Starbucks Stuff

Enough of you have asked my opinion on the recent news from the Starbuck founder, Howard Schultz that I should make a blog entry about the state of affairs. Seems that after Starbucks lost out in a somewhat questionable taste test v. McDonald's Premium Coffee, the e-mail boxes at the HQ were peppered with questions from worried store partners about it. Howard made sure to support the workers and the brand and vented his frustration at being unfairly criticized to the entire corporation through an internally distributed letter. I was asked why a letter? Why not e-mail? Well whenever Howard or the CEO, Jim Donald want to make sure everyone sees it they send a letter that can be printed and posted in the back rooms. Not every employee has e-mail or voicemail, so the letter is the best way to get the word out to everyone. I am sure they understand the risk of it going public, so they are pretty careful not to word things too inflammatory. Just a few days ago another Howard memo made it to the blogosphere. In an internal memo directed to his senior staff, he critically looked at past decisions and how they may have negatively affected the brand. That memo had only a handful of addressees, but it somehow got leaked. Go figure. Here is my take and interpretation as I "read between the lines."

Howard spoke about the brand "losing its soul." I gotta tell you, I agree with him! It is one of the reasons I left the organization. However, some of you have told me that you don't see it, that business looks good, it is still crowded, the drinks still delicious, the stores beautifully decorated, etc. Yea, that is the pretty facade, but the core might still be hollow and empty. The best indication for me is through the slack and lifeless eyes of the Barista. That is how you want to measure the soul of this organization. Even the new hires might not feel the same love that was evident just a mere 3 years ago. Howard talked about a focus on the numbers, on losing out on quality, on losing our touch with the heritage...preach it, Howard! You have a bunch of professional managers running your "business" like it was only about money. That is the soul that is being snuffed out. It has never just been about the money...it was always about the coffee and the people. Poof! I can feel the soul suffocating. If you look at it from the Barista's perspective, that is the essence of the experience that is being lost. Love and appreciation for the "beans"...both coffee and human variety. The consumer has already turned the experience into a personal one...MY drink, MY store, MY experience. With that focus on their personal interaction with their warm cup, they aren't interested in much else...the smell, sounds, and sights of the atmosphere. They have no reason to look around, they only need to rush in and out.

As a former partner, I have sat through meeting after meeting where "strategies" to reduce the cost of store design, equipment and operations were being developed. As a mid level manager designated to innovate, it seemed impossible to keep adding new beverages to new stores that were coming online without the right level of resources, let alone old stores that had been neglected and in need of updating. For example, if the peak hours in a store approached 300 drinks per hour (and going up), then why were we designing and building stores that could only max out at 200 drinks per hour? The new stores were coming online already obsolete! Well they don't tell that to the new manager, so she or he then pushes the Baristas to make drinks with an under resourced store! The poor Baristas work themselves silly to make the number of drinks needed, resorting to clever tricks and solutions to keep up. In the meantime some management doofus gets a huge bonus because they were able to keep the per store building cost down. And that is just one example of many similar strategies. Another example is something that is mentioned in the letter...the use of automated espresso makers and the diminishing quality of espresso. I gotta say again, there is something there. I used to manage the sensory team, and there is a "significant difference" (meaning quantifiable) in the quality of espresso shots pulled from a La Marzocco manual machine v. an automated one-button machine. But it comes down to cost again. To pull the perfect shot (18-23 seconds), you might go through two portafilters worth of coffee...so your yield numbers might be as high as 40% loss. With the automated units, you push a button and get a shot, and you just use it, so yield nunbers are much, much higher. It is also easier to train newbies on an automated machine v. the labor intensive, but higher quality manual one. So where does taste come back into play? All development efforts were placed on designing a new automated machine that rivaled a manual one in flavor and consistency. They got close, but no cigar. It does look reminiscent of a manual machine, but it has no need for artistry and the artisan's touch.

Many of you have heard me say that the Supply Chain group at Starbucks will be the group to bring down the giant. If any group will kill the brand, it is this group. Their single-minded focus on costs, their burn rate through good vendors, single management approach (fear and intimidation) and disregard for the mission and values of the company will be the downfall of Starbucks. People that have attempted to keep the passion and quality and dare to speak out are quickly dismissed and replaced. Hard working, effective managers are given more and more responsibility until they crack and either quit, or transfer. Ineffective managers are kept around, sapping positive energy and creating more work for the effective. No executive is brave enough to call it like it is, and burn down the altar.

Howard, bring the torch! And ignore all that rubbish about how your perqs are unreasonable...crap, you started the company. The way you created shareholder value, you are entitled to a little cushy travel and protection. As a stockholder, I am glad to pay it...you deserve it! But please, freakin' burn down SCCO!

Okay, off to the east coast to deliver a presentation and then to celebrate some family birthdays...My Dad, and both sisters are March babies, so we will celebrate while I am in town. We always need just a minimal excuse to have a party.

Chow for now!