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 / Summer 2008 / Issue 51(originally published by Booz & Company)


Starbucks and the Power of Story

Corroborative Detail
In business, the value of a good story is fully realized only when the promise of the tale is met. Starbucks has spun a good story, but its credibility comes down to developing the operational capacity to back it up. And here’s where the company has developed hardware as robust as its software. In the world of retail, where execution counts for so much, Starbucks has managed, for nearly four decades, to maintain premium product quality while attracting and training motivated employees without faltering on its aggressive growth strategy. The company has corroborated its story through terrific execution.

To see how the company has done so, we can tap into a handful of excellent books from former Starbucks executives: Built for Growth, A New Brand World, and John Moore’s Tribal Knowledge: Business Wisdom Brewed from the Grounds of Starbucks Corporate Culture. Whereas the last two share insightful lessons about marketing, the principles in Arthur Rubinfeld’s Built for Growth (written with Collins Hemingway) are worth focusing on.

Rubinfeld, who led Starbucks’s growth from 100 to nearly 4,000 stores, shares a sharp set of ideas and practices that help explain how the company grew so fast with such little resistance. If the public face of the company was a friendly, welcoming environment of great coffee and a supportive community, the brains in the back were executing a detailed plan with discipline and imagination. Rubinfeld brought to Starbucks a background in architecture and real estate development that enabled the young company to follow a dynamic growth plan.

Rubinfeld reinforces Schultz’s argument about the need for a company to establish and articulate a core set of values. Yet his book delves far more practically into the way such a sense of purpose informs the daily processes of opening and operating new stores. “A retail brand comes down to the overall experience of the customer in the store, of which product quality or value is only one part,” Rubinfeld explains.

He shares numerous insights about how Starbucks achieves its hypergrowth. On the one hand, the company uses a sophisticated demographic analysis to guide site selection. On the other hand, it blends this careful analysis with street smarts — siting stores on the side of major avenues where drivers are more likely to make a turn, and even searching out parking lots with many oil stains because that indicates heavy traffic. In everything from budgeting new store openings to clustering new outlets for brand awareness to systematically breaking into new markets, the company is tactically superb.

Built for Growth, which draws from Rubinfeld’s Starbucks ex­perience but includes other experience, does a great job of presenting a systematic approach to growth that should help one make smart choices. The key is to have a mix of the sacred and the profane — growth guidelines that are articu­lated with enough clarity to guide key decisions, yet loose enough for individuals to adapt and personalize them to their unique settings. For Starbucks, for example, this means designing a “vocabulary” of store icons enabling new store managers to select fixtures and signage that are consistent with the growing brand yet mindful of the unique site.

It’s exactly this tension between sticking closely to rigid formulas and remaining responsive to current conditions that will dictate the next round of Starbucks stories. Schultz himself identified the challenge 10 years ago by saying that “one of the greatest responsibilities of an entrepreneur is to imprint his or her values on the organization.” Recently he shared a memo expressing his concern that the company risks drifting from its original spirit.

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Starbucks Resources
Works mentioned in this review.

  1. Scott Bedbury with Stephen Fenichell, A New Brand World: 8 Principles for Achieving Brand Leadership in the 21st Century (Viking, 2002), 240 pages
  2. Karen Blumenthal, Grande Expectations: A Year in the Life of Starbucks’ Stock (Crown Business, 2007), 309 pages
  3. Taylor Clark, Starbucked: A Double Tall Tale of Caffeine, Commerce, and Culture (Little, Brown, 2007), 297 pages
  4. Michael Gates Gill, How Starbucks Saved My Life: A Son of Privilege Learns to Live Like Everyone Else (Gotham Books, 2007), 265 pages
  5. John Moore, Tribal Knowledge: Business Wisdom Brewed from the Grounds of Starbucks Corporate Culture (Kaplan, 2006), 252 pages
  6. Phil Rosenzweig, The Halo Effect — and the Eight Other Business Delusions That Deceive Managers (Free Press, 2007), 260 pages
  7. Arthur Rubinfeld and Collins Hemingway, Built for Growth: Expanding Your Business around the Corner or across the Globe (Wharton School, 2005), 268 pages
  8. Howard Schultz and Dori Jones Yang, Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time (Hyperion, 1997), 358 pages
  9. Leonard Sweet, The Gospel According to Starbucks: Living with a Grande Passion (Waterbrook Press, 2007), 222 pages
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