Thursday, July 26th, 2007

Starbucks’ growth paradox

Starbucks’ growth paradox
Email to a friend Comments (16)

Almost every morning, I spend $2.17 on a doppio espresso. The Starbucks on Water Street is just a short walk from our office, and as a creature of habit this little excursion has become part of my morning. Recently though, I find myself tiring of the experience and asking if it’s time for a change.

A brilliantly efficient machine

I recently bought Howard’s Schultz’s book “Pour Your Heart Into It“. Although it often reads like an extended advertisement for his company, there are a few compelling stories in there. I think that anyone who has ever tried to build a company would appreciate the home-run Howard has struck. Think about this: in just five years, he took the company from a purchase price of under $4 million to a market capitalization of $273 million.

Stories like this kept me hooked for the first third of the book. There’s something pretty neat in their roots, and it’s hard to argue that they defined a sector. Wikipedia claims that as of February 2007, Starbucks and its licensees amounted to a whopping 13,168 locations worldwide. They continue to outperform expectations, and have effectively extended their brand into new and arguably risky areas.

The path to ubiquity and its perils

Starbucks is a case study in how to effectively apply assembly line precision to an entire operation. In measuring, assessing and refining every procedure they ensure a consistent experience for customers. This level of efficiency allows them to readily grow their operations and manage the logistics of opening new locations at a breakneck pace. Without such a clearly defined vision they wouldn’t have reached this level.

This approach has allowed Starbucks to reach a certain degree of ubiquity —a dream come true for any brand manager. Customers know what to expect from Starbucks, so they feel a sense of safety when buying from them. You’re unlikely to be disappointed at Starbucks, as the product is quite identical from day to day. I believe that most people aren’t that fond of surprises; furthermore, ubiquitous brands become so, by limiting inconsistencies. In the minds of most customers, this is a good thing.

Companies race to become the next “Xerox”, “Google” or “Kleenex”, and understandably so; however, meeting this lofty goal does come with a price. First of all, we human beings are a fickle lot. As much as we like to see something grow, we just as much love to see it tumble down; just think of how enamored we are with celebrity nosedives.

It’s also true that too much of anything can diminish its value. Flood the market with a product, and its desirability reduces. This is simple supply and demand. In the case of Starbucks’ growth the challenge is greater yet. Their level of saturation in some markets leaves community members feeling as though they have been invaded. This is a precarious spot for any brand to find itself in.

As of late, my morning trips to Starbucks have been tinged by this notion. I’ve started to wonder if in frequenting the institution I’m contributing to a homogenized future. Clearly, I’m not alone in this thought, as is evidenced by the numerous sites that voice frustration with the vendor. Perhaps the Starbucks brand is simply too big for its own good.

So, what’s the problem?

I doubt the folks at Starbucks are worried about this notion, but they should be. They can continue to grow, but what can they do should the public opinion turn? Perhaps this will never happen, but there’s grumbling out there. In fact, sites like “Delocator” present a persuasive argument for choosing any coffee shop other than Starbucks.

I desire a world as diverse and colorful as possible; so, the question of whether I should frequent Starbucks is one I continue to ponder. That being said, I’m not going to enter this debate in this post. Instead, I’d like to ponder how one might address this concern from a brand standpoint.

In his book, Howard often discusses the notion of Starbucks being a “Third Place”: a venue in between work and home, where one can connect with community and share in an experience. I think Howard has something here, but I also wonder if he’s holding the reigns a little too tight to allow this to happen as he’d like. All of the order and precision that Starbucks wields is useful in building a machine, but it’s not quite so helpful when trying to create community.

Real communities are messy, organic, and naturally occurring. I like to think of them as ecosystems. I ask if anyone would really want to live in a community that was exactly the same as the neighboring one. Starbucks’ ability to measure and predict almost every tiny detail may become a liability in Howard’s aim to create the “Third Place”.

A (risky) option

Systematization and process can be a great springboard for a company. These practices allow an organization to grow quickly, raise awareness and build a brand; however, at a certain point, should the training wheels come off? Does every Starbucks have to be exactly the same in order to maintain the brand identity? I argue that they don’t. In fact, I present that idea that thinking this way is an overly narrow way of seeing what constitutes a brand.

