Bean Counters No More: Starbucks Finding Success by Thinking Local

Starbucks is doing well by reviving a start-up approach.



One of The Onion‘s more memorable headlines was written way back in 1998: “New Starbucks Opens in Restroom of Existing Starbucks.” It’s funny because it may as well be true. There was a time when the ubiquitous green giant was opening new and identical outposts at a whiplash rate–the Seattle-based chain introduced 2,571 new locations in 2007 alone–and even sneaking in a few non-Starbucks secret Starbucks locations for giggles.

But soon after Starbucks experienced its first ever quarterly sales dip, its feisty founder Howard Schultz returned to his CEO post in early 2008 and made immediate changes. He slowed the pace of expansion, cut over 3,000 positions around the world and attempted to revive a start-up attitude that had been dormant for many years. Part of that effort included busting new stores out of a tired mold, both in terms of design and bean selection. New Starbucks coffee shops were encouraged to deviate from the aggressively middlebrow, overwhelmingly beige look that had become associated with the company. (One shop in the Capitol Hill area of Seattle even began featuring–gasp–live music.) Buyers were allowed to purchase from smaller, more local bean providers. Even the names might be changed–Seattle’s Roy Street Coffee and Tea is actually just a Starbucks in hipper clothing. The customer, Shultz pledged, would once again be king.

So far all this change is working. Yesterday the caffeinated corporation announced that first quarter income was up from $64.3 million a year ago to $241.5 million this year (the holidays are counted here). Revenue hit $2.7 billion, up 4% and the all-important same-store sales figure also increased by 4% from a year ago. The company’s stock may be well under it’s 2006 high of about $40 a share but it is worth almost three times what it was a year ago, at $23 and change.

Starbucks is not the only large company going back to basics. Buried deep in a lengthy analysis of NBC’s recent woes last weekend was news that the peacockers plan to produce 20 new pilots this year versus the 11 they made last year. That is, in part, due to the desire of NBC Universal Chairman Jeff Gaspin to return the network to its glory days of the 1980s and 90s when it churned out hit after prime-time hit. “I’m not trying to reinvent right now,” Mr. Gaspin said. “I’m really going back to basics.”

There are plenty of lessons to be found in the trials and new directions of both Starbucks and NBC. Perhaps the most poignant one is this: while globalization and new technologies make rapid expansion and fiddling with the formula attractive, sometimes the best thing a business can do is stick with what works. Be that television shows or a cup of coffee. And then making those things better.

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