Fixable
Unsolicited Advice: Can Starbucks get their order right?
May 15, 2024
[00:00:00] Anne Morriss:
Hello everyone. Welcome back to Fixable. Today we are bringing you our second installment of Unsolicited Advice, our occasional segment where we indulge our inner meddlers and tell a company that hasn't asked for it what we think they should be doing differently. Last time that company was Boeing. This time, that company is Starbucks.
[00:00:23] Frances Frei:
Oh, Seattle's gonna hate us.
[00:00:25] Anne Morriss:
Yeah, Frances. Attention is the currency of love.
[00:00:30] Frances Frei:
Oh, Seattle's gonna love us.
[00:00:31] Anne Morriss:
Yeah. Alright, so here's what's happening. In the past few weeks, shares of Starbucks have dropped sharply after the company reported a significant slowdown in visits to its stores in both the US and China.
Its two biggest markets. And lower than expected sales and profits over the last quarter. So from a performance standpoint, things are officially not going in the right direction. And everybody seems to be very worked up about this.
[00:01:03] Frances Frei:
If only that's how the world responded to Boeing back in the day. I love that the world is worked up.
[00:01:09] Anne Morriss:
Yeah, I love that the world's paying attention. And I thought about that too. Um, thinking about this episode, I think part of it is that. We all have this very direct, very personal relationship with Starbucks. We all have our special order. We've all been on this company's truly unbelievable ride as it reshaped our relationship with coffee, with breakfast.
[00:01:34] Frances Frei:
Mm-hmm.
[00:01:35] Anne Morriss:
With going outside and gathering in this third place that wasn't home, it wasn't the office. All of this was huge. And all of us in the chattering class right now have been doing it with a cup of something branded Starbucks in our hands. I'm your host, Anne Morris. I'm a company builder and leadership coach.
[00:01:58] Frances Frei:
And I'm your co-host Frances Frei. I'm a professor at the Harvard Business School and I'm Anne's wife.
[00:02:04] Anne Morriss:
On this show, we believe that meaningful change happens fast. Anything is fixable and good solutions are usually just a single, brave, conversational way.
[00:02:23] Frances Frei:
You know when Starbucks first took over as the third place, I used to teach a case on it, and.
[00:02:30] Anne Morriss:
I remember that.
[00:02:30] Frances Frei:
The part of the case that might have been the liveliest part of the entire semester when I was teaching was when I would ask people what their order was at Starbucks and people would just reveal so much about themselves when we would ask the very simple question of, what's your order at Starbucks?
[00:02:51] Anne Morriss:
Well, as you know Frances, I am a simple woman with simple needs. I'm a simple cup of coffee or a latte. If I'm gonna indulge. But if I recall, you reveal your true diva nature with your Starbucks order.
[00:03:08] Frances Frei:
Which makes me not alone, but yes, I'm a tall non-fat latte with an extra shot.
[00:03:15] Anne Morriss:
Oh yeah. So many.
[00:03:16] Frances Frei:
And.
[00:03:16] Anne Morriss:
Extras.
[00:03:18] Frances Frei:
Yeah. And then there's also caramel that gets added into their and things of that nature.
[00:03:22] Anne Morriss:
Yeah, I won't make you reveal all of it.
[00:03:25] Frances Frei:
I appreciate that.
[00:03:26] Anne Morriss:
To our audience. Okay. So in response to this unexpected performance hiccup, Starbucks leadership, the, the people who are currently on the payroll have essentially said that they've got this, they're gonna reduce wait times, they're gonna keep innovating with the menu.
They're gonna try to get people into the stores at all hours. They're gonna do a bunch of back of the house work to make sure that products are available at peak times, that the baristas can actually do a job that seems to get harder by the day. It's reasonable stuff.
[00:04:00] Frances Frei:
It is, except that as I recall, the reason that unions came in and the reason that one of the big challenges they had in the past is that they were asking the baristas to do too much, and this sounds like more too much there.