The Starbucks brand is built on a good foundation, and that affords some room to play. Of course, this is a little risky, as the amount one can experiment with such a formula is unclear. Most of us never get to test our theories on this level—there just aren’t that many brands as big as Starbucks’. Additionally, the risks associated are not insignificant. (Then of course, the risks of not doing so may be equally considerable.)

Here’s what I propose. What if Howard’s plan is right, but he just needs to jump in wholeheartedly and push this idea further? There’s no “authenticity” filter in Photoshop, and it’s not something that can be prescribed. These kinds of attributes have to take root naturally, and they take a little time; but, if the folks at Starbucks really embrace this idea of community, they might be able to leverage their numerous locations to do something delightfully interesting.

With their numerous locations and processes, they already have the “skeleton” in place, and are on solid footing. So, what if Starbucks loosened-up on the implementation of their brand? The value they offer is about more than fastidious adherence to the visual presentation. There’s room for the appearance to be more liquid.

Starbucks could work to make every store a discovery. Keep the logo there, keep the service the same, but let the shop grow in to the fabric of the community. Skip the standard music in every shop, and ask the staff to bring in different music and mix it up. Hire people in the community who understand the local pulse and character, and ask them to help shape the experience as the locals might like it.

Allow the nature of the community to inspire its interior design, and contract local artists to display works on site. Build a menu that is varied with locally grown foods and the flavors of the region. None of this would happen overnight, but the notion of a more organic space does bring with it some appeal. What a great experience for the consumer, knowing that the product would be consistently good, but with each shop boasting its own unique “flavor”. Wouldn’t that be a compelling reason to visit more locations?

Embracing community is about more than designing a mug or t-shirt around it.

A framework that affords authentic community

Logistically, this is all pretty tough to do when you are opening several new locations a day, but that’s sort of the point. In a user-generated world, maybe things like this don’t have to be top-down initiatives. Perhaps it’s a spot to set up a loose framework, and rely on the local partners to do the rest. It’s a potentially uncontrollable and chaotic strategy, but it just might be what has to be done to shake-off the “big brother” vibe. Plus, it works with the belief that Howard espouses in his book, of trying to inspire entrepreneurial spirit amongst stakeholders. While they seem to do this at a management level, to really weave the shops into the fabric of a community, they may have to open this up to all levels.

Perhaps all of this comes down to a notion that I continue to tinker with, of forming a solid framework that integrates room for independent creative action. Although I believe this to be rather tricky, I feel that it’s an approach well suited to large ecosystems. Think about a municipality. It provides guide-rails for constituents, without determining every detail. In my mind, this is pivotal in building community: developing a shared framework that ensures key items are addressed, while affording opportunity for constituents to shape the experience.

We do need places to engage with other community members, and I am not that worried about Starbucks being the one to facilitate this experience. I do however question whether they are currently doing it in a way that really works.

He’s smarter than I am

Howard Schultz built an empire that sells more in an hour than our firm bills in a year, so maybe I don’t have much of a right to present my ideas. That being said, it’s difficult to see where you are at, from within an organization; additionally, Starbucks’ success to date doesn’t make it invulnerable, and the challenge they face is an interesting one to ponder. It’s curious; their success has, in a respect, become their Achilles heel. Their machine has to grow, but in doing so, they increasingly put themselves at risk of alienating their patrons.

I predict that Starbucks will continue to do what they are doing, and they’ll continue to do so well—selling an awful lot of coffee in the process. I also admit that my proposal is a little “out there”. Suggesting that a multi-national should tinker with its winning formula may seem a little counter-intuitive.

In his book though, Howard talks in great length about the virtues of authenticity and community. It would be interesting to see what happened if he pushed these notions a little further. Very few companies can grow forever, and the challenge of making something great seems less daunting than keeping it that way. I’m interested to see what’s next in the story of this brand.

Follow @karj to hear about these posts first.

Comments & Trackbacks

  1. Pingback: motion sickness » Blog Archive » Delocator

  2. Pingback: Ad Speak Admonition #1: Words are nothing when not followed by action

Voice Your Opinion

Thoughtful and critical comments are welcomed, and we ask that you use your real name (just seems fair, doesn't it?). Offensive, derogatory, and dim-witted remarks will be removed or result in equally mean-spirited finger-pointing and mockery.


Not published