Tuesday, April 5, 2011

Capitalizing on Capabilities (EMiceli blog 3)

Capitalizing on Capabilities (EMiceli blog 3)

Reference Article: Talevich, Tim. (2011, April). The big four-oh. The Costco Connection, Volume 26 Number 4, 30-33.

In 2008, Howard Schultz announced to his company, Starbucks that he was returning to his CEO position after an eight-year hiatus. When he left, the company was in good shape: Starbucks stock was at $40 per share and there were 12,440 stores worldwide. During his absence, his company began to experience trouble. For example, competition from Dunkin’ Donuts and other fast-food chains were entering the market with their new coffee products. In addition, Starbucks had been such a fast growing company that growing pains were now taking their toll. The infrastructure of his company, that is, the management team and employees were not prepared and trained strong enough to execute Starbucks business plans. Schultz announced to his employees in 2008 that, “We have to find and bring the soul of our company back, find our voice.”

Upon his return to CEO, how did Schultz fix his company’s problems? Within two-years of his reprised CEO role, Schultz and his management team reviewed, analyzed and repaired what Ulrich and Smallwood called in their Harvard Business Review article, Capitalizing on Capabilities, “key tangible assets”: talent, speed, shared mind-set and coherent brand identity, accountability, collaboration, learning, leadership, customer connectivity, strategic unity, innovation, and efficiency. Starbucks assessed three of the 11 “key tangible assets” and made the necessary business changes in the hopes of raising the stock price again to $40 per share. For example, a major problem was that customer traffic had hit an all-time low in the stores, so Starbucks combined customer connectivity, innovation and efficiency to bring back the customer to the store and spend. They reached out to their customers by again grinding their own coffee beans as they had done earlier in the company history. They had stopped this grinding process to save money and time. Also, they developed a new product line called Via, which was the company’s first instant coffee. And, “the company is also trying out new concepts, such as serving beer and wine in some stores after 4 p.m. and has launched a mobile payment system.” Finally, this past January, the company began experimenting with a new logo: STARBUCKS.

As Talevich concludes in his article, “Perhaps none of this thinking would be taking place if Starbucks hadn’t suffered its perfect storm. If forced the company to examine its values and return to its roots: innovation and pleasing customers. Schultz says he’s most pleased that Starbucks was able to right its course without compromising it cornerstones, rejecting suggestions to buy lower-quality coffee or eliminate healthcare for part-time workers. It found and eliminated a corporate hubris that was leading to disaster.”

Question: Without the leadership qualities of Schultz (who happens to be one the company’s owners) could these changes have been made so effectively and rapidly by some other leader?

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