[00:04:17] Anne Morriss:
There’s a long list over the past couple weeks that the company has uh, officially issued in terms of the action plan. There are some things in there to make the baristas job easier, and you're correct. The fact that this job got so hard as this menu expanded was one of the factors behind this now years long unionization effort, which has also been a source of pain for the company over the past few years, for sure.
Okay, so here's the final twist in the story, and then we're, we're gonna get into it. So the company's iconic founder and former CEO, the great Howard Schultz, who is not currently on the payroll, but who has of course left and returned to his job multiple times, has now jumped into this conversation and taken the unusual step of offering his very own unsolicited advice to his third swing at a successor, CEO, Laxman Narasimhan via a LinkedIn post.
So we're not gonna get into the content of the post deeply. It's still up, listeners you can check it out yourself. He offers some, I would say back to basics advice about, you know, leadership, spending more time in stores and focusing on what he calls Coffee Forward Innovation.
[00:05:38] Frances Frei:
And you know about Howard's message to Laxman because he posted it on LinkedIn.
[00:05:46] Anne Morriss:
Yeah. I feel like at this point we're on a first name basis. Yes. He posted. All of this on, on LinkedIn.
[00:05:52] Frances Frei:
Do you wonder as, I wonder, did he not have Laxman's phone number?
[00:05:56] Anne Morriss:
Yeah. So that's where I wanna start this conversation. Okay. Because we've seen this happen at other organizations to recently former CEOs, certain former university presidents offering very public critiques.
And I would say Howard was gentle. Um, but it's quite a public critique of their successors' decision via social media. So, what's happening here and is there not a better way to handle succession?
[00:06:26] Frances Frei:
Uh, there's a much better way to handle succession. We post to social media when we have no other means of getting in touch with people.
And so it makes sense if I'm an.
[00:06:37] Anne Morriss:
It's a great punching up technology that's been invented. It's in our generation.
[00:06:41] Frances Frei:
Unbelievable. It's unbelievable and can end up being very helpful, but the punching down or punching forward seems like a very odd use of it. So, if Howard really wanted to help Laxman, would he make his advice public?
Because then people can just say, well, did Laxman follow the advice? Did they not? Yeah. So he's actually just complicated Laxman job. Right? It's just really difficult to wonder why he's doing it.
[00:07:11] Anne Morriss:
Yeah. This founder to successor, CEO handoff. Is really difficult under the best of circumstances. Successors of longstanding CEOs typically have shorter tenures, worse financial performance.
They're often forced out relatively quickly. You know, a, a third to a half of new CEOs fail within their first 18 months. And again, this is not his first rodeo trying to set a successor up for success. This is the time to be part of the solution to do everything in his power to create the conditions for this guy to succeed wildly.
And it is a signal that the comp, this system as a whole is not creating those conditions. I mean, Schultz is a huge, whether he is on the payroll or not, whether he is official role or not, he's a huge part of, of this company's ecosystem, and he and the company have an obligation to be deeply thoughtful about how to use that informal power to set the organization up for success in this chapter.
[00:08:16] Frances Frei:
And I think that it's probably tempting in the middle of the night.
[00:08:20] Anne Morriss:
Don't ever do it.
[00:08:22] Frances Frei:
Don't post it.
[00:08:22] Anne Morriss:
So, that's where I wanna start this conversation 'cause we've seen this happening in other organizations too. Former CEO, certain former university presidents offering public critiques of their successors decisions via social media.
Is there not a better way to h handle what can be an awkward position, but of, of looking at this former company that you've led and pitching advice via social media?
[00:08:49] Frances Frei:
Yeah, in fact, I, I guess the first part of our unsolicited advice is to Howard Schultz and all of his friends, which is when you wanna communicate with your successor and you have their cell phone. Call them.
[00:09:02] Anne Morriss:
Yeah.
[00:09:03] Frances Frei:
And try to resist making a public document of a private conversation because it's really hard to imagine that that's gonna help.
[00:09:11] Anne Morriss:
Yeah. It doesn't feel like, uh, it, it feels like a disingenuous investment in, in your successor's success. Um.
[00:09:19] Frances Frei:
We have a phrase when is help helpful? Not here.
