Starbucks - This is ridiculous

Starbucks just doesn’t get it.

Someone should have told Howard Schultz when he first got involved in Starbucks that selling high priced coffee wouldn’t work. (Actually, a lot of investment firms and Wall Street gurus did and would not invest). Now someone needs to tell the Chairman and Jim Donald, Starbucks President and Chief Operating Officer that no one in today’s competitive world is supposed to post same store double digit growth – 10% growth. Results March 2006. January saw similar store growth while February showed a “much weaker” performance – only 8% growth. Just not good enough guys!!

This organization is just amazing. Much of the commentary about Starbucks relates to their incessant growth – today 11,000 units, and by the time you have read this, that number will be wrong. Starbucks suggests that it could grow to 30,000 units globally over coming years, with a major emphasis on China.

But how does an organization which “everyone visits all the time” continue to grow same store sales so consistently. Starbucks has posted same store growth of at least 5% for fourteen consecutive years.

In my book Why Ireland Never Invaded America www.whyirelandneverinvadedamerica.com I write about The ER Factor – Drivers of Corporate Health. The basic concept is growth comes from Execution (E) of a Relevant (R) strategy and surely Starbucks is a poster child for this concept. By the way, I will also give particular credit to McDonald’s for being a prime example of The ER Factor.

Starbucks can post this growth – and by the way management consistent advice is that 3-7% is more realistic - because of the famed Starbucks Experience. This does not just mean that the stores have a welcoming, homely ambience (how can they achieve this with so many units?), but also staff (partner) recruitment consistently seems better than average. Combine this with an extremely successful beverage innovation program, incremental sales such as music and now involvement in promotion of family friendly movies and you have an organization that presents consistently superb results.

When speaking on the concept of a Clear and Compelling Vision, I often reference the comment from Howard Scultz’s autobiography Pour Your Heart Into It – How Starbucks Built a Company, One Cup at a Time. Schultz had come to Chicago to set up the first Starbucks unit outside the West Coast. At a time when money was so tight that he and Starbucks investor Jack Rogers shared a hotel room, Schultz said to his colleague as they walked Chicago streets “Five years from now, everyone of those people will be walking around holding a Starbucks cup.” His colleague told him he was “Crazy.”

It was a ludicrous, outlandish vision for a business that at that stage was unknown. Thankfully for Starbucks investors and customers, Schultz and Co. do not seem to have a problem with “Crazy – Ludicrous – Outlandish.”

It is inconceivable that Starbucks will not hit a speed bump at some stage, but its ability to implement The ER Factor so consistently well suggests substantial good results for a long time to come.

Cheers

Conor Cunneen - C.A.S.H.
Consultant, Author, Speaker, Humorist