My pal Jon-Eric has brought me along to some NY/NJ Giants football games in the last few years, on occasions when his brother can’t use their ticket. The seats his family has are great: lower tier, 47-yard line, just below the overhang of the mezzanine. It’s a great view, somewhat protected from crappy weather, and we always have great tailgate get-togethers in the parking lot beforehand.
And when the Giants invariably cough up a lead, fumble during a big drive, or call 3 consecutive runs for -2 yards, we are graced with his dad’s signature comment: “They can’t handle prosperity, Jon-Eric!”
We joke about having a betting pool based on what point in the game his dad will utter those words, to the point of one of us handing a $5 to the other after the statement.
Which brings me to Starbucks. Our trip to Seattle last year coincided with Howard Schultz’ publicized memo about how his company had lost its way and needed to rediscover itself. Since, Schultz has reclaimed the CEO position, and is trying to retrench the company.
The story of Starbucks and how it handles “life at the top” echoes Jon-Eric’s dad’s sentiments: they can’t handle prosperity.
One of the aspects of business that fascinates me is this question of how a company copes with being a leader. I find it instructional to look at how businesses try to stay on top, particularly when they’ve established an overwhelming position in their field. Because they never stay on top: an unforeseen competitor shows up and eats its lunch, or the game changes around the market leader and its field is rendered useless, or it engages in dubious business practices that land it in serious regulatory trouble. Or a combination.
In Starbucks’ case, market dominance led to an attempt to diversify its product offerings, with the attendant loss of “romance” that Schultz lamented in his memo. I’d love to see a time-lapse map showing the opening and closing of Starbucks locations in the last 10 years; I bet there’d be a very organic/epidemiological appearance to it.
Here’s an article on how the company is trying to cope, and how local coffeeshops are benefiting as Starbucks closes some of its locations.
I think the upshot of the piece is the discovery that, even if the company is facing upheaval, at least it’s taken a big step in making sure its employees don’t breed:
Geoff Vuleta, chief executive of Fahrenheit 212, an innovation consultancy in New York, said Starbucks had lost focus on the experience that drew customers in the first place by neutering the baristas and by crowding the stores with merchandise, or as he put it, “replacing mystique with relentless commerce.”
Me? I still think their black coffee sucks, and that’s my make-or-break criteria. Maybe I need to try it with some sambuca, the way Jon-Eric’s dad’s pals end our tailgate parties before the Giants’ games. . .
(Update! Starbucks is going to stop selling sandwiches. I didn’t know they were selling sandwiches, but they showed me! The company is also planning to announce “five bold innovations” at its shareholders meeting on March 19. Unless it involves a caffeine IV-drip, I ain’t interested.)
great post
Hokay, I didn’t even see this post and Fink & I were mourning the breakfast sandwich thing this afternoon. In Seattle we’re so lousy with good coffee that only two things get me into a Starbucks:
1) My wife & I receive Starbucks gift cards so regularly it might as well be company-town scrip.
2) Convenient, tasty hot protein, often purchased with the afore-mentioned scrip.
In downtown Seattle, your options for #2 are surprisingly restricted, especially if one is working on a weekend. Clearly, further research is warranted.
Companies that stay on top forever? Coca-Cola. Outsell Pepsi in every market and still quadrouple their yearly ad budget. Except for the reformulated experiment. That blew.
Good example! Even there, though, they need to respond to changing market conditions. In their case, they’ve bought into other beverage fields — energy drinks, juice, bottled water, um, bottled energy water — rather than sticking solely to the core product. Without that — and without brand extensions intended to compete with Pepsi’s brand extensions — they’d see market share erode and stock price stagnate. Even when you’re #1 by a mile, you have to negotiate the Scylla & Charybdis of resting on your laurels and moving into markets that are too tangential to what you do. And size (inertia) is a double-edged sword: it helps for economies of scale and financing acquisitions, but it kills the ability to rapidly react to a threat.
Is all I’m sayin’.