[00:09:21] Anne Morriss:
Yeah. Yeah. So I wanna get into the heart of this conversation, which is, what should Laxman do now?
[00:09:29] Frances Frei:
Oh yeah.
[00:09:30] Anne Morriss:
You know, you're, you're running this company, you just had a rough quarter. Your iconic founder is throwing shit at you from the cheap seats. Um, and I wanna frame it, you and I have this five day plan for solving problems, and I wanna start this conversation, which, what day do you think we're on at, at Starbucks?
But can you just give a very quick overview of the five days?
[00:09:54] Frances Frei:
Yes. So it goes Monday through Friday. Monday is identify the real problem.Tuesday, solve for trust Wednesday, make new friends Thursday, tell a good story. And Friday and only Friday, go as fast as you can.
[00:10:09] Anne Morriss:
Okay, so let me go back to the question. What day are we on at Starbucks?
[00:10:15] Frances Frei:
From my perspective, I think we're on Monday because it's not clear to me that they know which problem they're solving.
[00:10:22] Anne Morriss:
Mm-hmm. What, what's your evidence that it's not clear with the problem they're solving?
[00:10:26] Frances Frei:
Um, well, for example, are is the barista's job too complicated or are the baristas not doing enough?
[00:10:32] Anne Morriss:
Mm-hmm.
[00:10:33] Frances Frei:
Because some of what they're doing suggests that they wanna simplify things for the barista, and some of what they're doing is trying to add tasks to what the barista can do. So it just feels like there of mixed minds about the barista as the central protagonist.
[00:10:47] Anne Morriss:
Yeah. There, there's a new summer menu coming. There's bubble tea on the menu. There are energy drinks.
[00:10:53] Frances Frei:
Which implies there's slack in the system for baristas, if you're gonna be able to put all of that in.
[00:10:59] Anne Morriss:
Yeah, there was an astonishing uh, statistic. I think Financial Times did some reporting that there are more than 170,000 ways to customize Starbucks drinks.
[00:11:10] Frances Frei:
It just feels like a lot.
[00:11:11] Anne Morriss:
It feels like a lot.
[00:11:12] Frances Frei:
Alright.
[00:11:12] Anne Morriss:
Yeah. So I was with you on Monday when I was kind of listening to people debate this because certainly there's no theory of the case that the world agrees on. I think the company actually does have a point of view here. I think they're running a whole bunch of experiments.
[00:11:30] Frances Frei:
Well, that's a good Tuesday sign.
[00:11:31] Anne Morriss:
I have to imagine a company this sophisticated is involving the right people in designing tho and testing those experiments.
[00:11:41] Frances Frei:
Which would be baristas and customers and suppliers.
[00:11:44] Anne Morriss:
Yeah. The, the like Chinese Gen X consumers.
[00:11:48] Frances Frei:
Yeah. Yeah.
[00:11:48] Anne Morriss:
You know, my guess is this is a sophisticated company who's doing all of these things.
[00:11:52] Frances Frei:
Okay. Okay.
[00:11:53] Anne Morriss:
And I am operating with a little bit of faith here.
[00:11:56] Frances Frei:
Yeah.
[00:11:56] Anne Morriss:
But just when I look at how thoughtful they're being about the list of things they're doing right now. In response to the street being kind of so shocked by what happened. From my perspective, we're now at Thursday, which is storytelling day, and this brings us back to Howard because he's such a powerful protagonist.
[00:12:15] Frances Frei:
Oh yeah.
[00:12:16] Anne Morriss:
In the company. And clearly he's got some time on his hands. Right.
[00:12:21] Frances Frei:
So let's wait, let's, let's make Howard a useful engine. Wow. You're a kinder person than I am. I'm ready to just.
[00:12:29] Anne Morriss:
Yeah.
[00:12:29] Frances Frei:
E evict Howard.
[00:12:30] Anne Morriss:
Because, because I want us to honor the glorious pass.
[00:12:33] Frances Frei:
No, you're right. You’re right.
[00:12:33] Anne Morriss:
Of this company. And the question always on Thursday is what's the clear and compelling change mandate?
