Why is Starbucks so Successful?


Last week the blog made a simple claim – you don’t need to be outstanding to be successful – and I used the Howard Schultz/Starbucks story for much of the background.

So is Starbucks outstanding? If you use coffee as your yardstick, then the answer is a resounding ‘no.’ I doubt that more than five people reading this blog would name Starbucks as their favourite place to grab a coffee. Give me thirty seconds and I can list half a dozen places where the coffee/cake/ambience/service – or all four – are better.

But those half dozen places are all one-offs. They’re successful – but on a small scale. There are not 23,043 of them around the world, up from 21,366 last year and 19,767 in 2014. In 2015 842 of those Starbucks outlets were in the UK, split more or less evenly between company-operated and licenced stores. Revenue and profits continue to grow strongly.

By any standards, that’s a success story. If ever there was a company that knew where it was going and paid attention to its KPIs, it’s Starbucks. Remember, we’re not taking about apps, iPhones or technology here: we’re talking about cups of coffee.

But why is Starbucks so successful? Ask Google and the search engine returns 12.4m results, so I’m not the first person to wonder.

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…And there are plenty of articles as well, many of them extolling exemplary qualities. Start small, expand carefully. Leadership, be efficient, training… But those are simply good management in any business. Based on my own career – hundreds of meetings in hundreds of coffee shops – here are three Starbucks qualities that really stand out for me.

Remorseless attention to detail. Howard Schultz is famous for this – and if you want to read a case-study in getting the little things right, read this book by journalist Taylor Clark. Let me pick up on just one example: the tables are round. Why?

So that if you’re on your own, you don’t feel awkward. Someone has to arrive first for the meeting – and even a 1:1 needs a table for four. But sitting at a rectangular table with three empty chairs feels downright awkward. You can’t put your finger on why you didn’t have the meeting in the other coffee shop; Starbucks just felt more comfortable.

This attention to detail extends to the pictures, the length of the counter, the height of the window seats. If genius is an infinite capacity for taking pains, then there’s a lot of genius in the layout of a Starbucks.

Secondly, consider the cups: short, tall, grande, venti and trenta. Starbucks doesn’t do regular, it doesn’t do medium. Supposedly three out of the five cup sizes are in a foreign language to cater to the ‘collegiate’ needs of Starbucks’ clientele. Howard Shultz wanted to foster a feeling of belonging, of exclusivity. He wanted Starbucks to be an experience, in the same way that Disney was an experience.

Lastly, Starbucks innovates. Use of first names when you’re ordering your coffee; among the first to adopt mobile payments and Starbucks has worked with PayPal to create its own mobile payment app.

So small wonder that there are more than 23,000 outlets around the world: the coffee may not be better in Starbucks, but the relentless attention to detail, appreciation of their customers and willingness to innovate has produced one of the world’s best known and most valuable brands, with a market capitalisation of $85bn.

If it works for Starbucks, it can work for you: damn it, all they do is sell coffee and cake…

The Knowledge Economy


“What do you do?” I asked someone I’d just met.

“We’re in the knowledge business,” she said. “My company adds knowledge to knowledge.”

We’ve all asked the ‘what do you do’ question a thousand times. And we’ve heard every reply imaginable. But I’d never heard one as intriguing as ‘adding knowledge to knowledge.’ I couldn’t help but ask her to explain.

…And I couldn’t help thinking about it afterwards either. Because we’re all in the knowledge business now.

When I started in business – not that many years ago despite what my sons think – people had stock: they had inventories. The auditors would turn up and spend a week stocktaking. Now, I look round the offices of so many of the TAB York members and all I see are the serried ranks of Apple Macs. Yes, there are honourable exceptions, but they’re becoming increasingly rare: those of us writing blogs may soon need to find a replacement for the apocryphal widget maker.

So everything’s fine: we’re all knowledge workers and whether we vote to Remain or to Leave (see next week…) then the future for our businesses is rosy.

Perhaps. I came across this article in the Harvard Business Review recently: it certainly bears out what I see – and what various TAB York members tell me. A bank of Macs is not necessarily the answer to all your problems: in fact the modern office throws up almost as many challenges as its Rolodex and Kalamazoo counterpart…

Interruptions

There’s a great line in the HBR article: I think it’s safe to say that at least some of the work of your company requires sustained focus of longer than two minutes.

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Absolutely: and yet we seem to go out of our way to encourage interruptions to our work. An e-mail flashes up: there’s an alert on your phone: your computer starts cheering – someone’s scored a goal in the Euros. (Yes, yes, I plead guilty to the last one.)

But if the knowledge economy demands anything, it demands concentration. All the studies show that your work takes longer if you’re constantly interrupted, and that you produce lower quality work. There are plenty of techniques for keeping you focused – from the Pomodoro upwards – but they all depend on you turning off interruptions. (And recognising that it really doesn’t matter if Croatia take the lead against the Czech Republic…)

The Design of the Office

Hand in hand with the banks of Macs have come open plan offices. As Maura Thomas describes in the HBR, they’re a double-edged sword. Yes, open plan offices bring increased collaboration, sharing of ideas and a more social working environment. But they also bring distractions, noise and a loss of privacy.

