Last week, Starbucks unveiled its strategy for profitable global growth, having taken approximately US$ 600 million out of costs in since January 2008.
These two years have been eventful. Shortly after Schultz stepped in, Starbucks announced that it would close 600 under-performing stores in the US. That was well before the “financial tsunami”. In 2009, another 200 in the US and 100 globally were identified for closure, and the company also scaled back on its 2009 expansion plan for 200 new stores.
At its shareholders’ meeting last week, Starbucks presented a more confident face, and outlined a return to growth with plans to expand its presence and “accelerate profitable growth in both the U.S. retail business and in key international markets”. (This profitable growth mantra was also recited in last year’s shareholder meeting.)
However, while the business is looking better, it is far from fixed.
The environment is different. Globally, consumer wallets are leaner, competitors are meaner, and Starbucks may yet need to shrink further; the fat ain’t all in the latte.
Yet, there must be much good in the business if, for all its faults, it still gets imitated around the world.
According to Starbucks, it currently has less than 4 percent of the U.S. coffee market with its 6,800 own and 4,400 licensed stores, and less than 1 percent of the global coffee market even with 2,000+ company stores and 3,500 licensed stores. The company sees that as enough headroom to grow.
Schultz has promised to put the tough lessons learned in the last two years to good use. The company currently has approximately 200 fewer stores than it did at the beginning of 2009 even after new store openings during the year. (To put the current number of 16,700+ stores in perspective, the company had a total of “only” 2,600 stores in Q1-2000.)
But there’s something to think about. If the entrepreneur needs to step back in to fix things gone horribly corporate (bland) and wrong, maybe it’s time to acknowledge that there’s a logical limit to the size and scaling-up capability of personalized experience businesses.
Or, as a friend says, scale can be a logical outcome of excellence but excellence is never the logical outcome of scale.
It remains to be seen whether this round of growth will come from the company’s natural strengths or whether Starbucks will return to growth-by-steroids as Schultz eases on the controls.
For someone who loves books and dislikes naming favourites, it’s tough to quickly make a list of only 10 must-read books. There are so many valuable books an entrepreneur can learn from that this list is only a starting point, rather than “the Top-10”. But, then, one of the most important things an entrepreneur can do is to overcome his or her own resistance at some of the most inconvenient times. So here goes!
Good to Great (Jim Collins) – this book delves into some fundamental strengths that entrepreneurs need to seed into their business fairly early. Interestingly some of the companies listed in the book may no longer be called great (a weakness with most management books quoting specific examples), but I believe the principles stand the test of time.
The Tipping Point (Malcolm Gladwell) – some small things do become big. Every entrepreneur and start-up would love to know how and why; Gladwell’s book offers a different perspective – from epidemics to better governance. Much learning for the start-up and the small business owner.
Losing My Virginity & Screw It, Let’s Do It (Richard Branson) – one autobiography is usually enough for most people – trust Richard Branson to not fit into that mould. I’ll count them as one. As an entrepreneur who went from selling records to creating one of the most diverse brands covering airlines to telephone services, Branson will certainly have something for everyone. The books offer a view into his struggles as much as his successes.
The High Performance Entrepreneur: Golden Rules for Success in Today’s World (Subroto Bagchi) – if for nothing else, read it for the first chapter: “How Do I Know if I Am Ready”. Of course, once you’ve gone through that chapter, it is remarkably easy to go through the rest of the book, which offers guidance from Bagchi’s own deep experience as an entrepreneurial manager and as an entrepreneur.
Fortune at the Bottom of the Pyramid (C. K. Prahlad) – who says you have to have millions in the bank and service only rich customers to be a successful entrepreneur? I must admit I came very late to this book, and am yet to complete it, but it is an excellent reference source for case studies of innovative and very large businesses being grown in markets that are typically treated as poor or low value, environments that many Indian entrepreneurs can relate to.
Made to Stick: Why Some Ideas Survive and Others Die (Chip Heath, Dan Heath) – Inspired by the Tipping Point, the Heath brothers describe what it takes to get your ideas across, and make a lasting impact. A must for entrepreneurs looking for funding, to hire great people and keep them motivated, and to capture lasting customer relationships.
It Happened in India: The Story of Pantaloons, Big Bazaar, Central and the Great Indian Consumer (Kishore Biyani) – there are too few books about or by Indian entrepreneurs, so this is one growth story in desi style that many start-ups would be able to relate to. It is not as polished as most other entrepreneurial autobiographies, but valuable nevertheless.
The New Business Road Test: What Entrepreneurs And Executives Should Do Before Writing A Business Plan (John Mullins) – an someone who turned from corporate life to academics and further to being involved with entrepreneurs, Mullins provides a great framework to help the entrepreneur filter and refine his concept of the “next big thing” into a real business.
Venture Capital Funding: A Practical Guide to Raising Finance (Stephen Bloomfield) – while written from a UK and European perspective, it is a valuable reference for anyone looking for external funding. A practical guide to the whys and the wherefores, the jargon and the structures of venture funding written for an entrepreneur.
