Howard Schultz/Starbucks: 18 insights and lessons from a customer experience master

It is worth learning from the masters

You may have noticed that I am an avid student of all things customer.  Over the last few months I have been reading Onward by Howard Schultz and I have found it to be an insightful and inspiring read – I recommend you buy it and read it!

Perhaps, I love the book because it validates my point of view (bias) on customer-centricity and customer experience – as a philosophy rather than a strategy or simply tactics (I’ll get into that distinction in a follow up post).  For today I simply want to share with you some stuff in the book that resonated with me in the hope that you may find it useful too (any stuff in bold is my doing).

18 insights / lessons from Howard Schultz

“A well built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.” (p23)

“I always say that Starbucks is at its best when we are creating enduring relationships and personal connections. It is the essence of our brand, but not simple to achieve. Many layers go into eliciting such an emotional response.  Starbucks is intensely personal.” (p23)

“Unlike other brands, Starbucks was not built through marketing and traditional advertising.  We succeed by creating and experience that comes to life, in large part, because of how we treat our people, how we treat our farmers, our customers, and how we give back to the communities.  Inside the company, there had always been an unspoken level of trust….” (p27)

“I suggested something to the group as the ideas began to percolate. “The only filters to our thinking should be: Will it make our people proud? Will it make the customer experience better? And will it enhance Starbucks in the minds and hearts of our customers?”” (p75)

In my head I knew that no silver bullet would transform Starbucks overnight, but in my heart I was on the lookout for a big idea – what would be the next Frappucino, the most successful new product in Starbucks’ history?” (p75)

“But there was an even more important reason that I chose to eliminate comps from our quarterly reporting. They were a dangerous enemy in the battle to transform the company…….The fruits of this comp effect could be seen in seemingly small details. Once I walked into a store and was appalled by the proliferation of stuffed animals for sale.  “What is this?”  I asked the store manager in frustration…..The manager didn’t blink. “They’re great for incremental sales and have a big gross margin.” This was the type of mentality that had become pervasive. And dangerous.” (p89)

“In any well run retail business, there is, by definition, a maniacal focus on details……..In 2008 I felt very strongly that many of us had lost our attention to the details of our business…..Like a doctor who measures a patient’s height and weight every year without checking blood pressure without checking blood pressure or heart rate, Starbucks was not diagnosing itself at a level of detail that would help ensure its long-term health….We thought in terms of millions of customers and thousands of stores instead of one customer, one partner and one coffee at a time. We forgot that “ones” add up.” (p97

Their instruction at this “seeing” exercise was to consider each retail experience not as a merchant or an operator, but from the point of view of the customer. What did they witness, smell and hear? What non-verbal cues enhanced the experience? ……That journey helped put our leaders back in customers’ shoes, providing an enlightening and for some emotional exercise that underscored how important it was to put the customer at the centre of every meeting and business decision.” (p107)

“Starbucks coffee is exceptional, yes, but emotional connection is our true value proposition.  This is a subtle concept, often too subtle for many businesspeople to replicate or cynics to appreciate. Where is emotion’s return on investment? they want to know. To me, the answer is clear: When partners like Sandie feel proud of our company – because of their trust in the company, because of our values, because of how they are treated, because of how they treat others, because of our ethical practices – they willingly elevate the experience of each other and customers, one cup at a time.” (p115)

I have always believed that innovation is about rethinking the nature of relationships, not just rethinking products and as Michael explained how Ideastorm was helping Dell listen to customers and improv its products and services…..Thee was definately something here for Starbucks.  A chance to reconnect with customers we had lost touch with.” (p120)

“..one of the most important pieces of advice I’d heard upon my return…….”Protect and preserve your core customers.”…..”The cost of losing your core customers and trying to get them back in a down economy will be much greater than the cost of investing in them and trying to keep them.“” (p129)

“Some corporations are built, or rebuilt, on data driven business plans and hired guns with formulaic strategies. They may succeed, but they lack soul.  Starbucks is, by its founding nature, different……..transformation was not only about tightening nuts and boltsIf we did not also feel, if we did not have conviction in our values and believe that we really were in the business of human connection – on our farms, in our offices, in our stores, in our communities – then we were doomed.  We had to preserve our humanity.” (p131)

