play Strategy. I have edited and expanded it for clarity here. 

If you sell Toyota financing unit for passenger cars in U.S., Toyota revenue in the U.S. will drop. Yes, most customers will be unable to buy Toyota cars. With Toyota, you can get a 0% interest rate for five years if you have good credit. If you have a degree from some top universities, you get a 0% also as a fresh graduate. Less than 2% rate is typical. Not many commercial banks will offer you a competitive rate like that.

But if one crazy guy comes in and says Toyota financing is losing money and needs to be closed, he will be shocked within quarters. Yes, the sales will drop because even if it has outsourced financing to partners, none can be better than what Toyota gives for its cars. The key is making sure that Toyota bundles its risks into the pricing of its cars. But shutting down the financing unit would be an own-goal as they say in football (yes, soccer).

That was the basis of my point with GE and the selling of GE Capital in 2015. Since GE Capital was sold, GE is yet to recover. Of course, GE has other issues like buying Alstom and other heavy power properties. Interestingly, it needed to sell assets to have the capital to acquire those assets. But losing GE Capital exposed the company to inability to close deals faster since clients could not easily get alternative capital. I am not saying GE Capital was the only reason that messed up GE. GE did not see the emerging renewable energy redesign where power systems are getting distributed which means large turbines are not the future but micro-power stations distributed across communities.

That brings me to Starbucks, a coffee chain: it has the best retail app which keeps winning awards because it is easy to use. Yet, Starbucks app is one of the “least” secure apps in retail. Your points can be stolen but Starbucks will replace them overnight. Starbucks can make extra $1 billion revenue for that lousy security per quarter and spend $100k to replenish stolen points. (Of course the stolen points are used in Starbucks. So, it is giving away $100k which also counts as “revenue”). Wall Street likes the extra $1 billion, adding extra $2 billion in its market cap. It has used $100k to get $2 billion in market cap and sold a commoditized product, adding extra $1 billion in the bank. So, telling Starbucks to secure its app does not get the idea!

If the app becomes so secure that it is now not easy to get that extra $1 billion, it will lose the $1 billion and the pop in its market cap. I might have simplified this but get the idea; never think that Starbucks does not have good engineers to make the mobile app as secure as bank app!

Business is organic in nature. There is transfer of value in the mechanics of financing. If you control the source of money, you win markets and territory.

 

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8 thoughts on “Why Starbucks Mobile App Has Lousy Security But Great User Experience

  1. I once said that those who own the capital also own the wealth, it doesn’t really matter the location or continent where the business activities take place; the source controls everything.

    As for Starbucks’ perceived weak security on its app, it’s part of why performance management and specifically the KPIs are unique for every business, you cannot copy and paste. This is because success means different things to different people, so your intent and purpose determine what success means to you.

    As long as you are achieving your objectives, you are already successful. So it’s out of place for anyone to even define what success means for another person or business.

    Nice insights.

    Reply
  2. one of the key points of this analysis is having a perfect product is not the point but having a product that can generate revenue. This is because revenue is a parameter for market success and nothing more.

    what a great analysis!

    Reply
    1. That is the point as we have also noted in the Discussion section of the Mini-MBA: if it is “great” and no one buys it, you have a problem. But if it is not good and yet sells, you can party. Unless you sell, you have no product, good security or not.

      Reply
      1. I’ve a three line business quote I coined Progress Strategy of innovation. It goes thus:
        1. Your first product or innovation must not be perfect but should be good.

        2.Your second product or innovation must not be perfect but should be better.

        3.Your third product or innovation must not be perfect but should be the best.

        But i now see this Starbuck App to to be an exceptional case…

        What do you think sir?

        Reply
      2. I’ve a three line business quote I coined Progress Strategy of innovation. It goes thus:
        1. Your first product or innovation must not be perfect but should be good.

        2.Your second product or innovation must not be perfect but should be better.

        3.Your third product or innovation must not be perfect but should be the best.

        But i now see this Starbuck App to to be an exceptional case…

        What do you think sir?

        Reply

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