And last but not the least – pick your favourite philosopher or guide. No matter whether we are overtly spiritual or completely agnostic, there are times, many times in an entrepreneur’s life, when we need to step beyond the intellectual construct of business, look beyond plans and strategies, and next year’s targets. Depending on how you are feeling and what you need at that particular time, this book (or these books) can be versatile in offering you guidance for your next steps, direction to correct your course, or simply a platform to stabilise yourself.
The thing about lists is that even if you find one item on the list that makes a substantial difference to you, the list has been useful. Among the above, I believe you will find more than one that will create such an impact. Happy reading!
[Column written for The Economic Times, 13 November 2009]
A few thoughts that I shared at the Sustainable Fashion Forum (Hong Kong, October 7, 2009):
Most people want to fit in rather than stand apart from their peers, so pushing sustainable or responsible fashion will need time – just like the typical fashion cycle, the first thrust needs to be on the innovators and early adopters (both consumers and companies), before the majority of the market picks up the trend.
We typically talk about the “triple-bottom line” – referring to the benefit to the business (profit), benefit to the environment and benefit to the community. However, I think most sustainability initiatives don’t gain enough traction because there is no bottom-line defined for the “individual”. The questions “how am I impacted?” and “what is in it for me?” need to be answered to really push fashion in the direction of sustainability.
“There is enough on this Earth for everyone’s need, but not for everyone’s greed”. Fashion, by its very nature, lives on obsolescence, so it is pertinent to ask whether “sustainable fashion” is an oxymoron. However, there is some merit in questioning how extreme this sense of forcing obsolescence has become in the industry over the last few decades as companies have sought ever-growing top-lines. The entire industry ecosystem will need to be overhauled for it to become “sustainable”.
The cause of sustainability may be helped actually by the fragmentation of demand that is going on around the world. This fragmentation may be our inadvertent saviour. Since fashion is about the peaking and the decline of specific trends, with fragmentation there are lower peaks, less forced trending, less forced obsolescence and potentially less waste.
There was a mention of the concept of “fast fashion”. There are two aspects to it: one is the more visible rapid-change, low-price retail concept and that would certainly seem to be the antithesis of sustainability. However, there is another side to the fast fashion business model: lean management, efficient product development and reduced waste. The traditional fashion business model and supply chain can’t cope effectively with the fragmented demand and short selling-windows. In the fast fashion supply chain model, with shorter lead times, more time is spent on productive activities and successful products, rather than wasting resources and money in developing designs and flying samples back and forth for products that will get sold at a discount. Such waste would be fatal in the aerospace, automotive and high-tech industries – those industries use tools and processes that have also been available to the fashion industry for the last 4 decades. If fashion companies honestly examine how expensive that waste is, we might start moving towards more sustainable fashion.
Bernice Hurst, Contributing Editor, RetailWire mentioned the “Let Children Grow” campaign in the UK jointly promoted by The Independent on Sunday newspaper and the highly respected gardening charity, the Royal Horticultural Society (RHS). Launched in 2007, the RHS Campaign for School Gardening, sponsored by the food and grocery retailer Waitrose, is a nationwide scheme designed to encourage schools to create gardens and teach children the skills of growing plants.
It is described as “an ambitious initiative to encourage the nation’s children to grow their own fruit and vegetables”. The programme targets deprived areas, particularly those with combinations of poor health, low income and levels of aspiration. By working with young people, the idea is to improve their health while teaching them what to eat and where food comes from. RHS research suggests it can “help improve academic achievement, behavior and confidence among pupils”.
According to the Independent on Sunday, most of the children “are learning for the first time about gardening, and with it the enjoyment of fresh air, appreciation of the environment, healthy eating and in turn the prospect of a longer life.”
Bernice Hurst asks, “Can/should retailers encourage and sponsor such education programs to inspire consumer loyalty?”
As far as I can tell, if there is a country in love with its gardens, it is the UK, so this should be a hit with the parents and the teachers.
Pre-teens certainly don’t mind getting dirt under their fingernails, so it should appeal to them as well.
Whether this has any tangible impact on Waitrose’s image and business remains to be seen but, then, some things should simply be done because they are the right thing to do.
The Austin American-Statesman asks: Is a purpose-driven company more likely to profit? The idea is that, no matter what product or service you are selling, successful companies often have a deeper purpose beyond making a profit.
It’s a moot point or loaded question or just a load of [fuzzy-thinking], depending on your point of view. We’re likely to get sucked into a debate about whether businesses should just focus on business (i.e. making money) or should they be governed by a “higher” purpose than that.
Someone wise once wrote: we need to break away from the tyranny of “or.” Having a purpose beyond making money, and making money are not two diametrically opposite directions for a business.
Focusing only on profits gives us scenarios such as we’ve had with the banks in the last year. There is no end to greed, and a business that is solely focused on increasing its own revenues and profits essentially becomes a dysfunctional member of civil society.
On the other hand, a business that is not focusing on making profits and only follows some other “higher calling” is on the expressway to the business graveyard, taking the higher purpose along with it.
I think the principle of enlightened self-interest works for businesses as well as it does for individuals.
