We talk all the time at ManagersRealm about remaining true to the purpose of our company. The story of Starbucks is one that shows what can happen to a dynamic powerhouse when they take their eyes off of what makes them who they are.
About two weeks ago Starbucks chairman Howard Schultz sent a memo which asked CEO Jim Donald and top managers to "get back to the core."
Some of the things Schultz pointed out in the memo were the installation of automatic espresso machines, which resulted in baristas not having to pull shots, and also don't allow customers seeing the drinks actually being made.
He added that packaging was another culprit, which got rid of the need to grind the coffe in-store because it locked in the flavor. All of this is pointing to that rich aroma that used to pervade the shops when you walked in.
Finally, he also pointed out the sameness in store design, which while financially efficient, made it look like a chain rather than the neighborhood store they're trying to purvey. In other words, Schultz is saying that the store is becoming a commodity business rather than the great, differentiated store they used to represent.
His closing thoughts in the memo were: "I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. Let's be smarter about how we are spending our time, money and resources. Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others."
Robert Passikoff, founder-president of the consultancy Brand Keys, said Schultz's concerns are legitimate. "They took their eye off the brand," he said. An annual study by Brand Keys also revealed that Starbucks was knocked out of first place in the coffee-and-doughnuts category by Dunkin' Donuts, the first time in five years the company didn't take that honor.
"You probably wouldn't leave a Starbucks dissatisfied," he said, "but satisfaction is just the price of entry. It has lost its differentiation, its crispness of experience."
Some believe that Schultz says one thing and does another though, as he's trying to say go back to the core, while adding all sorts of things like selling movies and other unrelated merchandise to the Starbucks experience. Many believe they're trying to become too many things, plus attempting to grow to fast.
The company has over 13,000 stores and is reaching for 40,000. They're experiencing the old problem of how to grow the company without diluting its core experience for the customers. So far they haven't been doing it right. Maybe they need to slow down and grow in a managed way, while focusing on their core business; not just in words, but in actions.
If they don't, they may see their market share continue to dwindle as local stores and fast-food businesses continue to eat into their share.
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Great post on Starbucks. I do believe that they have lost something. I spend a great deal in Starbucks; its my office away from my home on most days. One thing I can say is the "experience" they are striving for begins and ends with the people they hire. I can travel between 4-5 stores in a given week and each time the level of service and their commitment to making my experience a positive one varies greatly. I believe if they are going to make a real push to return to their roots they need to start with their people and helping them understand just how valuable the customer and their perception is to the dollars that they choose to spend.
Love teh BLOG and look forward to becoming a regular reader.
Ripple On!
Steve Harper
Posted by: Steve Harper | March 5, 2007 6:29 AM | Permalink to Comment