Shultz re-takes the reins at Starbucks

Starbucks announced last week that founder Howard Schultz is to return as CEO, after the company booted out Jim Donald. This comes as no big surprise. One year ago almost to the day Schultz sent the now famous "leaked" memo to Donald bemoaning the "commoditisation" of the Starbucks brand (read the memo here). Back then Schultz said to Donald: "As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you." Mmm. I guess by "I want to share some thoughts" he meant "Fix this or I'll fix it for you".

Schultz is the latest high-profile business leader to get back in the driving seat of the business he created, following the example of Michael Dell at Dell and of course Steve Job’s victorious  second coming at Apple. Several interesting lessons come from this.

1. The power of the "brand CEO"
I've posted before on the importance of the brand CEO: the leader who is the living, breathing embodiment of the brand. The person who sets the direction for the brand not by what they say, but by what they do and how they behave. In a multi-product company like Unilever this can be the global brand director or marketing director. But in most mono-brand companies the brand CEO is the CEO of the whole business.

Nowhere is this more important than in companies where the founder played a visible, high-profile role in defining the brand and inspiring people. The likes of Dell, Jobs and Schultz have an intuitive, visceral understanding of the brand and business. As Professor Mark Ritson comments, "Founders have an implicit understanding of the brand equity in their bones". No matter how professional an external manager brought in to be CEO might be, it's hard to replicate this understanding. Schultz was after all CEO for 13 years from 1987 to 2000 during the creation and expansion of the business.   

The more I work in marketing, the more I believe that people count more than process. We might have expected advances in marketing technology and systems to make the human touch less important. But in fact the opposite is true. Most companies are drowning in data, and the systems seem to often slow things down. The leaders who are winning are those with vision, creativity and inspiration who can react quickly and take the whole company with them.

2. Remember what made you famous
This is another topic close to my heart. In a voice-mail to Starbucks partners Schultz said:

"We will be re-focusing our entire organisation on the Starbucks experience by going back to our heritage and what made us successful in the first place".

Schultz believes that the rapid expansion of Starbucks means the customer experience has been weakened, allowing competition to catch-up.

Over time brands can forget what made them famous and stray off course. Examples I've posted on include easyGroup and Orange. We're always told that the key to marketing success is to look into the future, and this is of course important. But looking back can also be a source of inspiration. More on doing this here, illustrated with a brand that has stuck closely to what made it famous: James Bond.

3. Focus on the core
Starbucks has done all sorts of brand extension since Schultz left. Pre-mixed drinks sold in supermarkets, branded merchandise, a record label etc. As often happens, this has distracted the company from the core business. Schultz is now following through on the direction he gave in his 2007 memo:

"Let's get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others."

4. Cutting through the treacle
Another issue Schultz has identified is that the company has become too bureaucratic. Time and again as I work with brand teams this problem of "organisational treacle" comes up: sticky, icky stuff that slows things down. Only last week I met the global marketing director of a big drinks company and even after an hour of discussion I still couldn't understand the structure of the marketing team and how things got done.

Simplifying structures and cutting down on the ridiculous amount of meetings that take up so much of everyone's time will help Starbucks, as it would most companies.

Well my bet is that one year from now Starbuck's will be in much better health. In fact, I think its time to buy some stock...here's the share price trends for the last 2 years... check back in Jan 2009!

Comments

[Chintu]

I was thrilled when I leanerd about the GF cake at Starbucks. At last I had a snack to eat with my iced tea. Not only was this little orange cake free of gluten, it has no soy or milk either I also can't have these. It was perfect. Not only that, it tasted great.Living GF is all about being prepared, but there are times when you're out shopping and are caught up short. That's when dropping by Starbucks is a god-send. And there are times when you want to meet friends for coffee. Where better to go than Starbucks. It's been tough to sit and watch while the friends gobble down pumpkin loaf or scones, and the Valencia Orange Cake promised a great solution. But I barely got to try one before they disappeared from the bakery case.I hope you will reconsider your decision and bring them back. Thank you.

[Dewey]

I will tell ya I have been in and out of church meianng I attended regularly, actively participated and my life was good, less stress, life just seemed to flow smoother than those times in my life that I was not plugged into a church.However this is the first time that we Eileen and I together as a couple are plugged into a small group and it is soooo good, we have grown so much our faith has gone through the roof, In these uncertain times we are living in today with the economy, the wars and unstable governed countries around the globe and on and on, we are concerned but we don't worry due to the fact we know that God is in control.It has only been through the teachings of our small group, that for the very first time in our marriage of 23 years that we now pray together as a couple, do a daily devotion time together as a couple, folks I only tell ya that because if your not doing that, you are missing out big time! You need to get plugged into a small group, I am telling you it will change your life!

[David Taylor (brandgym)]

Mike,
Thanks for joining the conversation.

I love your idea of the "rock star CEO"!

You may well be right its too little, too late. But then the same could have been said of Steve Jobs re-joining the almost bankrupt Apple back in the 1990's, couldn't it.

I think its down to how deep he gets involved. Is it superficial window-dressing? Or is it real change.

I hope the latter is true as I bought a load of stock... up to now, the share-price is more in your camp!
David

[Mike Myatt]

As much as I concur with your thoughts about the power of a branded CEO, even the return of the rock-star like Brand of Shultz (too little too late) can't turn the Titanic around. The Starbucks business model has been off the mark for too long to rely on an 11th hour Hail Mary...