Well, they just got a gift right? In, in terms of the performance over the last court, and everyone's leaning forward.
[00:12:46] Frances Frei:
Everybody's listening, so they can tell a story now.
[00:12:46] Anne Morriss:
Everybody listening, so there's this compelling change mandate that has fallen in their lap. And I think that's what Laxman's job right now is. What's the rigorous and optimistic way forward?
What I wanna do is pull out the kind of wartime CEO inside this guy and have him get out there with a bullhorn, tell us the direction he's going. I think the story is there. He's just gotta get out there and, and tell it.
[00:13:13] Frances Frei:
I'm, I'm totally intrigued by that. And then I guess with Howard's missteps, because we have to honor the past, we can show Howard what Howard should have done.
[00:13:23] Anne Morriss:
I mean, he's still wearing the team jersey.
[00:13:25] Frances Frei:
Yeah.
[00:13:25] Anne Morriss:
And, and you can have Howard as a lone wolf wandering around, um, and butcher the metaphor, banging into things. Or you can kind of re recruit him to tell the story of the company in this chapter of its history. I think there's something here about the relevance and branding of this company.
It's playing as a very corporate, this is the, the man now serving you coffee. And I think the other beautiful thing about HH Howard as part of the storytelling challenge is, is here's this like living, breathing, human being who did this extraordinary thing, invented a whole fucking industry and, and changed our lives.
And in the recent past, there's been this tension between people working at Starbucks and the people building Starbucks and the people walking into the store. And I actually think in this beautiful storytelling moment, there's a chance to bring the humanity of all three of these together to talk about, okay, what is Starbucks now?
What does it stand for? Where is it going? And what is the, as we always say, the rigorous and optimistic way forward.
[00:14:35] Frances Frei:
So what does it look like to have a rigorous and optimistic way forward here?
[00:14:39] Anne Morriss:
So, I go back to your research on the power of co-production in a service setting, and the company has these very deep roots of understanding that it's, it's not just a transactional service where the, the customer just receives the value that the company's creating.
In fact, that experience is, is created together. But you, you'll, you'll be able to explain this better.
[00:15:04] Frances Frei:
No, I, I, I like that very much. That what we think about is that when you can co-produce the experience with the customer. And the experience is better for the customer as a result. That's gold.
[00:15:17] Anne Morriss:
Yeah.
[00:15:18] Frances Frei:
So we don't wanna offload work to the customer that the customer resents doing like self-service gas.
[00:15:24] Anne Morriss:
Yeah. Or, or self-service checkout.
[00:15:25] Frances Frei:
Or self-service. Service check. Oh, that's really painful. Are there ways in which we can get the customer involved that the quality goes up? Maybe the efficiency goes up, the experience goes up. And so if we look back at the earliest days of Starbucks, they offloaded some of the complexity of all of the orders that the barista had to remember by they cut us as customers to think really hard about how we were gonna order, so we were ordering by ingredient, we were thinking about getting the sequence correct and we were using their made up language.
[00:15:59] Anne Morriss:
Yeah. Their freaky made up new language. And tall is small.
[00:16:03] Frances Frei:
Yeah. And here's the thing that's amazing. Every time we got it right, we felt better about ourselves.
[00:16:10] Anne Morriss:
It was a delightful experience.
[00:16:12] Frances Frei:
That's what we wanna do with co-production. So are there ways that we can involve the customer to have the customer co-produce an even better experience for the customer? And what's a beautiful thing about that is the baristas will go back to feeling like heroes again.
[00:16:27] Anne Morriss:
Yeah. And, and so what's different in 2024? One of the things that's different is that we have this incredibly powerful tool in our pockets, which is our phone. So our capability in that interaction goes up dramatically. And now we're talking about AI tools for the baristas. So their capability goes up dramatically.
So this customization pain, that's a burden that can be shared a across this whole system in a new way. Like we are living through an epidemic of, in our language, empathy wobbling. Right. So we go through the world.
[00:17:07] Frances Frei:
Yes. Yes.
