Starbucks – Breaking the Rules

I like this article because I have always been fascinated by Starbucks. Here is a company that decided to come in and charge three times the regular price for what most people thought was a commodity product. Then they expanded without franchising and often put stores so close that they cannibalized sales of other stores. Howard Schultz violated numerous rules about how to run a business, but so far it seems like he was right and the doubters were wrong.

Schultz, of course, has now created an American institution. Starbucks today is possibly the most dynamic new brand and retailer to be conceived over the past two decades. The company's stores—over 7,500 and counting—are everywhere from Omaha to Osaka to Oman. That's a blessing for the company's millions of latte-dependent customers but something of a challenge for Schultz and his team because it raises the saturation question. If Starbucks is already everywhere, how can it keep growing so fast?

"We are in the second inning of a nine-inning game," Howard Schultz says. "We are just beginning to tap into all sorts of new markets, new customers, and new products." Many of Schultz's ideas about how to achieve these are unconventional—like refusing to franchise—but that's the Starbucks way, and millions of us seem to love it. We stream into Starbucks to buy coffee for $1.75 that we used to pay 50 cents for. We drop into our local Starbucks to read on plush couches. We lug in our laptops and hold meetings, and we buy gifts and music there. We load money onto the company's stored-value cards. How unusual a set of customer experiences is that?

That is the key to Starbucks success – customer experience. In a world where it is easy to copy someone's product offering and difficult to compete on price, customer experience is one of the few things left that can make a real difference and add value that a customer is willing to pay for.

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