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Making Tough Decisions To Preserve Your Core: Learning from Starbucks

In The post “What is Your Core Business”,  I spoke about how confusing it can be to define your core business. Since then, it has become pretty clear to me on how to do it.  And it all comes down to your core purpose.  Your core business should never stray from your purpose.  It is the lens through which you know if the new service or business or division that you are adding is part of your core business. 

I am reminded of this as I read Howard Schultz’s new book “Onward“.  It is the story of how, in 2008, after 8 years of letting another C.E.O run the company, Howard Schultz returned to the C.E.O post. 

 Why? In the midst of a period of decline unprecedented in the company’s history, he felt that the soul of his brand was at risk. Starbucks had lost its way. The Starbucks brand became diluted. Although the brand grew (and as of today, is now the 3rd largest restaurant behind MacDonald’s and subway),the Starbucks experience stopped being an experience and more like a fast food  takeout restaurant.

So he returned to fix a problem that most entrepreneurs and CEOs would never think is a problem: Starbucks had become too focused on “efficiency”—too much the cookie-cutter colossus with 16,000 stores that it is. Through efficiency, Starbucks had become commoditized.  Through efficiency, they strayed from their core purpose. So he sacked the CEO and rolled up his sleeves.

To regain the Starbucks soul, he started to make subtle, but powerful changes to their service.  And the changes all had to do with getting back to their core, getting back to the original purpose that helped propel Starbucks into becoming such a  powerful brand. 

Here are a few of the decisions that Howard Schultz made  in order to get their soul back.

 One day, while walking through a store, he noticed a bunch of stuffed animals being displayed. So he asked the manager about it.  “They are great for added sales, he replied. And they have really high margins.”  But in Howard’s mind, they had nothing to do with coffee, and nothing to do with their purpose of being the “third” place for people to go and socialize.

Despite being an easy way to make additional profits in all 16,000 stores around the world (which would add up to a lot of profit!), he took the stuffed animals away. Why? They dilute the brand, because it isn’t aligned with their purpose. And thus, isn’t core to their business.

A second example are the breakfast sandwiches. If you know Starbucks, they started offering breakfast sandwiches a few years ago. And they were a hit, contributing 3% of sales worldwide and again, highly profitable.

But as Howard walked through his stores, he noticed the smell of cheese. And that wasn’t good. We are a coffee place. We should be experiencing the aroma of coffee, not burnt cheese. And he made the decision to stop making breakfast sandwiches.

Highly profitable. His customers wanted them. They attracted a new type of customer who hadn’t frequented Starbucks before. But it diluted the coffee experience, and subsequently, the brand.

He then went onto take away videos being sold (The movie studios  were actually willing to pay Starbucks just to promote their products! You know you have a powerful brand when…) Again, a money maker, but what did selling movies have to do with coffee? How was it part of the Starbucks purpose? It wasn’t.    

He stopped pre shipping filled bags of coffee, and started to perform this function in each store again. Pre – shipping was highly efficient (have you ever stood in line behind the guy who buys 2 bags of coffee? It takes a long time), but the stores lost that rich aroma of freshly ground coffee, an important sensory trigger in the experience.

He replaced the new automated espresso machines with machines that took a bit more work to make each espresso. The new automatic espresso machines were fast and efficient, but they were so tall that the barista’s could no longer interact with their customers, losing the important personal connection and engagement that made Starbucks so unique many years ago.

Most companies would never make these type’s of decisions. But Howard did because he knew he had to make them in order to regain the lost soul of Starbucks.

And guess what? Starbucks is starting to regain its swagger again.  Its soul is coming back. Stores are regaining their sales. They are on the right track again.

The great and enduring brands are the brands that make these tough decisions. They are the brands that use their purpose as their filter; as their lens in which businesses and service and products to enter into and not enter into – even when they can make money doing it.

This is why it is so clear to me now.  When determining your true core business, and making those decisions on which opportunities to pursue, the filter has to be your core purpose – your why.