“But what many or our people had in spirit they lacked in business acumen and tools…….We also observed too much waste…….Something subtler was being wasted: our people’s time and energy……The fault did not lie with our people in the stores.  They were doing the jobs they had been asked to do with the resources and training they’d been given.  For all the brand’s marketing success, Starbucks needed a more disciplined operations system…..” (p145)

Growth had been a carcinogen. When it became our primary operating principle, it diverted attention from revenue and cost saving opportunities, and we did not effectively manage expenses……..Then as consumers cut their spending, we faced a lethal combination – rising costs and sinking sales – which meant Starbucks economic model was no longer viable.” (p149)

“As I stared at the list of 600, a lesson resonated: Success is not sustainable if it’s defined by how big you become.  Large numbers that once captivated me – 40,000 stores – are not what matter. The only number that matters is “one”. One cup. One customer. One partner. One experience at a time. We had to get back to what mattered most.” (p152)

“Kristen summed up Lean’s benefit well: “We were spending too much of our time fixing moments , but not actually solving problems. But fixing moments, like mopping a dirty floor, only provides short-term satisfaction.  But take the time to understand the problem – like how to keep a floor from getting so dirty in the first place – solves, and maybe eliminates a problem for the long term.”” (p278)

“At it’s core, I believe leadership is about instilling confidence in others..” (p302)

“There are companies that operate huge global networks of retail stores, like us.  Others distribute their products on grocery shelves all over the world, like us.  And a few do an extraordinary job of building emotional connections with their customers, as we have learned to do.” (p311)

My recommendation

Buy the book – it is a great read and has lots of real world lessons and insights.  For most business people it is likely to be a challenge because Starbucks is Starbucks because it is not built on nor operates on conventional business wisdom and practices.

The core challenge facing the customer experience designer

From a customer point of view what matters is an ‘effective’ organisation – one that is good at anticipating and responding to the diversity of customers and their needs.  That means designing the organisation to be flexible, adaptable, versatile – this allows the organisation to absorb and effectively deal with the variety of demands that are placed on the organisation by customers.  This in turn requires the organisation to have ‘redundancy’ built into it.  That is a fancy way of saying that it needs extra resources (“fat”) to deal with and take advantages of unexpected difficulties and opportunities – to cater for the inherent unpredictability of the world.  Finally, making the parts work well together (integration) is a key requirement of effectiveness.  Think of a car it is only of value if all the components work well together.

Organisations are enmeshed in an ideology that values efficiency and structure that lends towards fragmentation.  The focus is on cutting out all the ‘fat’ so as to minimise operating costs and thus drive efficiency.   This way of thinking involves lots of efforts in up front forecasting and planning to predict and manage demand.  It also involves finding and standardising on the one best way of doing things and then striving to make customers, employees, suppliers and partners to use that one way.   This way of thinking encourages and insists that managers control the real world – at least their piece of it: to act on it so as to force it into the shape that was envisaged in the plan.

So customers want organisation to dance to their specific, individual, tunes.  Whereas organisations insist that customers fall into line – the line that reduces operating costs and thus maximises profitability.  That is how we come to the gaping hole between what customers want and what organisations deliver.

Sometimes the gaping hole gets smaller – at least for a while – when the organisation finds a way of being effective (customer perspective) by taking actions that improve efficiency.  Enter the category of self-service: ATMs, electronic banking, e-boarding card, well designed IVRs to do standard stuff like top up mobile phones come to mind.   At other times the gaping hole grows larger: sales assistants who know less about the products then the shopper, badly designed IVRs, waiting a long time to speak to a human being, call centre agents who are not in a position to help and so pass you on and then on again and so forth.

The fascinating thing about ‘social media’  is that it provides a great opportunity for organisations to be effective (from a customer perspective) whilst being firmly wedded to efficiency.  Yet, there is little movement in the direction of social media because there are a couple of things organisations are more wedded to than efficiency.  Secrecy, ownership and control – in every organisation lurks the dictator.  Again we have a divide: customers want organisations to be open, truthful, clear and collaborative.  Organisations are wedded to secrecy, spin, ambiguity, ownership and control.  And this divide explains why so few organisations have adopted social media to bring customers into the heart of the organisation.

So the challenge that falls to the customer experience designer is how to deliver the effectiveness, openness, transparency and participation that customers want whilst being embedded in an organisation that worships at the altar of efficiency, secrecy, ownership and control – sacrificing many customers in the process.  This is not an easy trick to pull off and it is why I have profound respect for all the people in organisations battling to improve the customer experience!