CASE 1: On Target: Rethinking the Retail Website:Target is one big-brand retailer that seems to have survived

and even thrived in the apocalyptic retail landscape. What's its secret?  Srikant Datar discusses the company's
relentless focus on online data.
In the mid-1990s, Target was a discount superstore behemoth.
The retailer had set itself apart from chief rival Walmart with a focus on more upscale but wallet-friendly fashion and
lifestyle lines, spurring double-digit growth by double-digits each year for more than a decade.
That fruitful streak came to an abrupt halt with the United States financial crash in the fall of 2008. Target was hit
hard—much harder, in fact, than Walmart. Five years later the company was still struggling.
With more than 1,800 stores and a relatively new e-commerce site, Target was collecting reams of data about its
online customers—products purchased, browsing habits, items abandoned in shopping carts—yet it wasn’t fully
leveraging all that information. The company began to see this huge pile of e-commerce data as the needle-in-a-
haystack key to driving higher sales, says Harvard Business School Professor Srikant M. Datar in a recent case
study, Data Science at Target, co-written with research associate Caitlin N. Bowler.
“Target had to make this big shift from thinking only about retailing to also thinking about data. And to do that, data
had to become the big asset they needed to develop to provide new opportunities,” Datar says. “Even today, not all
retailers have embraced data fully to the point where they think of themselves as data companies, and it might be why
many companies are suffering.”
Several traditional retailers are indeed tripping over the digital divide. JC Penney has been tanking, with shares
recently trading at $1.50. And in October, Sears filed for bankruptcy protection, following the dark road paved by
Borders, RadioShack, and Toys ‘R’ Us.
“TARGET HAD TO MAKE THIS BIG SHIFT FROM THINKING ONLY ABOUT RETAILING TO ALSO
THINKING ABOUT DATA."
Target, meanwhile, managed a startling recovery from its five-year slump. The company’s third-quarter sales
increased by more than 5 percent over last year, and in August online revenue showed especially high growth of a
whopping 41 percent—the firm’s highest gain on record.
Fascinated with Target’s stunning turnaround, Datar studied the calculated steps it took to fuel its success.
Hire data experts
In 2013, the one bright spot in Target’s otherwise bleak financial picture was its then-small e-commerce arm.
Although overall sales declined, online business soared nearly 30 percent between 2012 and 2013.
Target was awash in customer data from these online sales, but to make sense of it, the company needed to bring in
the right people. Paritosh Desai joined Target in August 2013 as vice president of business intelligence, analytics, and
testing, and he then went on a hiring spree, growing the analytics team with data scientists and others trained in
computer science, math, statistics, and physics, including many who held doctorates.
To attract the best people, Target knew it had to keep at least part of its data operation in Silicon Valley, even though
the company’s corporate offices were in Minneapolis. “It was a big decision to stay in Silicon Valley,” Datar says.
“The demand for data-science professionals is through the roof, so you have to go where the experts are. Desai credits
the success of data science at Target to this team.”
Experiment and execute quickly
Desai created an entrepreneurial culture, knowing experimentation would be critical to discovering how data could be
woven into the company’s business practices. His colleagues followed this mantra: develop, test, measure.
Yet they couldn’t just continue with experiment after experiment without applying what they learned—and quickly.
“If you just keep experimenting, people [in the company] will say, when do the sales come in? You don’t have that
much time to keep trying,” Datar says. “The only solution is to learn fast, take action, and continue to build on your
learning.”
Deliver a mobile response in milliseconds
Desai knew from previous experience leading data science at Gap Inc. that consumers get frustrated with slow mobile
apps. To him, the most important engineering requirement was providing users with a response to their search in
milliseconds consistently.
““THE ONLY SOLUTION IS TO LEARN FAST, TAKE ACTION, AND CONTINUE TO BUILD ON YOUR
LEARNING.”

