Startups
Why Starbucks Is So Successful: 5 Must Have Ingredients
Starbucks has not only revolutionized the way we think about coffee, but they have literally transformed the English language.
Starbucks has introduced terms like barista, chai, latte, venti, and Frappuccino into everyday vocabulary.
The “third place,” as many of us refer to it as, has had a global impact on the way coffee is purchased, sold, and ultimately consumed by millions of people each day. Howard Schultz, CEO of Starbucks has no plan of scaling back his efforts either.
Starbucks continues to open 5 stores daily, 365 days a year. With that type of continual rapid growth, there are many key insights that have attributed to this success. There have been many books written about this story, however I am a stickler for empirical evidence.
Joseph Michelli, author of the Starbucks Experience, spent countless hours, days, and months working alongside Starbucks senior management figuring out what the key success principles are that have allowed this company to have such rapid growth, while staying vigilantly consistent across the board. I have deduced what I believe to be the top 5 insights that we, as business managers and owners can use to help scale our businesses and create raving fans.
Before we dive in to the insights, I would like to set the stage by sharing with you a quote from Jim Alling, President of Starbucks U.S.
“Sure, one of our principles is to recognize that profitability is essential to our future success. But it’s not the first item on the list; it’s the last one. And when you live and work according to those kinds of principles, good things seem to come your way.”
Key Insight #1: Create strategic alliances with your employees
Starbucks links their partner’s efforts directly to the success of the whole business enterprise: if the partners win, Starbucks wins. This eliminates the normal zero-sum game and creates a win-win scenario because the more profitable Starbucks is, the more profitable the individual partner at the store level is as well. Not every company can reward employees in the same fashion or scale as Starbuck’s. What we can do is treat our teams with enough care and concern to inspire passion and creativity.
Many companies have shied away from talking with their employees about profit, however, Starbucks takes a completely different approach. “Starbucks leadership has done an exceptional job of both linking a partner’s financial gain to Starbuck’s profit and helping partners understand that profit is the lifeblood of a business.” Michelli
Starbucks consistently spends more on training than it does on advertising which results in 120% less turnover than the industry average.
“The way we have built our company by including the success of the company with everyone in it and not leaving our people behind is a great example of building a business the right way.” – Howard Schultz
Key Insight #2: Living the mission statement
It was said best by Paul Williams: “The mission statement and the intentions – they’re not just on paper. They truly are meant to be the way things get done.”
Leaders walk the walk, so they don’t have to talk the talk. The company is aligned on their vision across all levels of the business. This creates a culture of living the mission statement which in turn encourages the partners to offer the same vision to their customers.
Leading by example – Michelli noted a perfect quote for this point: “For any organization, it’s difficult, albeit not impossible, to soar with the eagles if you are led by a flock of turkeys.”
Key Insight #3: Starbucks 5 ways of being
Every partner is coached on embodying the Starbucks 5 ways of being, which creates a consistently fresh and delightful experience for patrons.
- Be Welcoming – make it your own – leaders encourage partners to use their own unique style to produce inviting encounters. Different means to the same end goal – each person is different and should champion their own strengths to create a lasting relationship with the customer
- Be genuine – Starbucks definition – “to connect, discover, and respond.” This requires listening followed by action. Do not get stuck in paralysis by analysis
- Be considerate – consider the needs of others, how can you invest more of yourself and encourage your teammates to increase their investment to be more considerate?
- Be knowledgeable – Starbucks definition – “love what they do and share it with others.” In today’s information age, we add value to our efforts when we gain work related knowledge. Sharing knowledge with customers makes for more sophisticated consumers – AKA the “ideal customer.” When we add value/knowledge to our customers, they offer our business their loyalty and come to see us as trusted advisors rather than just transaction handlers!
- Be involved – community, and in the store with customers.
Key Insight #4: Everything matters
This is referring to solid processes and procedures in daily operations – “retail is detail.” Starbucks puts an emphasis on consistency, even in the minute details. They take the mentality of nothing is trivial and our customers notice everything.
Starbucks focuses on finding ways to deliver existing products and services in ways that make the brand more significant to the customer – more than just a transaction, they focus on the whole buying experience. Starbucks focuses on creating a “felt sense” about the business
Dr. Eugene Gendlin defined this term as the result of a myriad of tiny details that lurk below our conscious awareness. How can we make our customers “felt sense” align with our businesses brand/vision? Focus on all the details.
“The Starbucks sensation is driven not just by the quality of its products but by the entire atmosphere surrounding the purchase of coffee.” – Corporate Design Foundation
Key Insight #5: Embrace resistance
This requires leaders to distinguish between customers who want their concerns to be resolved and those who will never stop complaining or be satisfied.
When faced with customer complaints, there is an opportunity to actually turn that perceived negative into a head over heels positive. You gain a rare perspective into the customers mind. This is an opportunity to learn more about what you can do, how to become better, how to approach processes differently, and ultimately become closer to creating a great experience for the customer.
Just listening is not enough, you must take action which shows the customers that their voices are heard and that leadership cares, thus creating brand loyalty.
Starbucks example – when entering new markets, in some cases Starbucks receives a lot of resistance. The way they have combated this is to keep their core products and services the same, but tailored other aspects such as food offerings to the local cuisines. This creates a sense of caring, and turns many “haters” into long lasting patrons.
“Embracing resistance involves a complex set of skills that can enable business and individuals to create business and relationship opportunities when they are confronted with skepticism, irritation, or wariness.” – Michelli
My advice to us as business leaders and owners is to understand these insights at a granular level, and start to implement them one at a time in our respective businesses. In the next strategic planning meeting, brainstorm on how these insights relate to your industry, and create an implementation plan. Remember; it is all about the customer.
I want to end with a quote that Michelli ended his book with – “Starbucks excellence emerges from visionary management, a passionate entrepreneurial spirit, a social conscience, and guiding principles that are inculcated into the fabric of the business.”