At the present rate of change, organizations can go from peak to trough in a matter of months. To prevent downturns from becoming a death spiral, making tough decisions to initiate change often becomes critical.
In facilitating change, whilst innovation is often necessary (after all “insanity is doing the same things over and over again expecting a different result”), it is equally valuable to review your organization’s raison d’etre and values and to find opportunities to get back to roots the organization might have strayed from.
One such organization that successfully turned its performance around both through introducing new strategies as well as restoring its heritage is Starbucks.
Starbucks started as a small Seattle coffee store, which under the leadership of Howard Schultz became a global business with more than $10 billion in annual sales and 200,000 employees. Yet in the early 2000s, with Schultz having stepped down as CEO and faced with a significant downturn in the US economy, Starbucks was hit with slumping sales and quality control issues. As consumers cut back on $4 lattes, Starbucks had to lay off thousands of staff and close about 600 stores.
Since Schultz’s return to take on the reins of the company in 2008, Starbucks has experienced a turnaround and become one of the success stories of the recession. I read with interest Bobbie Gossage’s interview with Howard Schultz, published in 16th June 2011 edition of “The Deal” (the business magazine of The Australian newspaper) and Gil Schwart’z article in Men’s Health on “CEO Business Tips: Howard Schultz”
Key messages I picked up that are useful for managing effective transformations are summarized here.
“Cutting prices or putting things on sale is not sustainable business strategy. We’ve found that consumers are willing to walk another block and potentially spend a little bit more for companies whose values they truly trust. “
“At a time when so many constituents – the media, Wall Street, competitors, ex-employees – were all saying that Starbucks’ best days are behind it… they underestimated the power of our culture and values and the resiliency of the brand and our people.”
“I’ve said for years that the most important aspect of our company is our culture. People laugh at that but that’s the truth. Whether it’s a small or large company, transformation can’t take place with only one person saying “I’m going to transform this enterprise”.
LESSON 1
When initiating change, it’s worth reviewing your core mission and values and culture, the key things which built your brand in the first place and that represents your “unique selling proposition” and take the necessary steps, however painful, to get back to the basics.
One of these basics for Starbucks is the passion and expertise of its staff in making great coffee. An example of what Schultz did to get back to this was a bold decision to close all 7100 stores across the USA for an evening to get every staff member re-trained on the passion and science of brewing and serving great coffee.
At its core, Starbucks is defined as an experiential brand. Beyond its coffee, the place provides an experience that is defined by “very comfortable and soft, and provides human contact.”
To get back to this, another bold decision was to take toasted cheese sandwiches off their menu, even though Starbucks was making “a ton of money” with them, simply because the smell of toasted cheese conflicted with the lovely aroma of roasting coffee.
Yet another was to ditch its investment in “cool and shiny coffee machines” because they were tall and interfered with the line of sight between customers and their baristas, a visual relationship that Schultz saw as crucial to the entire coffee experience.
Another important element that had made Starbucks successful in the first place was its culture and the value it placed on its people. A feature of this was the health care it provided for all employees – both full and part-time.
The Starbucks mission is basically a reproduction of the mission Schultz had written for Il Giornale, the coffee company he renamed to Starbucks when he bought Starbucks in 1987. In a memo Schultz wrote about this mission, he said, “Il Giornale will strive to be the best coffee bar company on earth. We are genuinely interested in educating our customers and will not compromise our ethics or integrity in the name of profit. . . We will build into each Il Giornale coffee bar a level of quality, performance and value that will earn the respect and loyalty of our customers.” During the recession, despite shareholder pressure to cut this benefit, Starbucks chose to retain this key component that symbolized what was core to its DNA.
LESSON 2
Apart from going back to your roots, it is equally important to review your strategies and business plans for relevancy and take equally bold steps to come up with new strategies.
With the Starbucks turnaround, one of those key changes has been the introduction of Via, its instant coffee. Taking 20 years to invent (“primarily because we couldn’t replicate the taste of Starbucks coffee in an instant”), Via in its first year did more than $US180 million in sales.
In summary, to turn an organization around, bold steps are required. Firstly to get back to core principles that are at the heart and passion of what made you successful in the first place, and then to initiate innovations that take the organization to its next level of evolution.
Points to reflect today:
- How well is your organization or project team doing in fulfilling its mission and living our your core values? What more can you do to get the team focused on getting back to doing its basics really well?
- How well are you doing in living out your core mission and values? What more could you do to fulfil your mission and live your core values?
- What innovations could you introduce that will enable you, your organization and your project team to create even more value for your clients and in the process create even greater vitality and growth?
Love to hear your comments on this.
Onwards and forwards,
Kindest
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