Welcome to the Block & Mortar newsletter! Every week, I bring you the top stories and my analysis on where business meets web3: blockchain, cryptocurrencies, NFTs, and metaverse. Brought to you by Q McCallum.
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A web3 coffee odyssey
Sorting out use cases for a new technology can feel daunting at times. It helps to understand what it really is, on a fundamental level, to unlock ideas. Consider that NFTs are built on cryptocurrency tokens, which are built on blockchains. So if we can think of use cases for blockchains, some of those will bubble up into uses for tokens and NFTs.
Blockchains are ultimately tamper-resistant systems for logging events: “person A moved value B to person C on time D” or “item A moved from facility B to truck G at time C." This framing also works for “customer A completed action B at time C," which is why companies are increasingly exploring blockchain technology for their loyalty programs. It feels natural to model customers as wallets, loyalty points as fungible tokens, and special participation as NFTs.
(For more details on the economics of loyalty programs, please check out this newsletter segment from last month.)
And if you’ve been thinking about how to employ web3 for your company’s loyalty program, the new Starbucks “Odyssey” is worth a look:
Starbucks Odyssey will be an extension of the industry-leading Starbucks Rewards program […]. Once logged in, members can engage in Starbucks Odyssey ‘journeys,’ a series of activities, such as playing interactive games or taking on fun challenges to deepen their knowledge of coffee and Starbucks. Members will be rewarded for completing journeys with a digital collectable ‘journey stamp’ (NFT).
It’s notable that such a large, high-profile player is embracing web3. Sure. What we find even more interesting is that they’ve clearly put a lot of planning into this. Odyssey is not your typical case of a company throwing a new technology in the mix just because it’s cool. Quite the contrary:
Environmental impact: Starbucks has built Odyssey on the Polygon network. Polygon uses the low(er)-energy Proof of Stake scheme for validating blockchain activities, compared to the resource-hungry Proof of Work scheme used by Bitcoin (and, until recently, Ethereum). This is both an environmental win and a PR measure. No one can accuse Odyssey of burning down the rainforests for issuing JPEGs.
Ease of use: Starbucks recognizes that most people are not familiar with day-to-day blockchain concepts, so it’s hiding that to reduce barriers to entry:
[Starbucks] opted to make NFTs the passes that allow access to this digital community, but it’s intentionally obscuring the nature of the technology underpinning the experience in order to bring in more consumers — including non-technical people — to the web3 platform.
“It happens to be built on blockchain and web3 technologies, but the customer — to be honest — may very well not even know that what they’re doing is interacting with blockchain technology. It’s just the enabler,” Brewer explains.
That TechCrunch article further explains that the company is using the term “journey stamp” instead of “NFT,” which further separates the user experience from the underlying technology. No doubt Starbucks is proud of the tech stack it’s put together, but we wager their team is saving that for internal high-fives. The company is outwardly focused on its customers, who care more about coffee than crypto.
(If you’ve been thinking about a web3-based loyalty program but have been put off by asking customers to manage crypto wallets, take note. We’re seeing more and more companies handle the backing wallet mechanics on behalf of customers, and people will eventually expect this as a standard.)
Focus on the outcome: Moving beyond the purely technical aspects, Starbucks has built Odyssey as a way to truly engage with its loyal customers. Quoting the TechCrunch piece again:
[Customers will] be able to engage with various activities, which Starbucks called “journeys” — like playing interactive games or taking on challenges designed to deepen their knowledge of the Starbucks brand or coffee in general. As they complete these journeys, members can collect early digital collectibles in the form of NFTs (non-fungible tokens).
Whereas your typical loyalty program is purely transactional in nature – “do this activity ten times and get a free item” – Odyssey is designed to build an experience to cultivate brand affinity. This highlights the difference between, say, taking a one-off class at a local university versus pursuing the full requirements for a degree. Starbucks has removed the friction where it causes trouble (by handling the blockchain matters behind the scenes) while introducing friction right where it’s needed (it’s harder for people to get the best outcomes while being passive or distracted in their interactions with the coffee chain).
Overall, we get the impression that Starbucks has really thought through the technical, tactical, and strategic aspects of developing this program. We look forward to watching Odyssey evolve.
This pixelated steak has real-world flavor
Food chain Chipotle is also ramping up its web3 loyalty efforts. The company has unveiled the new Garlic Guajillo Steak … inside its Roblox metaverse property. Participants can practice grilling and seasoning steak, in a simulated kitchen, under the tutelage of Chipotle’s head chef.
The prize was more than just virtual points, however:
Chipotle is also giving users who successfully cook and taste Garlic Guajillo Steak a chance to try the new menu innovation in real life. On September 13 and 14, Chipotle will drop 25,000 codes for free entrées at 7 a.m. PT and 3 p.m. PT — a total of 100,000 codes. The codes can only be accessed by Chipotle Rewards members in the U.S. and Canada on the Chipotle app, Chipotle.com and Chipotle.ca.
Rewards members and Roblox players will get early access to the new entrée.
