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March 13, 2007

Solving Starbucks Problems : LOSS OF IDENTITY


This post completes the series where Paul Williams and I, two former Starbucks marketers, offer recommended changes based upon Howard Schultz's email to the Starbucks leadership team.
Loss_of_identity
"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." -- Howard Schultz email

Paul Williams began this conversation about restoring Starbucks “coffee” identity by using the analogy of restoring antique furniture to its original state. He says Starbucks should strip off the extra layers of paint that have collected over the years. From there, he recommends Starbucks sandpaper away the rough spots and then apply a durable finish to intensify and highlight the unique grain of the Starbucks core. Interesting …

Maintaining the Starbucks Garden
Paul’s analogy to restoring the Starbucks brand luster, like one would restore antique furniture, got me thinking about gardening. Paul and I once played around with this gardening analogy back in the day. We were probably chomping on a Briazz sandwich at Starbucks HQ when we began drawing the connections between the role of gardener and our role as marketers.

When you look at it, the Starbucks business resembles a garden landscape. Hear me out …

The seeds of the business were first planted in 1971 with the three original founders of Starbucks playing the role of company gardener. As company gardeners, they carefully worked with the soil in the Pacific Northwest until it became fertile ground. At first, the soil wasn’t fertile enough for the roots of the company to take hold and grow. But after years of dedication and daily nurturing, the hard soil became fertile and Starbucks began to not only grow deep, healthy roots—it also began to blossom. By 1992, the Starbucks garden landscape was thriving with new growth happening. Throughout the 90s, Starbucks flowers were always in full bloom and its garden landscape was growing, and growing, and growing.

Today, the Starbucks garden is still growing, but its growth is unwieldy. Company gardeners are having a hard time managing the garden’s growth. An increasing number of new plants have sprouted in the Starbucks garden that do not belong there. Coffee plants have always grown in the Starbucks garden but today, there are more and more plants in the garden that resemble nothing like coffee. The Starbucks garden has become so cluttered by wildflowers and weeds that it’s hard to recognize where the coffee plants are. Because of the wildflower and weed clutter, the Starbucks garden has lost its identity.

It’s become apparent—the Starbucks garden needs major maintenance. It needs pruning.

Pruning promotes healthy growth. By pruning, gardeners are able to remove unwanted, unneeded, and unhealthy plants as well as limbs from trees. This reduction of plants and tree limbs will allow for more light and air into the garden, thus allowing for wanted and needed plants to grow in a healthy, sustainable manner.

To promote healthy growth, Starbucks needs to prune its business by removing unwanted, unneeded, and unhealthy elements from its business. Prune its Merchandise assortment. Prune its Entertainment division. Prune its New Store expansion. Prune its Automation Efficiency projects. Prune its partnership with Jim Beam. Prune everything that is causing Starbucks to lose its identity of sourcing, roasting, and serving the highest-quality coffee.

These pruning efforts will allow for Starbucks to rejuvenate its soul and refertilize its reason for existing. Then, and only then, will the Starbucks garden be able to grow in a much healthier, sustainable manner.

It’s not about the brand, it’s about THE COFFEE
In many ways, the Starbucks brand has taken over the coffee experience. Ten years ago when two people sat down to enjoy a conversation over coffee at their neighborhood Starbucks, it was a quaint, relaxing, and comforting experience. They did not have to endure hearing a marketing pitch for satellite radio playing overhead, nor did they have to endure a sales pitch for a dual Starbucks/Visa card. It was just two friends connecting over coffee. Nothing more, nothing less.

Starbucks has changed the in-store conversation from being about the coffee to being about the Starbucks brand. No longer is it a customer experience inside Starbucks—it’s become a customer’s “Starbucks Experience.”

If Starbucks truly wants to return to its roots of being known and revered for the highest-quality coffee in the world, then it must stop talking about the brand and start talking about the coffee. Start scooping coffee beans from bins and grinding whole bean coffee in-store again. Bring back in-store coffee seminars. Put the 12-cup French Press for 2 back on the menu board. Bring back the old school customer coffee passports. And by all means, stop heating fancy breaded egg sandwiches in ovens. Customers expect great coffee at Starbucks, not semi-toasted mediocre breaded egg sandwiches.

Decisive and Divisive
Every solution Paul and I have recommended in this series requires decisiveness, which will result in divisiveness. Stakeholders connected to the Starbucks business will not like many of decisions Starbucks must make in order to become the company it once was.

A company leader must emerge from within Starbucks to truly champion the “back to the core” cause. Is that leader Starbucks CEO, Jim Donald? Is that leader Starbucks chairman, Howard Schultz? Or is that leader someone else within Starbucks? That’s a question the company MUST answer because this leader has many decisive and divisive decisions to make.

Plus, this leader MUST have the immense fortitude to stand up to the Wall Street Bully.

Starbucks and the Wall Street Bully
We’ve all known a bully. Many of us have probably been tormented by a bully on the school playground. Bullies have made us cower to their whims and in the process they have taken our brown bag lunches and stripped us of our pride.

At some point, after suffering enough humiliation, we learned to call the bully’s bluff. We fought back. We displayed immense fortitude and challenged the bully. And in response to our challenge, the bully may have thrown a punch bloodying or nose or leaving us with a black eye. It hurt. We cried. But a funny thing happened. The bully stopped bullying us. We stood our ground and the bully backed-down.

