Editor’s note: This article was first published in December 2014; its Starbucks figures, such as more than 21,000 stores in 65 countries, over 3.5 million Instagram followers and coffee costing over $4, and its growth outlook are from that year. Schultz, then chairman and CEO, has since stepped down and returned more than once.
On the face of it, Starbucks’ business is coffee. Since its first store opened in Seattle in 1971, the company has never stopped growing, and today it is the fastest-growing company in the United States.
It has more than 21,000 stores in 65 countries around the world, according to figures from Inc.com, and despite the crisis that has hit the planet in recent years, Starbucks has kept opening stores. Nothing suggests that the company’s pace of growth is likely to slow in the short or medium term.
So what are the keys to the success of Starbucks, a company with a product as simple as coffee?
Howard Schultz, its chairman, has proven to be a brilliant businessman whose vision, not just for business but also for leadership, has made the company’s success all but inevitable.
Schultz passed the business owner’s acid test when he had to face one of the biggest crises inside the company. He told that story himself in his book Onward: How Starbucks Fought for Its Life without Losing Its Soul, where he explains how he fought for his company without giving up its values and principles toward its employees and customers.
1. Starbucks takes care of its people, and its people take care of the customer
Starbucks is among the most inspiring companies for social initiatives. Howard Schultz knows that most of his employees won’t retire with the company, because many are college students who are only passing through. And the company pays for college for many of these employees. Schultz wants them to have reasons to feel motivated and grateful to work there.
That said, anyone who wants to build a career at the company also gets the chance. As Tom Peters put it, everything starts with taking care of your people; they’ll take care of the rest of the business chain.
2. Have a mission
Starbucks has a clear mission: “To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.”
This mission hasn’t changed in the company’s 40 years, because the company is more than coffee. Starbucks stores have become an escape for anyone who needs a break from their daily routine. They’ve become a meeting place for friends and families, and where businesspeople get together. “Whatever your age, profession or location, at Starbucks you have a place to relax, work and socialize.”
3. Starbucks launched a high-risk strategy, and it paid off
Starbucks didn’t focus on demographics or foot traffic patterns, or on where its competitors were. In fact, in major cities you can see a Starbucks on every corner, with no regard for the distance between its own stores. It was a very risky strategy, but in this way Howard Schultz boxed out the competition.
Any entrepreneur can try to compete with a Starbucks location, but few are crazy enough to open a café surrounded by four Starbucks within a few blocks.
This strategy is very similar to the one followed by Amancio Ortega of Inditex, who decided that his own brands would compete with each other, filling city-center streets with different stores belonging to the same group but under different brands. And both have shown that the strategy is profitable.
4. Innovation
Starbucks is a company that seeks to stay true to its principles and roots, but that hasn’t stopped it from keeping a close eye on innovation. The company didn’t want to fall behind on technology, so when it realized that customers wanted to spend more time in its stores, it was quick to offer them free Wi-Fi.
See also: Richard Branson’s 10 best tips for success in business and life
In the same way, it soon realized that many people don’t want to stay in the store and only want to take their coffee away. Today, takeaway coffee is a very important part of the company’s profits. The company also already lets you pay with your phone through an iPhone app. In other words, you can stay true to your roots while adapting to change and using it to your advantage.
5. Using social media
Communication through social networks has played a very important role for Starbucks in this new technological era. On its Instagram account, the company has more than 3.5 million followers.
Starbucks has told its brand story through this network, not only by promoting photos of its products but by sharing the company’s passion through images of its customers and their most special moments.
6. Small details matter
Howard Schultz is very clear that small details matter a great deal to customers, and that saving money in the business shouldn’t always come first if those savings could tarnish your image.
When the company’s accountants told Schultz he could save a lot of money by buying a cheaper kind of toilet paper, Schultz rejected the idea, because it would have broken the brand’s image of “affordable luxury.” A coffee at Starbucks can cost more than $4, so if you don’t look after the small details, customers may find that price very hard to justify.
7. The right synergies
Although the word “synergies” is badly overused these days, Schultz is very clear that synergies with the right partners can be very profitable. For example, the company partnered with a firm so it could serve its products in bookstores across the country, since there’s nothing better than reading a book with a cup of good coffee.
See also: Kevin O’Leary’s 10 lessons for business success
More recently, the company teamed up with Apple in an alliance to improve the coffee experience, which lets people buy on iTunes the songs they hear at Starbucks.
8. Be consistent
For Schultz, consistency is the best way to build loyal customers. If you’re consistent in the quality of your service and your product, customers will always be there.
(Read: 3 physical traits associated with great business leaders)
9. Don’t lose sight of your mission
Schultz writes in his book that in 2007, when the company was in trouble, he saw that it had lost its way. For some time the company had been focusing only on profits, as if profits were its reason for being, when that really wasn’t its chairman’s vision of the business. The business had to focus on exceeding customers’ expectations, and that way, the profits would come.
That was when Schultz organized a conference for 10,000 of the company’s managers, where they talked about inspiring employees and the importance of smart leadership. After that conference, things began to be done differently, and only five years later Starbucks was breaking profit records again.
Further reading
- 7 business lessons from Jack Ma, founder of Alibaba
- Jack Welch: 10 wise business lessons from the best executive of the 20th century
- Warren Buffett’s 10 best quotes for business
Featured image: Gage Skidmore from Peoria, AZ, United States of America, CC BY-SA 2.0, via Wikimedia Commons.
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