I’m in two minds on this one: I can see the economic argument in favour of open plan offices – but sometimes adding knowledge to knowledge needs silence, focus and being unsocial. In my experience those offices that work best are the ones combining the best of both: where there’s a shared purpose, where you can collaborate – but where can also disappear when that report simply has to be finished by 5pm.

Absent Friends

As I wrote last week, my eldest son has just turned 14. With 8 or 9 years to go until Dan enters the workplace, I wonder if he’ll ever work in a traditional office? It’s much more likely that he’ll spend a large amount of his time working remotely – keeping in touch with colleagues via whatever’s replaced e-mail, WhatsApp and Basecamp by 2025.

But we don’t have to wait until 2025: remote working is a trend that’s already well established. I do wonder, though, if the vast majority of businesses are getting the most out of the team members that aren’t in the office. If it’s not ‘out of sight, out of mind,’ all too often it’s ‘out of sight, out of the loop.’ Success comes from keeping everyone involved and taking all your team on the journey – wherever they are.

…And with that, my thoughts turn back to the Brexit debate. By the time you read next week’s post we’ll have voted. The polls will be closed and if we don’t know the result, we’ll have a very good idea. But next week I’m going to ask a simple question. Leave or Remain: will it make any difference to your business?

Learning from the big Apple


The numbers are quite simply staggering. $18bn profit for the last quarter of 2014 – that’s roughly £1bn a week. 74.4m iPhones sold – that’s 34,000 every hour – with sales up 70% in China. I’m obviously talking about Apple, the company that sits on a cash pile of $178bn – more than we spend every year on the NHS and education.

But there’s one more stat that I’m struggling to take in. According to the truly terrifying world population clock the number of people on Planet Earth is 7.3bn. Apple sold 74.4m iPhones. That means that in the last quarter of last year 1 in every 100 people on the planet bought an iPhone. Just one product – in the last three months of the year. I’m stunned.

Clearly Apple are doing plenty of things right: the key question is, what can we learn? Or is there simply too much difference between Apple – headquartered in Cupertino, California and dominating the world – and our businesses in North Yorkshire? So much difference that you can’t make worthwhile comparisons? I don’t think so: I think there are four very distinct lessons we can all learn from Apple.

  • First off, Apple make brilliant products that simply work. I remember getting my first iPhone out of the box. ‘Where’s the instruction book?’ I thought. There wasn’t one – because you didn’t need one. It just worked. I always come back to Simon Sinek’s TED talk when I think about Apple: many companies understand what they do and how they do it. Very few understand why they do it. That’s what sets Apple apart and it’s what can set your business apart. Apple give a brilliant customer experience and make fantastic products: they just happen to be computers and mobile devices.
  • Secondly, attention to detail. As the old cliché goes, good enough isn’t good enough. Or as one of the Michelin-starred chefs put it on Masterchef, “the difference between a good dish and a great dish is a pinch of salt.” You can never pay too much attention to detail, whether it’s design, function or customer service. In the long run, it always pays off.
  • Offer a complete package – and don’t underestimate what you know. I’ve seen two or three articles suggesting that Apple make more money from their after sales service and their cut of the apps than they do from their basic product line. Don’t underestimate the value of support, maintenance, updates, training and consultancy. Your knowledge can be as valuable as your products.
  • Lastly, don’t be afraid to charge what you’re worth. An iPhone isn’t cheap – but people pay for the perceived value. There’s a tendency in the North to say, ‘the market won’t stand it. The price is too high.’ It will: the price isn’t too high if the customer perceives the value he’s getting. Don’t ever be afraid to charge what you’re worth – or to say, ‘I’m sorry, that’s the price. No, I won’t negotiate or ‘do you a deal.’’ Sometimes you’ll need to be brave and walk away – but trust me, it works.

Of course, the cynics will say that Apple’s success won’t last. They may be right. When I started in business there was a saying: ‘No-one ever got fired for buying an IBM.’ Does anyone know anyone who’s bought an IBM recently?

But as long as Apple stay committed to the ‘why’ and – as Simon Sinek says – working from the inside out, then they’ve a great chance of staying ahead of the game. And let me chance my arm and make one prediction. The potential health benefits from your smart phone and developments like the iWatch are simply astonishing. Ten years from now monitoring your health – especially things like glucose levels – using a smart device should be routine.

Whether the NHS will be brave enough to embrace these potential benefits I don’t know. But clearly that’s enough from me for this week: still three months to go and I’m straying dangerously close to politics.

Have a great weekend – and remember the lessons from Apple. You might not be sitting on a billion dollar cash pile by the end of the year: but you can definitely have made a difference.