David Bollier posts on OntheCommons.org about a recent memo leaked from Starbuck's founder Howard Schultz. that is posted in the full entry, where the memo appears here first.
Starbucks chairman Howard Schultz wrote this to CEO Jim Donald earlier this month. The memo's authenticity has been confirmed by Starbucks.
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…
OnTheCommons.org - original posting
Posted by David Bollier on Mon, 02/26/2007 - 1:28pm
Howard Schultz, the Chairman of Starbucks, is wrestling with a conundrum caused his company’s own success: the erosion of social charm and conviviality that tends to accompany market enclosure. Inspired by the lovely social experience of Italian coffee bars, Schultz in 1987 decided to try to replicate that experience in the United States. It was a risky, entrepreneurial breakthrough. Now, with more than 13,000 Starbucks outlets around the planet, and aspirations to expand to 40,000, Schultz is honest enough to recognize that the corporatization of coffeehouses is degrading the experience.
In a February 14 internal corporate memo, “The Commoditization of the Starbucks Experience,” Schultz laments how the company’s fierce expansion and efficiency measures “have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.”
For example, Starbucks introduced automatic espresso machines so they could serve more customers more rapidly, and so boost the ever-increasing quarterly dividends that Wall Street demands. Customers no longer get to watch baristas make coffee by hand, complains Schultz, which has “removed much of the romance and theater” of the Starbucks experience.
Now that store clerks are “no longer scooping fresh coffee from the bins and grinding it fresh in front of the customer” (because the coffee is packed in flavor-locked packaging), Starbucks stores are no longer awash in the smell of that tangy coffee aroma. This smell was “perhaps the most powerful nonverbal signal we had in our stores.” Schultz continues:
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 [return on investment] 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.
So here’s the quandary: Schultz wants his company to become the only brand that you think about when you think about coffee, and this means a relentless quest for standardization and efficiency. But Schultz cannot acknowledge that this aspiration also means weakening the very social charm and local distinctiveness that he loves.
Let’s face it: a brand is all about creating a monoculture. It is all about efficiencies, bureaucratization of process, and the marketing of a single cultural image. It is all about carefully crafting an experience and then monetizing it. The commodification of experience is the polar opposite of what a commons offers. In this case, the market is trying to replicate that which only the commons can truly generate.
Starbucks goes to such extremes in branding its "customer experience" that it used to prohibit customers from taking casual photos of each other inside of stores lest they be used to “steal” the trade dress interior design -- a story that I detail in my book Brand Name Bullies). A local coffeehouse would consider that level of social control ridiculous, if not anti-social. For Starbucks, it was essential to "protecting the brand."
I am grateful for a Starbucks when I encounter one in an airport, mall or out-of-the-way places that don’t usually have fairly good coffee. But let’s face it – Starbucks is also responsible for displacing varied, irregular, distinctively local coffeehouses with its famous global brand.
Mr. Schultz is either disingenuous or self-deceiving if he thinks that Starbucks can offer substantially the same experience as a locally owned coffee bar, whether it’s in Italy or Cambridge or Tulsa. I prefer Rao’s coffeehouse in Amherst over the nearby Starbucks precisely because it is more funky, authentic and local in feel. It does not feel like a carefully crafted stage for merchandising coolness. Starbucks is suffering from an authenticity deficit.
I see pathos in this situation because Howard Schultz is one of the most socially aware and decent executives out there. He was the reason that Starbucks has long provided health benefits to part-time employees, and offers stock options to baristas. While growing up in a New York housing project, Schultz learned how the lack of health care can affect a family; today he is an outspoken champion for universal health care for all Americans. (See Charlie Rose’s TV interview with Schultz here.)
Starbucks' enclosure of coffee is almost poignant because Howard Schultz seems to recognize that the imperatives of corporate branding and finance are degrading his original vision. He wanted to create cozy and convivial "third places" in a culture that yearns for social connection. As the Chairman of a publicly traded corporation, however, Schultz is not likely going to be able to fulfill this vision because the global branding framework is working at cross-purposes.
Perhaps I’m wrong. Major tech companies have learned to embrace open source software, for example, showing that the proprietary and the commons can achieve a different kind of equilibrium. But that just may not be possible for a brand based on standardizing the local coffeehouse experience. It will be interesting to see how Howard Schultz moves this discussion forward...or not.
Posted by sinergi at March 20, 2007 04:35 PM