Wednesday, November 2, 2011 - Reinventing their Business Model?

On my daily Starbucks run I picked up a small newspaper headlined “Visibly Indivisible: This Country Needs Jobs.” It outlined a new initiative Starbucks is working on to help create jobs in America. They are working with the Opportunity Finance Network, a group of community lending institutions that provide financing for community based businesses, on this initiative called “Create Jobs USA”. The idea is that Starbucks will sell $5 bracelets in all their domestic retail stores and online and all proceeds will go to a nationwide fund for small business loans. Any and all businesses as well as non-profits can apply for these loans. The Starbucks Foundation donated the first five million dollars and intends for proceeds from the bracelets to grow the fund further. This is an example of how Starbucks uses the balanced scorecard approach well, and manages to stay innovative enough to reinvent its business model.
Starbucks aims to be a series of community coffeehouses across the United States; it works to have each store be tailored to its particular location. Its mission touts the importance of global responsibility, which it defines as, “conducting business in ways that produces social, environmental and economic benefits for the communities in which we operate and for the company’s stakeholders.” It is this business model and the focus on this long term goal that allows Starbucks to be successful despite the fact that its competitors have cheaper prices. McDonalds and Dunkin Donuts both offer coffee and espresso based drinks at cheaper prices than Starbucks; however Starbucks manages to maintain its customer base by being more socially responsible and more innovative. I think you could say that Starbucks defined “the need for America to do better” and “Americans helping Americans” as its CVP. Its model therefore draws customers in on the basis that they can help the country and be socially responsible by going to Starbucks. If you buy a bracelet you are helping the country. If you go into Starbucks and buy a bracelet, it is unlikely you are then going to walk to McDonalds to get your morning cup of Joe. OFN becomes a key resource as does buy-in from other small businesses. Key processes seem to be the way that Starbucks ties these initiatives into their stores and products, like they did with Ethos their bottled water company whose proceeds go to water sanitation efforts globally. They maintain their profit model but hook customers on a different angle. I wonder if this counts as reinventing their model? This is an idea I am still exploring, but leads me to wonder where corporate responsibility and social enterprises can use values to reinvent their business model. Can companies define customer value propositions that differ from their product line and be successfully in reinventing their business model?

Starbucks’ use of this goes beyond CreatejobsforUSA, they have had a long standing partnership with Project RED and the ONE Campaign, and their bottled water, Ethos. This is another step in a series of initiatives that Starbucks has. It seems to be the way CEO Howard Schultz has reinvented its business model, staying true to its mission while maintaining strong earnings.

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