Starbucks proves that leadership can even overcome bad management
by Miki SaxonPost from Leadership Turn Image credit: emsago CC license
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
If you’re alive, you’ve probably been watching the drama being played out at Starbucks. Hundreds of stores are slated to close across the country, and customers ranging from local neighbors to business owners to the mayors of cities are calling to lobby for their local store.
Starbucks management claim that they “over expanded,” and that has caught up with them as they experience the same economic downturn that is haunting everyone else. That is certainly the case, but there is something even more significant being displayed here: the power of an Alpha company.
Alpha companies are the leaders of customer expectations in a product or service category. They define what it means to be “good.” Everyone else has to either emulate or overcome them to establish themselves as acceptable. They accomplish that by driving emotional needs fulfillment ever higher to “self-satisfaction” and “significance.”
One of the benefits of making yourself this kind of company is that you have a lot more margin for error when you really blow it.
Not since Coca-Cola nearly immolated itself with “New Coke” in the 1980s has there been such a customer response as we are seeing for Starbucks. Customers saved Coca-Cola from disaster. They are trying to help Starbucks in the same way. What a testimony for leadership over management.
Cost-side management has really been the cause of the problem. What was forgotten was that cost-side management could never have created this kind of customer response. Only revenue-side management (which is the focus of leadership vs. management) could do this.
Luckily, Starbucks has been given a gift by its customers. I hope that it recognizes the true cause of its decline is a cost-side focus and uses this time to re-focus upon the customer experience that defined new experiential expectations for a coffee shop.
How will you react when your local Starbucks closes?
Your comments—priceless
July 22nd, 2008 at 5:29 am
How will I react when my local Starbucks closes?
I could not care less. (And I mean that… I really could not care less.) There are probably 5 or 6 Starbucks within easy distance of where I live and work. Stores that I walk or drive by regularly and, if I wanted a cup (from Starbucks), I would likely enter and purchase there.
Frankly Starbucks is overrated as a coffee or tea shop. As a corporate entity I say the company deserves the heaps of praise received… but not as a coffee shop. The shops usually carry a hectic feel… unfriendly… and I don’t really fell welcome (usually). I very much prefer the local shops and not because I’m against the big corporations. I regularly shop at the “big stores”.
I have found the quality of product to be very consistent at Starbucks… but not so much to my taste. I have found the quality of service and management to very INCONSISTENT at Starbucks. I’ve probably visited Starbucks in at least six different States so I don’t think this is a regional issue.
On behalf of the loyal customers, the employees, and the investors I do hope that Starbucks gets squared away… but for me personally again I say… I could not care less.
July 22nd, 2008 at 6:03 am
Great blog!
However, I couldn’t think of anyone better to turn this organization around than Howard Schultz. Starbucks got caught in the triple witching of the housing crash, $140 oil, and 5.5% unemployment.
Not to mention they have to answer to Wall Street. If this were a private company, they would be expanding their share by taking out weaker competitors.
The fact that they are closing stores on top of stores isn’t a bad idea. Will make them stronger in the end, and they still have 14,000 plus outlets world wide, so they are far from going out of business!
July 22nd, 2008 at 7:12 am
I’m in San Diego and like so many surrounded by starbucks, but you know, I usually try not to shop there… I do if I can’t find an alternative, but I’m only going to miss them once and awhile.
July 22nd, 2008 at 1:30 pm
I won’t miss them. I don’t do Starbucks—never have. Even when I lived in SF at the height of the dot com boom I thought Starbucks overpriced and too slick as compared to my local coffee house. Back then, a friend nicknamed it Fourbucks, but by now it should probably be Sixbucks:)
July 23rd, 2008 at 5:36 am
One of the fascinating things I discovered in my research for “The Alpha Factor,” was that quality is not a critical criteria for a company to become an Alpha. Starbucks proves that. I know lots of loyal Starbucks customers (myself included) who don’t believe that Starbucks’ coffee is the “end all” for coffee roasting or brewing.
What they offered very well in the formative years that made them an Alpha was an experience that went beyond what local coffee shops typically offered (except in extraordinary places like San Francisco). There was community. There was “drama.” There was a taste of the Paris Bohemian life that we all read about in high school and college. The quality of the product had little to do with it. Now they get the benefits of those smart moves, even though they have turned away from much of what got them there.
Actually, Alpha learning showed that the only quality criteria is one of at least meeting the “minimum acceptable” quality. The fact that Starbucks has been able to survive while (arguably) allowing their quality to slide and certainly allowing the customer experience to slide is a testament to how bad the experience is in most other coffee shops.
Alpha learning also showed that this “grace” period won’t last forever. We are witnessing the turning point for a great company. This is where companies who were dominant Alphas either lose that status and fall back into survival brands or go on to greater things, as Apple has done.
July 23rd, 2008 at 9:34 am
Wes, is it just me or do you also think that the short-term requirements of pleasing Wall Street is responsible for a large portion of the loss of quality and watering down of the “Starbucks experience?”
In general, does Wall Street support Alpha actions or undermine them?
July 23rd, 2008 at 10:41 am
I do agree with you, Miki. As I have written before, I think the stock market is the biggest enemy to good companies that go public. It drives agendas that are counter to good strategic planning and leadership. It has killed so many good companies that might otherwise have remained strong wealth creators for decades longer.
The sad conclusion, however, is that Alpha learning showed that the same things that create long-term strategic growth using the Alpha model also create short-term profit growth that can achieve the stock price growth desired.
July 23rd, 2008 at 10:51 am
If that’s the case, I’d love to see a post explaining how the long-term strategic growth is made synergistic with Wall Street demands. They’ve always seem like an oxymoron to me.