Context
In the 2000s Starbucks opened coffee shops very fast. To serve more guests, the company sped up its processes: it installed automatic espresso machines, sold coffee in sealed packaging and expanded the menu with hot sandwiches.
Symptom
In February 2007 chairman Howard Schultz, who had turned Starbucks into a coffee chain, wrote an internal memo, "The Commoditization of the Starbucks Experience." In his words, the tall automatic machines hid the barista's work from the guest, and the sealed packaging took the smell of freshly ground coffee out of the shops. The memo leaked to the press.
Cause
Each decision made for speed and efficiency was reasonable on its own. Together they removed from the coffee shop what guests paid more for than for ordinary coffee: the sense of craft and of place. Growth was measured by the number of new locations, not by what happened in each of them.
The fork
Keep opening coffee shops at the same pace, or stop and bring back what the brand rested on.
Decision
In January 2008 Schultz returned as chief executive. The company slowed the opening of new shops and turned to quality in the existing ones.
Execution
On February 26, 2008 Starbucks closed 7,100 coffee shops in the United States for about three and a half hours to retrain baristas in making espresso. On July 1, 2008 the company announced the closure of about 600 underperforming shops in the United States, roughly 8 percent of the chain.
Outcome
The company cut costs, brought attention back to the product and the guest experience, and returned to growth in the following years. The 2008 closures became a textbook example of how scale needs a system that keeps quality in every location.
What it means for you
You can only scale what already works and is written down. If every new location is slightly worse than the last, growth gradually eats what customers pay for.
- What exactly do customers pay you more for than your competitors?
- How much of that survives in each new location, branch or team?
- Which decisions made for speed have already removed part of your value to the customer?
We would start by comparing the best and the worst locations of the network on the same metrics and finding what sets them apart in practice.
Key dates
| Year | Event |
|---|---|
| 2007, February | Schultz's memo "The Commoditization of the Starbucks Experience" |
| 2008, January | Schultz returns as chief executive |
| 2008, February 26 | 7,100 US coffee shops closed for barista training |
| 2008, July 1 | Closure of about 600 US coffee shops announced |
Sources
- Starbucks Corp. Form 8-K, Exhibit 99.1, July 2008 (store closures): Source
- Starbucks Corp. Form 8-K, January 2008 (Schultz's return): Source
- NPR. *Starbucks To Close 600 Stores*, July 2, 2008: Source
- Harvard Business School Working Knowledge. *Starbucks Reinvented*: Source
- Howard Schultz. *Onward: How Starbucks Fought for Its Life without Losing Its Soul*. Rodale, 2011.
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