Wall Street bullies every public company. At least once-a-quarter, Wall Street waits outside in the financial playground for companies to announce their earnings. Miss projections by as little as a penny and your stock will get a black eye. Under-deliver upon revenue expectations and after-hours trading will send your stock price to its knees.

However, unlike the schoolyard bully scenario, public companies rarely, if ever, stand up to the Wall Street Bully. They cower. They allow Wall Street to bully them into setting a company agenda that’s predicated upon bigger profits, wider margins, higher sales, and faster growth.

Starbucks must stand up to the Wall Street Bully. Its company leader, be it Jim Donald or Howard Schultz, MUST champion the pruning concept and absorb the severe punishment Wall Street will unleash on a company that forsakes growing its sales for growing its soul.

Early Chapters in a Very Long Book
Howard Schultz is a charismatic salesman. His career before Starbucks was in sales. He sold copiers. He sold housewares. Today, he sells the vision of Starbucks.

Howard passionately talks about how Starbucks is the early chapters of a long, enduring story. He paints a picture of a company with 40,000 locations around the globe which will eclipse the number of McDonald’s worldwide locations. This isn’t a fairy-tale story to Howard. He believes it.

So, if indeed Starbucks is in the beginning chapters of a much longer story, the company can afford to prune now. Take the time now to reposition the company and redirect the Starbucks ship back to true north, focusing on making a great cup of coffee and delivering unparalleled experiences to each and every customer. Smart investors will wait. Loyal customers will be patient. Store partners will be jazzed. And Starbucks will once again redefine how a company can grow its brand without forsaking its soul.

End of story. (Or is it just the beginning?)



Series Review
Introduction post
LOSS of COFFEE THEATRE: Paul’s post and my reply
LOSS of COFFEE AROMA: My post and Paul’s reply
LOSS of STORE SOUL: Paul’s post and my reply
LACK of MERCHANDISE FOCUS: My post and Paul's reply
LOSS of IDENTITY: Paul's post and my reply

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Comments

"Prune its partnership with Jim Beam."

Them's FIGHTING words! You can have my Starbucks Liqueur when you pry it out of my cold, drunken hands!

Seriously, the Starbucks Liqueur is one of the most "coffee" things they've done recently. It's far more coffee than Khalua, and is amazingly tasty. I'd even recommend that they sell it in their stores if that didn't post legal problems in some states. (Few people in Washington even know it exists because of liquor laws.)

However, I agree with everything else. The stuff they were selling in stores around Halloween time was just silly. Eye-catching, but definitely not in-line with the brand image.

Why fight it. Let Starbucks continue it's current corporate path since we all know there is nothing we can say or do that will make them prune back. I do however see an amazing opportunity for an entrepreneur to create a business to satisfy the needs of a growing percentage of disenchanted Starbucks customers. Perhaps that entrepreneur is Howard Schultz.

Anthony ... you raise a great point. Because Starbucks has abdicated its coffee leadership position, it provides and amazing opportunity for another coffee company, of national reach, to step up. Perhaps Peet's!!??!!

People have to look at pruning as a positive approach to the business. Why does everybody think that means destroying the plants that are trying to grow inside the Starbucks coffee garden?

Doesn't Starbucks have the financial wherewithal to let the champions of these other ideas branch out on their own? There could (gasp!) be another brand built within the corporation that doesn't focus on coffee but has the same amount of passion for another delicacy. That said, Starbucks mgmt should be ruthless in making sure that this new entity delivers on all fronts and doesn't just extract Starbucks resources.

Isn't this somewhat the avenue taken with stores versus packaged merchandise sold through other outlets (coffee, Jim Beam, etc...)?

Only after the second brand is self-sufficient and recognized as world-class should any synergies be explored.

I liked your response series and stayed tuned in through each! section. Thanks for taking the time to consider Starbucks! Let us all hope for the best...may it be either a coffee-land wonder or a coffee wonderland

This is great stuff, John. We had two of the big enchiladas from Seattle in our store today and I was tempted to direct them to this series, but I think they already know about it.

Hi there,
I thought I should let you know that I am thoroughly enjoying this series of posts on Starbucks...amazing analysis & suggested solutions...
It makes great reading...
Many thanks!

Starbucks...I've had enough of them. Who said that they have the best coffee in the world? Have you guys been to the Old World? The culture of coffee IS about the coffee, not a particular brand! I don't want a world dominated by walmarts and starbuckses on every corner. I haven't been in a starbucks for 1 year and don't plan to. I support the independent cafes and won't stand for $4 cup of coffee!

Do we know who are the most profitable customers? Many of us love the coffee and want to get in, order, pay and get out with our coffee quickly. For us the new, more efficent coffee makers are fine. Making the place more homey for laptop Joe who ties up a the table for three hours may not be the most profitable move. Don't compromise the speed of service.

Starbucks got a little carried away with their success, kept raising prices and didn't plan for a competitve response from Dunkin and others. It was short sighted to think that competitors would not respond. The market is not unlimited. There are only so many cups of coffee sold each day. Starbucks share had to come out of someone else's. When that happens competitors respond aggressively. It is Starbucks' time to match prices with competitors. They have a major facility advantage over McDonalds, Dunkin Donuts and others. If prices are comparable, Starbucks wins.

They may also want to acqire Willougbys.

i liked a lot reading your interesting post, thank you very much for writing it!

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