Go to any
major city and you’ll see Starbucks. Not
a Starbuck, but Starbucks, lots of them. There are 8 in Fairfield, where I
live, and roughly 90 in San Francisco. There are over 7,000 in the United
States. That’s why, when I heard Harold Schultz, the CEO of Starbucks, say in
an interview, “Growth is not a strategy,” I was caught off guard.
and it is a lesson that Starbucks learned the hard way. Starbucks had strayed from their mission: “To inspire and nurture the human spirit –
one person, one cup, and one neighborhood at a time.” They increased the
number of stores and the products offered at those stores because they could,
not because they should. Meanwhile,
customer satisfaction fell, profitability declined and in 2008 and 2009 they
closed over 700 of their coffee shops.
observation that growth is not a strategy applies whether we are talking about
cups or cows. Expanding an enterprise
will not increase profit unless there is a production strategy in place that
results in a strong gross margin per unit, whether that unit be a cup or a
strategy was to be a place “between work and home” where people could relax,
refresh and socialize. Schultz said that
they strayed from that mission. As they
expanded, they diversified their product offering to include sandwiches and
other items to increase revenue in each store. It didn’t work. As they
unintentionally transformed a coffee shop into a restaurant, they lost
customers and profits. Walking into a Starbucks, Shultz said he smelled burned
cheese rather than brewed coffee.
dropped the sandwiches and returned to its core mission. They closed all of
their stores for one day to retrain their 135,000 employees “to pour the perfect shot of espresso.”
Profits are up and Starbucks has started growing again. This time the growth
isn’t just for growth’s sake. It is to serve more people a great cup of coffee.
Growth does not create success. Success