Having founded and sold five Seattle-area startups in less than a decade, Kelly Smith fits the description of a passionate, veteran, and successful entrepreneur.
Which is why it was surprising when Smith decided to switch gears a year ago — not only taking a job in the corporate world, but moving his life to Shanghai, China.
As part of our GeekWire China reporting trip last month, we met up with Smith at his new office inside the Starbucks China headquarters near downtown Shanghai. The startup vet has spent the past 14 months as VP of Digital for Starbucks China, helping grow a team from two to 20 employees who are working on everything from web, mobile, social, e-commerce, loyalty cards, and many more digital-related projects for Starbucks in China.
On a personal and professional level, it’s been quite the shift for Smith. But he seems happy with how things have turned out despite being so far from home.
“You do these things because you want a sense of adventure, because you want to see other parts of the world,” Smith told GeekWire. “At least for me, since I’ve been here, it doesn’t feel like I’m on the other side of the universe at all. It’s pretty comfortable and it’s a big city.”
Smith joined the coffee giant at a unique stage for the company in China, where Starbucks is opening up one store per day and sees huge growth potential — in particular from the digital side, given how many Chinese consumers own smartphones and are comfortable using new technology.
“I think there is a time and place to go back to the startup world, but you know, there’s a massive opportunity here to unlock that potential,” he said. “It’s very real. It’s an opportunity for somebody to work on something with immense scale, and an incredible amount of interest. It’s pretty exciting.”
Smith, who still helps run a Seattle-based investment fund called Curious Office, touched on a number of topics related to startups, Starbucks, Seattle, Shanghai, and much more during our chat. Here’s an edited transcript of our conversation.
GeekWire: Thanks for taking the time to meet with us, Kelly. Great seeing you in Shanghai. Was it a huge shock to come here and live in a totally different country?
Kelly Smith: “I was at a time in my life, professionally and personally, where I was ready for a change. So timing-wise, I think my mind was in the right place. I moved around a lot growing up — probably more than 30 cities. So, I think that I moved enough in my life that I was probably less startled or rattled by the differences than a lot of people might have been.
But I don’t really remember a huge cultural shock, so to speak. I wouldn’t even necessarily say I’ve been incredibly homesick. You do learn quickly with how to cope with lots of practical things. For example, I don’t speak the language, which makes everything a little difficult. You take things for granted like getting in a cab and just knowing how to give directions — if you don’t speak the language, you prepare yourself in advance before you get in the cab. It’s a lot of those little life adjustment things that you just learn to deal with.
But, on the whole, I think the big thing is you just learn to not sweat the small stuff. For example, maybe you drink your water cold back home because it comes out of the water machine cold, and here it doesn’t. There are a thousand little things like that you notice, but the sense of adventure of it all definitely overrides whatever inconveniences you ever might feel, from my point of view, anyways.”
GW: Is that what you thought before you got here? You landed the job after meeting with Starbucks Chief Digital Officer Adam Brotman, right?
Smith: “We connected on this opportunity really quickly. I think we had one meeting about it, maybe for an hour. Adam and I worked together before for a very brief time and I just felt like he understood what the needs were going to be, and I think he understood me. I similarly saw a unique opportunity that is very much like a startup. There was maybe one more person on the digital team when I got here and no formal digital ventures. There was much more that wasn’t yet figured out than there were things that were figured out, which you know for me, that’s an environment that I’m comfortable with. I’m comfortable with highly ambiguous situations, so we connected really quickly. It was a few weeks of back-and-forth about the role and meeting some other people in Starbucks back in Seattle, and conference calls with the team here, but I don’t think much more than a couple weeks went by before we were pretty sorted. And then the following month, I was on the airplane.”
GW: That’s crazy. So, what’s it like living here? I’ve been here just a few days, and it’s so different.
Smith: “You notice so many things it’s hard to know where to start. You know, one of the first things I noticed is that this is obviously a massive country. I’ve been to all but a few cities and towns since I’ve been here. You’ll often hear people to refer to China as Tier 1 cities, Tier 2 cities, Tier 3 cities, Tier 4 and so on. Pretty reliably that means something to people. They know what you mean when you say ‘I’m in a Tier 3 city.’ What you see in Shanghai is an entirely different China that what you’d see in a Tier 3 or Tier 4 city. Even the type of Starbucks store that we would open would be different, depending on the Tier.
But as far as Shanghai, it’s as crazy as any other mega city. It’s a city of haves and have nots, with extremes on both sides of the spectrum. If you are into cars, you’ll feel like you’re in Beverly Hills here, but then you turn a corner, just like I suppose you might say about L.A., and there are entire apartment buildings with five or six different units in it and everybody in building shares the same kitchen on the ground floor. Also, the number of people with climate control is probably far fewer than the number of people without climate control. So it’s very much a city of extremes.”
GW: How does it compare to living in Seattle?
Smith: “I would say in general, if you are an American you would be inclined to say it’s not as comfortable as living in Seattle. I think that’s a true assessment. On the other hand, you do these things because you want a sense of adventure, because you want to see other parts of the world. At least for me, since I’ve been here, it doesn’t feel like I’m on the other side of the universe at all. It’s pretty comfortable and it’s a big city. But, there are things, for sure. I’m not an adventurous food eater, so sometimes I’m a little caught off guard by that. But a lot of people love the food. That is always a little weird to me — like, chicken feet? It’s very common here. For me, no thanks.