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Just as important, the response had to be relevant to that customer. If a consumer searched for “sneakers,” the site
should not only provide a list of sneaker-like shoes, but at the top of the list should be the particular brand the user
purchased in the past.
Measure success in narrow terms
A successful customer interaction on Target.com was narrowly defined: Only when a customer searched for a product,
received recommendations, and actually purchased the product would the company bother to drill deeper to test which
banner designs worked best to push a sale through.
And if a customer didn’t buy after browsing, the team asked questions: What information was the customer missing?
Was there something in the customer’s purchase history that Target should have known that would have blocked the
sale?
“Only searches that led to sales of recommended products in the same session were considered statistically significant
and quantifiable,” Datar says. “By setting the bar that high, you remain humble about what you can learn from both
successful and unsuccessful transactions.”
Managers should ask data-related questions
Desai wanted the team to help managers in the field make smart business decisions based on data. Those managers
were encouraged to develop questions that could produce value if analysts could massage the data to provide accurate
answers. For example, a manager might ask: Did a dish detergent promotion boost sales, or would customers have
bought the detergent anyway?
“The folks who had the data did not go to the managers and say, ‘I have all this data. Let me tell you how to run your
business now.’ They said, ‘Look, let me understand the key questions you would like to have answered with data,’”
Datar says.
As the team worked with analysts and managers, the questions became so sophisticated that an engineer might be
required to develop a tool to answer them. The engineer had to work quickly. “Retail is always changing so fast that
you can’t wait three weeks to get an answer,” Datar says. “The engineer might have to build the tool and provide the
answer in an hour.”
Allow managers to analyze data
The alliance between data experts and managers was a good start. But Desai knew that if managers had to wait in a
queue for an expert every time they had a question, they might grow weary of asking. The solution: allow managers
themselves to work with the data. That meant creating a flexible analytics system that could not only adapt to real-
time business changes but one that managers felt comfortable using.
“He didn’t want to be the bottleneck. It took vision and humility to say, ‘The answer doesn’t have to come through me
and my data science team,’” Datar says. “It was a bold decision because it was much costlier and more complicated to
design flexible architecture that managers could easily interact with.”
Take a calculated approach to using data
In the early days of e-commerce many retailers made the mistake of treating their online unit as a mere add-on to the
store. Target, by contrast, spent much time focusing on how data could be used specifically to help build its web arm.
And the retailer was careful to establish the value of data, analytics, and algorithms for the e-commerce site first
before scaling up its capabilities to make decisions and solve problems in other areas of the business, such as
marketing, store sales, and the supply chain.
But when the time was right, this data-analytic approach would help dictate a variety of decisions for Target, including
which products earned precious shelf space inside its brick and mortar stores.
“Target realized the importance of devoting the time, attention, skill, and strategy to developing data and analytics
competencies in a critical part of the business—its e-commerce site—before rolling out these capabilities more
broadly,” Datar says. “I think that’s a big reason why Target’s adoption of a data-driven approach has been so
successful.”

CASE 2: Starbucks Reinvented: Nancy Koehn's new case on the rebirth of Starbucks under Howard Schultz
"distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in
turbulence."
Harvard Business School Professor and historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz,
for close to 20 years. For her, the company represents much more than a phenomenal success story.
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In a recently published case, "Starbucks Coffee Company: Transformation and Renewal," (available soon) Koehn and
coauthors Kelly McNamara, Nora Khan, and Elizabeth Legris trace the dramatic arc of the company's past seven-plus
years—a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and
direction, and launch itself in new, untested arenas that define the company as it exists today.
"This case distills 20 years of my thinking about the most important lessons of strategy, leadership, and managing in
turbulence in the frame of a very relevant company," says Koehn, the James E. Robison Professor of Business
Administration. "As a brand, leadership, and entrepreneurship scholar, I've been dogging Starbucks for a long time."
On a 1995 trip to Seattle, Koehn visited a Starbucks store for the first time and was struck by what she saw and felt.
The notion of a "third place" between home and work to relax and enjoy the small, affordable luxury of a special
coffee beverage seemed to resonate with the social and economic moment, she recalls. Six months later she met
Howard Schultz, an entrepreneur who acquired the company in 1987, and was struck by his seriousness of purpose
and the breadth of what he wanted to accomplish.
The case, Koehn's fourth to focus on Starbucks, opens in February 2007. Schultz, no longer Starbucks' CEO but still
its chairman, is worried the company is losing its ability to be true to its values while providing a store experience that
conveys a sense of comfort, connection, and respect for its product and the communities Starbucks serves.
So Schultz composed a heartfelt, searching memo to senior leadership. In it, he bemoaned decisions (for which he
accepted responsibility) that improved efficiency and increased economies of scale but robbed stores of some of their
essential magic, such as the smell of roasting coffee and the sights and sounds of traditional Italian espresso machines
and baristas at work.
He also cited the company's rapid expansion and the potential "commoditization" of the Starbucks brand. "[W]e
desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to
evoke the heritage, the tradition, and the passion that we all have for the true Starbucks Experience," Schultz wrote.
The scope and richness of Koehn's case gives it the feel of a page-turning novel; in that sense, Schultz's memo is the
inciting action for all that follows.
Remaining True To Core Values
The challenge that had confronted Starbucks in the early- and mid-2000s was one common to many organizations:
Could the company continue to grow while preserving its culture and values? In some areas, the drive to expand,
egged on by Wall Street, was compromising the company's ability to invest in its partners (Starbucks' term for its
employees), deliver personalized customer service, and maintain a close connection to the local community.
In addition, McDonald's and Dunkin' Donuts had emerged as serious competitors, offering their own lines of specialty
coffee beverages. Even so, Starbucks' financials for 2007, the year Schultz composed his memo, didn't look so bad.
But the entrepreneur became concerned as he dug more deeply into the numbers. Sure, revenues were up almost 21
percent over the previous year, but had slowed by over a third; transactions per store were up 1 percent, versus 5
percent the year before. Same-store sales rose only 5 percent, the smallest increase in five years.

