In January 2008, after 20 straight years of 5% or higher annual revenue growth, Starbucks Coffee Company announced that it had posted an anemic 1% growth. Newly reinstated CEO Howard Schulz sensed that something was rotten in the state of Starbucks. The culprit? Breakfast sandwiches.
Schulz recounts in his book Onward! that Starbucks did a lot of things well, but first and foremost it was “the coffee authority.” The company obsessed about finding the highest-quality beans, the best roasting techniques, and fully educating every in-store “partner” on the nuances of coffee.
Once upon a time, Starbucks also obsessed on ensuring that every patron entering a store would be greeted by the scent of fresh coffee — without the stiff olfactory competition of burnt cheddar, compliments of the Starbucks breakfast sandwich.
Schulz faced a conundrum. In 2007, breakfast sandwiches accounted for 3% of Starbucks’revenue. To discontinue them would have been like lopping off a toe in the middle of a marathon. Yet, lop is exactly what Schulz did. He felt that the only way Starbucks could be returned to its glory was by “getting back in the mud.” The company sought to rediscover its coffee roots by reducing the amount of CDs and breakfast sandwiches that cluttered the stores, diluted the brand and undermined the Starbucks position as the coffee authority.
By summer of 2009, despite a steadily declining economy, sales figures and stock prices for the stripped-down Starbucks were climbing once again.
Retail coffee is a different industry than banking. However, the Starbucks story highlights three vital decisions that leaders in today’s banks and credit unions must also make:
1. Find your “coffee authority” equivalent.
Around the same time as the Starbucks drama was unfolding, Panera found itself in trouble as well. Its response was the same as Starbucks, only different.
Instead of de-emphasizing breakfast sandwiches, Panera introduced its steak sandwich. Rather than getting sucked into lose-lose price wars with fast food chains, or taking on Starbucks and the new McCafes in a coffee war, the food retailer shored up its affluent upper-middle-class customer base by providing another good yet convenient food option at a premium price. This strategy beautifully reinforced the core Panera offering, and it proved to be a very profitable one.
2. Decide what you should do more of to reassert your authority.
A back-to-our-roots approach does not mean forgoing innovation or shunning change. At Starbucks, it meant ramping up innovation relating to coffee, and spending months perfecting its new Pike Place Roast. It also meant closing every store in North America for one afternoon, eating $3 million in revenue to re-train every barista on the proper techniques for pouring espresso.
3. Decide what you should stop doing to reassert your authority.
Due to the innate psychological phenomenon of loss aversion, this third decision is the most difficult to make. You have likely grown attached to the new (and certainly the old) initiatives you’ve instituted at your bank or your credit union. Some of these bold new processes, programs or products were probably even your idea.
Yet, you must take an honest look at how you defined your “coffee authority equivalent” in the first point above, and use that definition as your litmus test for everything that’s presently on the table. Is each initiative moving you the proper direction, or is it merely putting a Band-Aid on an open wound?
If it’s the latter, you might need to amputate.
A matter of reassertion
Both Starbucks and Panera resisted the urge to reinvent themselves. They chose to reassert instead. Neither company buried its head in the sand or stubbornly insisted that they didn’t need to change anything. They insisted on going in a direction that was consistent with who they really are at the core.
When times get tough, the natural human tendency is to move toward the middle. Who wants to be the isolated gazelle on the edge of the herd when the lion is prowling nearby?
But here’s why you should be that lone gazelle: the whole herd is looking a little gaunt right now, and the lion knows she can go directly into the crowd to find an easy meal. When a cloud of uncertainty hangs over the future, herds tend to get infected with a highly contagious virus of fear, mediocrity and conformity. You should keep a safe distance.
Verdant pastures are out there. But to find them, you must first define your unique direction, and then clearly articulate it for every employee across your organization. By doing so, every little decision and action will be passionately and obsessively reinforcing what you do best.
© 2010 Nick Tasler
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