One thing I found interesting is that despite being a very, very big place, I’ve never once seen a fight here, or, for example, graffiti on the walls. It’s really fascinating how people here just culturally follow the rules, or at least some kinds of rules. It’s not a violent culture, and in a city with so many extremes financially, and in some cases a fair amount of suffering and obviously massive crowds, it’s incredible that it’s so orderly. This is an incredibly safe place. If you’re walking through a tough neighborhood in Detroit or L.A. at 3 o’clock in the morning, you’re aware of the fact that it isn’t an ideal situation. You never feel that way here. I don’t know what that says. People are just very good about following the rules.”
GW: That’s interesting that people are law-abiding. Do you see that mentality in the workplace, where people are not as creative and risk-averse? Especially since you came from the startup world in the U.S.? I’ve heard that from a few people.
Smith: “I think there’s some part of that that is still very much true, no doubt. Part of the culture is that you go through a set of steps in your life and you are very much taught to follow the rules. I would guess that it’s not the majority’s immediate reaction to come out of college and suddenly think to yourself that, hey, I’m going to just take a totally different path and just do something that just makes absolutely no sense that is absolutely high risk. That DNA is not prevalent.
But as you probably know very well, which is part of the reason why you are here, it is steadily increasing. Still, whatever startup culture there is in China, it’s very much clustered around Beijing. Shanghai has more of a digital marketing culture versus a software culture, which makes hiring for us in Shanghai sometimes very difficult for some of our product roles. The entrepreneurial support infrastructure is in Beijing, so it’s roughly synonymous with Seattle or San Francisco in the U.S. I don’t really know why that is — they do have more of the technical colleges there, and I also think that having government support for whatever you’re working on in China is always important. I’m sure that has some effect. But yeah, it’s interesting. The startup culture is still in its early stages for sure.”
GW: Let’s talk about Starbucks in China. The growth seems huge. Do you guys have the same growth strategy here as in the U.S.?
Smith: “We open about a store everyday. That’s been the case since I’ve been here, so it’s been running at that clip for 12 months and well before I got here. So there’s about over 1,800 stores now, coming up on 1,900 stores. That’s pretty unbelievable. This is a big organization, and digital is a part of it, but obviously, Starbucks first and foremost is a food and beverage company with huge incentive to continue to open stores in markets like this. When you try to get your head around the infrastructure, the design, and the operational complexities of how we open a store a day, it’s just astounding to me that it works and that you can just do it reliably and have the stores come out at the volume they do. It’s really wild. My head is down focused on digital, but it is really interesting for me to sit in on the China leadership team and just listen to all the other aspects — how ingredients are sourced, what the status of store openings is, etc. It gives you a newfound respect for a whole ton of things that have nothing to do with digital. It’s pretty unbelievable.”
GW: I went to a Starbucks earlier this week and was surprised when they asked for my Starbucks Rewards card. Is that pretty common?
Smith: “In China, there was basically almost an entire generation that skipped the laptop phase and went straight to their phones. In Seattle, it’s absolutely the case that you have a laptop and you have the phone. That’s not necessarily the case with the younger generation now here. The phone, that’s the computer. You can find all the metrics in the world on mobile penetration here, but it’s massive. So yeah, there is no shortage of work for us to do on the digital front. And not only that, but payments, too. This culture is not just about mobile phone penetration, but digital payments is also a well-understood part of everyday life here. We are obviously very aware of that. We are doing everything we need to do to position ourselves the right way.”
GW: Is your new role with Starbucks China like working at a startup? Is it more stressful than startup? How does it compare to your previous jobs?
Smith: “That’s a very good question. Honestly, the workload feels about the same to me. To me, it feels more like a startup than not. I suppose if I were to sit here and think about it, do I have the exact same level of fear where failure is basically fatal? With a company this big, with the infrastructure and the support that there is, you never want to think that what you’re doing at Starbucks is about you. That’s absolutely the case, and I think that every single person here needs to say that. Because firstly, that’s true. And secondly, it’s part of the organizational DNA here that it’s never about the individual.
I think when you’re doing a startup, it’s very much about you. When you’re raising money, it’s your word and it’s what you do everyday that really counts. So in that sense, it’s totally different. But the workload to me feels about the same. With very few people, we are working on launching e-commerce, working on launching whatever we need to launch to basically provide for the social environment here that’s unique. There are also all these other experiences like digital payments and loyalty we are working on launching that weren’t here before. We are working on trying to figure out exactly what’s the right experience.
The thing about it is, what makes this very much unlike a startup is that we have the benefit of going back to global and they have many, many years of building out these digital experiences brick-by-brick and having it work well in some cases and not having it work well in others, then learning from mistakes, starting over and rebuilding it back up. So for us, of course we go back to global a lot and we say ‘hey, tell us how you think about security. Hey, tell us how you think about scalability. Hey, tell us how you think about DevOps.’ There’s very much constant communication around best practices. At a startup, it’s true you can go ask your friends, but whatever it is you’re building probably isn’t at all the same as what someone else is building, so you’re having to make up a lot less in an environment like this.”
