Starbucks Brews A Comeback With Purpose

Starbucks recently announced excellent results for Q4 2009. Earnings more than tripled and it posted its first quarterly same-store-sales gain in two years, up 4%. Here’s what CEO Howard Schultz said about the results:

I am pleased to report continued progress in our efforts to transform Starbucks and return the company to sustainable, profitable growth while at the same time [remaining] true to our core values and guiding principles

How does Schultz explain the turnaround?

We lost our way. We went back to start-up mode, hand-to-hand combat every day. And with the kind of discussion and focus that probably we had not had as a company since the early days — the fear of failure, the hunger to win.

My take: Starbucks’ turnaround was not accidental. It came from a multi-year effort to rediscover the essence of the company’s brand.

Nearly two years ago I wrote that Starbucks had lost its soul. That’s why Schultz returned to his role as CEO in January 2008. Shortly after his return, Shultz took the unprecedented action of closing 7,100 stores for three hours to “retrain” employees on the Starbucks experience.

Unfortunately, many companies go through this loss of identity when their initial leaders move on. The new executive team often lacks the same clarity and unrelenting commitment to a clear mission.

Shultz said many years ago:  “Customers must recognize that you stand for something.” That sense of purpose was key to Starbucks’ initial expansion as well as its recent recovery. It’s also a great example of what I call Purposeful Leadership, which is one of the four key ingredients of great organizations.

The bottom line: Does your organization have enough purpose?

Written by 

I am an experience management transformist, helping organizations improve business results by engaging the hearts and minds of their customers, employees, and partners. My "job" is Head of the Qualtrics XM Institute. The Institute is still being established, but our goal is to help organizations around the world thrive by mastering Experience Management (XM). As part of this focus, I examine strategy, culture, interaction design, customer service, branding and leadership practices. And, as many people know, I love to speak about these topics in almost any forum. Prior to joining Qualtrics, I was managing partner of Temkin Group (leading CX research, advisory, and training firm), co-founder and chair of the Customer Experience Professionals Association (CXPA.org), and a VP at Forrester Research. I'm a fanatical student of business, so this blog provides an outlet for sharing insights from my ongoing educational journey. Check out my LinkedIn profile: www.linkedin.com/in/brucetemkin

8 thoughts on “Starbucks Brews A Comeback With Purpose”

  1. We were studying the Starbucks problem of ” Customers must recognize that you stand for something.” in late 2007 in our MBA program. They went back to one of their original principles and also their capitalizing on a recent consumer trend.

    Schultz is famous for his positioning of Starbucks being the Third Place, the first being home, the second being work. So they were selling the “emotion” of their coffee and not features and benefits. When they started expanding rapidly, placing Starbucks store in a store where they did not belong, focusing on Starbucks music, etc… they lost their way to the “Third Place”.

    The recent trend of Affordable Indulgence has helped Starbucks although I attribute their success here less to Schultz and more to being in the right place at the right time. However I am certain they recognize this and have added this to their market plans.

    As a customer who views Starbucks as an Affordable Indulgence, I frequent my local store several times per week. The service level has definitely improved. The “team” effort behind the counter is tangible, very similar to what I see in Trader Joes, where everyone jumps in when necessary, to the point where they periodically have an associate walk out from behind the counter to take your order while waiting.

    Let’s see how they execute over the next 12 months.

  2. Domenick – Great insight. I had largely abandoned Starbucks in the last two years because it seemed as if the staff and attitude in the stores wasn’t as energized and focused as it was 4-5 years ago. I will have to stop into the local stores as my coffee cravings insist and find out if Schultz’s plans are making their way into the field!

    I enjoyed Bruce’s post on corporate purpose. At my company (RightNow Technologies) we sum up our mantra as “Rid the World of Bad Experiences.” It is amazing how much a simple mantra like this can energize a company when it fits the culture and attitude of the people.

  3. Brilliant!
    I’ve been wanting to give up all that Machiato I’ve had for years. I for one never cared for the brand itself – I’m in it for the coffee, after all it is the one thing one can expect from a coffee shop, good tasting coffee! but too bad only a few staff ever smiled at me while taking my order, which supposedly would make my coffee taste a bit bitter! Do I care? Not really…I’ll still make a comeback for another round of Machiato!

    I think subliminally all the smiling and the good attitude make us all magically hooked to Starbucks, and only a few realize that at the end of the day it’s really the actual taste that counts!

  4. I agree. The main message here is one of purpose. It does not matter if you are the last employee down the line, cleaning the toilet. Actually it does. You have more influence on customer experience and satisfaction than the CEO. Mangers need to embrace purpose and instill it in employees everyday work… If you succeed in instilling that sense of purpose in your employees you are half-way on your way to noticing and recognizing them. You are on the right way to explaining, everyday, how they made a difference. And that is a good path to be on. http://tinyurl.com/ydvnawx
    Very important insights here. Thanks for posting!
    Elad

  5. The most dififcult task fr an organziation is to recapture their custoemr experience after losing it. What Schultz did is remerkable. When you examine writings from late 2007 everyone stated that CE at Starbucks is over. That they passed their prime and grew too fast. they claimed that CE is not going to be successful in such large operation. Schultz on his part was worried about the loss of coffee smell in his stores. that is whe I knew (and wrote about it in my column in early 2008) that he will bring it back. and he did.

    It is ultimately about authentic commitment to customer experience and not a lip service as many CEOs delivered and then when it was tough they cut all budgets.

  6. This is a well-caffeinated discussion; thanks for sharing all of your comments! It will be very interesting to keep an eye on Starbucks since, as Lior states, recapturing customer experience is not easy to do. And, there have been several references in the comments to “purpose” which I believe is a critical element to keeping a brand on track. I’m also keeping an eye on Andrew’s company (RightNow Technologies), because I think it has a uniquely high level of purpose for a software company. I actually wrote about the firm’s new mission “To rid the world of bad experiences.”

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