In January 2008, Schultz returned as Starbucks CEO, replacing Jim Donald, the man he and other senior colleagues
had chosen to lead the company.
Starbucks Sails Again
The case chronicles the blizzard of decisions and initiatives that follow what could have been the company's death
knell as the financial crisis hit home and consumers cinched their belts.
"Schultz understood that you can't lift your foot off the gas pedal when you're attempting to transform a company,"
Koehn says. "Severe as its financial needs may be, you also have to figure out what you will invest in. Schultz knew
that if he waited until the company was out of the woods to invest in new products, communication channels, and
ways of doing business it would be too late—Starbucks would no longer be relevant."
From the start, Schultz sent the clear, unwavering message that Starbucks' transformation would represent a return to
its roots and an uncompromising commitment to core values, such as health care benefits for any partners working at
least 20 hours a week.
At a March 2008 gathering of 200 senior-level company leaders, Schultz unveiled a Transformation Agenda that
included seven "Big Moves":
1. Be the undisputed coffee authority;
2. Engage and inspire our partners;

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 3. Ignite the emotional attachment with our customers;
4. Expand our global presence—while making each store the heart of a local neighborhood;
5. Be a leader in ethical sourcing and environmental impact;
6. Creative innovation growth platforms worthy of our coffee;
7. Deliver a sustainable economic model.
The case provides a behind-the-scenes look at how the coffee company moved forward on these goals, including the
introduction of the milder Pike Place Roast; the story of its VIA Ready Brew line; the launch of a loyalty program;
investment in and engagement with social media; focus on a global expansion strategy; and the extension of social
programs. The company closed stores, restructured its manufacturing and supply operations, and, perhaps most
significantly, took steps to reengage its partners and store managers. In February 2008, Starbucks closed more than
7,000 of its stores across the country for "Espresso Excellence Training," taking the time to work with approximately
135,000 baristas to ensure they could pour a perfect espresso shot and steam milk properly.
For Schultz, however, that wasn't enough—he wanted to reach the company's store managers, recognizing them as
essential to the transformation process.
"I needed an unfiltered venue for expressing my empathy about all that we were asking our partners to do and telling
them plainly what was at stake," he wrote in Onward: How Starbucks Fought for Its Life without Losing Its Soul. The
answer, in Schultz's mind, was a three-day conference in New Orleans in October 2008, a moment when the global
economy happened to be tanking. Starbucks' fourth quarter profits were down 97 percent from the same time a year
earlier; for the fiscal year, net earnings were down 53 percent to $316 million. The Starbucks board was reluctant to
send 10,000 partners to New Orleans at a cost of $30 million, but Schultz stuck to his guns.
In addition to rolling up their sleeves and taking part in community service projects to aid areas of the city still
recovering from Hurricane Katrina, partners participated in team-building events that reviewed the company's guiding
principles and reminded them of their central role in the customer experience. Schultz also brought in Bono, lead
singer of U2, to announce a partnership to channel proceeds from holiday beverage sales to the Global Fund in support
of AIDS relief programs in Africa.
The New Orleans conference was a turning point for Starbucks; in the "novel" of Koehn's case, it's the climax.
"Investing in a conference of that size is such an unusual thing to do when faced with a cash crunch," Koehn says.
"Schultz understood that what saves and breaks businesses is much more than cash. In the midst of so much
turbulence, it's all too easy to pull levers on the low-hanging fruit of cash and logistics. But you don't save a business
and turn it around without speaking to, focusing, and calling on the spirit of your people."
Schultz's experience qualifies him for closer study in Koehn's HBS course Power and Glory in Turbulent Times: The
History of Leadership from Henry V to Steve Jobs. Not all managers are confronted in their careers with the sort of
transformation challenge faced by Starbucks, but Schultz's reflections and actions are instructive for anyone charged
with finding sources of strength, innovation, and renewal in today's turbulent business environment, Koehn says.