Similar to the Starbucks program noted above, Chipotle is using its web3 presence for more than just a purely transactional loyalty program. They’ve taken the time to create an engaging, interactive experience that gets their true fans to self-identify. Compare this to the web2 marketing approach – trying to contact specific individuals in the hopes of converting them with a semi-tailored message – and you’ll see why the web3 version is so much stronger.
(Also of note: that simulated steak-grilling experience? Don’t laugh. Treat it as a reminder that a corporate metaverse can double as a training center. Maybe Chipotle is using these public games to test-drive future such programs …)
Granted, creating and managing an online game sounds much more involved than your typical marketing effort. Even if your data scientists have crunched through years’ worth of customer transactions to build a suitable analysis, that’s still a very different animal than developing an interactive app that has to run 24/7. We’d love to know what percentage of Chipotle’s marketing spend is allocated to technology, and what are the returns compared to their traditional marketing efforts. If you work there and you’re authorized to share that kind of detail, please hit us up!
web3 also works for in-person experiences
In today’s third example of companies blending the digital and physical worlds, Universal Studios is running a scavenger hunt that will issue NFTs for participation. Unlike the Chipotle Guajillo Steak experience, which ran inside a metaverse property, this Universal event takes place in the real-world Universal Studios theme parks.
Similar to the Starbucks Odyssey program, Universal (through its web3 partner, Moonpay) will handle all of the wallet mechanics behind the scenes:
Park guests won’t require advanced crypto knowledge — or even knowing how to set up a crypto wallet — to claim these NFTs. “It’s just basically a claim page where you put in your email address, and boom, what we do in the background is we mint that NFT, we spin up a wallet for that particular person and then they’re able to claim it when they’re ready,” [Moonpay CEO Ivan] Soto-Wright said.
A lot of what we’ve said about the Starbucks and Chipotle programs also applies to the Universal scavenger hunt, so we won’t repeat that here. We’ll just wrap up this thread with a reminder that web3 is showing real promise for loyalty programs. You can mix in-person and metaverse activities to create interactive experiences, and handle the underlying mechanics with a well-chosen blockchain.
Good idea, but needs a new name
One of your Block & Mortar editors has spent more than a decade in the world of machine learning and artificial intelligence (ML/AI) and he’s … seen a few things. Relevant to this segment, he’s seen companies rush to fill the Chief Data Officer (CDO) role. The typical sequence of events is: stakeholders hear that data is the Hot New Thing; they want a piece of the Hot New Thing; so their first step is to hire a CDO.
(What happens next? We’ll get to that in a moment.)
Not to be outdone by its older emerging-tech sibling, web3 is repeating this trend as companies hire Chief Metaverse Officers. This is when we’d abbreviate that as “CMO” but that title is already taken by someone who heads up marketing. But we digress.
Interestingly enough, according to this Bloomberg piece, not all of these are full-time roles:
It’s common for now for newly named metaverse mavens to hold on to other responsibilities. Take Crate & Barrel’s Sebastian Brauer. His day job is leading product design and development, but he says he spends about 20% of his time on meta-duties like strategy, outreach, and finding ways to bridge physical and virtual domains.
Is your company pondering a Chief Metaverse Officer? We think it’s great that you’re staking a claim on the web3 landscape. We’d also suggest that you consider the following:
1/ The rest of the executive team should develop a solid understanding of what a metaverse is and what it can do before opening up that new C-level role. Yes, you’d want this person to take the reins of your web3 efforts and guide the company on what to do. But you don’t want to throw them into an office and say “we don’t even know what this stuff is but come back when we’ve been metaverse’d kthxbye” as you close the door.
This is the big takeaway lesson from ML/AI, and it pairs with the “what happens next?” that we mentioned earlier. If you speak with enough CDOs, Heads of AI, and people with similar titles, you’ll note a common refrain: “The company hired me years too soon and I had to spend far too much time laying down the basic groundwork. They did not position this role for success." You don’t want your Chief Metaverse Officer to say that, so have a think before carving out that role.
2/ Ease into it. Crate & Barrel’s “20% time” executive may raise eyebrows – companies typically prefer that people be completely focused on a single job, especially when they sit that high in the org chart – but we see the part-time Chief Metaverse Officer as a smart approach. It reflects that the company’s web3 efforts are still in an experimental stage.
Hiring from within (or working with a consultant as a fractional executive) allows you to skip several months of recruiting for a full-time role. It also provides the person a safety net: in the event the company cancels its web3 plans, the Chief Metaverse Officer isn’t completely out of a job. They can reallocate that 20% of their time and keep moving.
3/ Expand the title. “Metaverse” is just a fraction of web3 today, and will likely become an even smaller part as new technologies move under the web3 umbrella. Calling this role the Chief Metaverse Officer is like calling your head of data a “Chief Database Officer.” Sure, you store data in a database, but such a title would skip over all that valuable analysis and predictive modeling.
We’d suggest naming the role to reflect your wider ambitions. There’s no need to limit this person, and their soon-to-be-team, to just metaverse activities.
The wrap-up
This was an issue of Block & Mortar.
Who’s behind Block & Mortar? I'm Q McCallum. I've spent the past two decades in the emerging-tech space. And I'm very interested in web3 use cases.
Credit where it's due. Big thanks to Shane Glynn for reviewing early drafts. Any mistakes that remain are mine.
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