A common characteristic of CEOs in firms of endearment is authenticity, candor and the humility to acknowledge error.
In its January 24 edition The Wall Street Journal ran a story about a leaked memo from
Starbucks CEO Howard Schultz to key executives that projected those three attributes. In the memo, Schultz expressed his growing concern that Starbucks was in danger of “commoditizing” the brand, a danger he admitted contributing to.
Here is the memo in full:
From: Howard Schultz
Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken
Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor
Subject: The Commoditization of
the Starbucks Experience
As you prepare for the FY 08 strategic
planning process, I want to share some of my thoughts with you.
Over the past ten years, in order to
achieve the growth, development, and scale necessary to go from less than 1,000
stores to 13,000 stores and beyond, we have had to make a series of decisions
that, in retrospect, have lead to the watering down of the Starbucks
experience, and, what some might call the commoditization of our brand.
Many of these decisions were probably
right at the time, and on their own merit would not have created the dilution
of the experience; but in this case, the sum is much greater and,
unfortunately, much more damaging than the individual pieces. For example, when
we went to automatic espresso machines, we solved a major problem in terms of
speed of service and efficiency. At the same time, we overlooked the fact that
we would remove much of the romance and theatre that was in play with the use
of the La Marzocca machines. This specific decision became even more damaging
when the height of the machines, which are now in thousands of stores, blocked
the visual sight line the customer previously had to watch the drink being
made, and for the intimate experience with the barista. This, coupled with the
need for fresh roasted coffee in every North America city and every
international market, moved us toward the decision and the need for flavor
locked packaging. Again, the right decision at the right time, and once again I
believe we overlooked the cause and the affect of flavor lock in our stores. We
achieved fresh roasted bagged coffee, but at what cost? The loss of aroma --
perhaps the most powerful non-verbal signal we had in our stores; the loss of
our people scooping fresh coffee from the bins and grinding it fresh in front
of the customer, and once again stripping the store of tradition and our
heritage? Then we moved to store design. Clearly we have had to streamline
store design to gain efficiencies of scale and to make sure we had the ROI on
sales to investment ratios that would satisfy the financial side of our
business. However, one of the results has been stores that no longer have the
soul of the past and reflect a chain of stores vs. the warm feeling of a
neighborhood store. Some people even call our stores sterile, cookie cutter, no
longer reflecting the passion our partners feel about our coffee. In fact, I am
not sure people today even know we are roasting coffee. You certainly can't get
the message from being in our stores. The merchandise, more art than science,
is far removed from being the merchant that I believe we can be and certainly
at a minimum should support the foundation of our coffee heritage. Some stores
don't have coffee grinders, French presses from Bodum, or even coffee filters.
Now that I have provided you with a
list of some of the underlying issues that I believe we need to solve, let me
say at the outset that we have all been part of these decisions. I take full
responsibility myself, but we desperately need to look into the mirror and
realize it's time to get back to the core and make the changes necessary to
evoke the heritage, the tradition, and the passion that we all have for the
true Starbucks experience. While the current state of affairs for the most part
is self induced, that has lead to competitors of all kinds, small and large
coffee companies, fast food operators, and mom and pops, to position themselves
in a way that creates awareness, trial and loyalty of people who previously
have been Starbucks customers. This must be eradicated.
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. We source and buy the highest quality
coffee. We have built the most trusted brand in coffee in the world, and we
have an enormous responsibility to both the people who have come before us and
the 150,000 partners and their families who are relying on our stewardship.
Finally, I would like to acknowledge
all that you do for Starbucks. Without your passion and commitment, we would
not be where we are today.
Onward…
_______________
I will share thoughts about the Schultz memo that have arisen in
my mind in the next post.
(This post also appears at http://agelessmarketing.typepad.com)
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