GW: It seems that the Chinese really love the Starbucks brand. Given what we’ve seen with loyalty brand stickiness in the U.S., how much potential is there in China for Starbucks?
Smith: “I think it would be hard to quantify the opportunity for Starbucks in China, quite honestly. I can see with my own eyes, people genuinely have a real emotional connection to the brand here as they are trying to understand it. But there’s a huge amount of willingness from people to learn more about the brand, and you can see it in their eyes when they are standing in the coffee line, with how they are looking at the menu board. Remember that for a lot of the people that would be standing in a line in front of you at a Starbucks in China, not necessarily everybody would even be familiar with those types of products. So, the brand is a very powerful force here and there’s a huge amount of curiosity. The opportunity for now couldn’t be overstated.”
GW: Even more so than in the U.S.?
Smith: “Long term, I would say it’s absolutely the case.”
GW: As it relates to digital, where do you see Starbucks China in two, five, 10 years?
Smith: “My goal is to help build in the relatively near future what will ultimately become the most significant brand app in the country. Exclude the social platforms and the payment platforms — I’m just saying as a brand, my goal would be to make this the most prevalent application used by people in China, bar none. I think that if we deliver on the promise of digital payments tied to loyalty and especially the mobile ordering component, and we do a good job of modeling after other experiences that are being released in the U.S. that are successful and we learn from it and we deploy them in this market the right way, my expectation would be that the growth could be explosive. I think that there’s all the potential in the world here for Starbucks. I genuinely believe that. I think this company is doing fantastically well and digital is an opportunity for us here that, well, let’s call it wildly significant.”
GW: What about things like ordering food and drinks with your phone ahead of time? Will that be rolled out in China?
Smith: “Mobile ordering has been really successful in the U.S. We don’t have that solution here in China. We think the market situation would be very friendly and receptive to those types of offerings that we already see back home, perhaps even more so. So, right now we’re just heads down looking at what, from those solutions, should we take here in China. What you see as being successful back home will likely be even more so here. I think that is what I have learned in my time here in China. The appetite is there, the customers are waiting, I think their affinity for the brand is remarkable here, everything is in place. Now it’s about execution.”
GW: What motivates you at Starbucks? Is it different than what motivated you at your startups?
Smith: “I think that in practical terms, if I didn’t do well here, of course I know that it’s not fatal to the company. But the emotional drive to nevertheless do well, that part is pretty similar. I remember how I felt on previous startups, convincing people to come with you to help build this thing. And you definitely feel a certain amount of obligation and responsibility as people make a choice to come with you and pursue this path, right?
Well similarly, everything you hear about the Starbucks culture is absolutely real. There is a very unusual bond that happens inside Starbucks, I would imagine, compared to other big companies. And so, you feel a sense of responsibility to do well for your partners that you’ve committed to. I think everybody here takes that pretty seriously, to be honest with you. In that sense, it’s very much like a startup. I think the culture that’s been built in this company, it’s incredibly unusual and it’s incredibly strong.
And so what motivates me? Basically, delivering on what you said you were going to do for the people that support you. That’s it. I basically am very open about that as my motivation. Not just to Adam Brotman, but also to [Starbucks China President] Belinda Wong, and I say it very directly. I think there is a time and place to go back to the startup world, but you know, there’s a massive opportunity here to unlock the potential we just talked about. It’s very real. It’s an opportunity for somebody to work on something with immense scale, and an incredible amount of interest. It’s pretty exciting.
When I took this job, I understood the importance of the digital transformation for Starbucks having been based in Seattle. It’s been pretty well documented. I understood the scope of the opportunity and for me, that was the motivation. But, you know, the intensity has been dialed up in the last year because I think the expectations are really high. More than ever, this company is absolutely committed to the digital mission, and China, I think, is an integral part of the company’s future growth. So what more can you ask for?”
GW: How much do you think about going back to the startup world?
Smith: “I go back to Seattle about once per quarter to just touch base, both personally and professionally. I think that if you spend so many years building your own companies before taking a job like this, naturally you’re always noticing things around you and always thinking about an opportunity. How can you make something better than what you see isn’t working very well? That’s just part of the entrepreneurial culture. When Adrian Hanauer and I started Curious Office, there’s a reason that we gave it that name. That’s because people who like to start companies are just people who are fundamentally curious. That doesn’t go away. I think about things that could be made better and subsequently could be companies all the time. But I think any entrepreneur hired by Starbucks or any other company, that would be the case. I’m not sure there’s anything special about that.
But, man, for the time being, it would be hard to imagine what digital things I would work on that could exceed the scope and scale of deploying these digital solutions in China. There aren’t many. I’ve been lucky, frankly, to have had the opportunity to do both. We’ll see what happens down the road. But Adam would say the same thing. He was an entrepreneur before he joined Starbucks. This is a very entrepreneurial friendly culture, to be honest with you. So the way you think and act and talk is not entirely dissimilar. But there are differences, of course. There are differences.”
