The Lessons of the Commoditization of Starbucks

"Overhaul, Make It A Venti," an article in the Wednesdays, January 30, 2008, New York Times discusses the current restructuring of Starbucks. The article references a memo written by Howard Schultz, its long-time and newly rehired CEO, entitled "The Commoditization of the Starbucks Experience." As I read the article I started wondering whether some very cogent lessons for high-variety manufacturers, can be derived from the Starbucks experience.

The Times article quotes several analysts:
"…replacing mystique with relentless commerce."
"…the mystique that so thoroughly defined the initial experience is conspicuously absent - trampled in the stampede of proliferation."

Starbucks tried to become everything to everybody. They loaded up their stores with absolutely everything they could sell: music, food, cutesy beverages, appliances, gifts, etc. They tried to be everywhere. And their biggest mistake: they replaced the experience of the barista-made cappuccino with automatic machines.

So how does this relate to job shops, mass customizers, build-to-order, and the like? It is very easy, especially in a time of economic uncertainty and pressure, to accept every possible order if one has the slightest capability to deliver it. It is very easy to try to create a "product" from every possible idea a customer or an employee may have.

What this sort of reaction can do, however, is destroy the very competencies and customer values that have contributed to the growth and success of the business to date.

Being a job shop, a mass customizer, or other sort of high-variety manufacturer requires an exceptionally-disciplined focus on what it is that you do well and what value you deliver to your customer. If you are accepting every order that comes in the door, what impact does that have on your quality? On meeting your delivery deadlines? On managing your production schedules? On the perception of your most profitable customers as to who you are?

Starbucks lost sight of those items, is experiencing declining customer traffic, and is closing stores. The NY Times article frames its discussion by profiling a neighborhood coffee shop that has four Starbucks stores within one mile of its location. At least one of those Starbucks is closing. The neighborhood coffee shop? It's continuing to thrive, with coffee roasted by hand, free refills, and a funky atmosphere.