[00:17:08] Anne Morriss:
Right? Yes. Experiencing these nicks and bruises to our humanity.
[00:17:12] Frances Frei:
Yeah.
[00:17:12] Anne Morriss:
With most of our interactions and here is a company with the, the incredible assets of these stores, this workforce that is motivated to interact with people, these impeccable values, this culture that really wants to put people first. So, it is positioned to deliver empathy at scale in a way that I think few other organizations are right now.
I mean, I disagree with Howard that empathy can only show up in the form of a cup of coffee, like bring on the summer menu, right? It can show up as bubble tea. It can show up as a gorgeous blueberry muffin. And by the way, I need empathy at every hour of the day. So, I think all the experiments as companies running and keeping the doors open and figuring out how to be of service to the world, not just during peak coffee drinking hours from seven to nine in the morning, that's a moment of opportunity and empathy.
And then it brings me back to the, so how do you tell the story? So, you have to be really clear, and particularly if you're in the empathy business, it has to honor all of the human beings in this ecosystem. But we don't get there unless we honor everybody's humanity in the story. Customers, employees, baristas, consumers.
Like, you gotta just be part of the village.
[00:18:33] Frances Frei:
I love it. Yeah. I, I love it because the technology, both the fact that we're carrying the supercomputer around in our pocket now and the advances of AI, let's use those so that Starbucks can pour empathy into us every time we walk into the store. And, you know, when I walk into the store, something is radiating who I am.
I shouldn't even have to announce who I am.
[00:18:56] Anne Morriss:
You don't anymore.
[00:18:53] Frances Frei:
Yeah. So.
[00:18:57] Anne Morriss:
These tools now know it.
[00:18:58] Frances Frei:
And that my order is gonna be done in one minute and 32 seconds. So, even the notion of standing in a line is very old fashioned and really shows that you're not in control of the technology. So, there's so many things that we could do, and what I love is that we would be putting the barista back as the center of the story and they're the ones who are delivering empathy.
[00:19:20] Anne Morriss:
Yeah. To your point, I might have ordered online. I might be walking in thinking it's gonna be this very transactional moment, but you actually spark joy somewhere along the way.
[00:19:31] Frances Frei:
I thought coffee was at the center of Starbucks, but what you're saying is in 2024, empathy is at the center of Starbucks. And that is certainly an optimistic way forward.
And that would honor the baristas. I mean, they've been paying for education before anyone else was paying for education for their frontline workers. Like this is a mission driven company. So that would make sense.
[00:19:54] Anne Morriss:
And then, but then they put them in an impossible job.
[00:19:56] Frances Frei:
But then they put them in an impossible job.
[00:19:58] Anne Morriss:
Yeah.
[00:19:58] Frances Frei:
But we can use technology to make it possible and get the customer involved in it. The story would tell itself. I like to say, as a, as somebody who doesn't write.
[00:20:10] Anne Morriss:
And yeah. And then of course our message is always going to be to do this with a sense of urgency. The earnings report is a gift. I think Howard, keeping the story alive is a gift.
I think it's created the tension for Laxman to take a really big swing. But he needs a story and he needs a lot of clarity and rigor and optimism about where this company is going and what business is it in in 2024.
[00:20:36] Frances Frei:
And one of the reasons we have that you can solve hard problems in a week, it might be more than a week, but he doesn't have a quarter or six months or a year.
And so the time to act is when you have the world's attention. It turns out we would now listen to the story and for sure the world is, is hoping that it will work out because they were such a delight to so many of us. I'm really now quite enamored with the idea that it's empathy at the center of their story, and then let's figure out how they pour empathy into us again.
[00:21:10] Anne Morriss:
All right. Thanks for listening, everyone. That's our show. If you wanna figure out your workplace problem or you want us to just also offer advice from the chief seats, that's what we do here at Fixable. Send us a message. Email us at [email protected] or call us at 2-3-4-FIXABLE. That's 2-3-4-3-4-9-2-2-5-3. Or just shoot us a text.
[00:21:32] Frances Frei:
We'd love to hear from you.