The Secret of Starbucks’ Success:
No single factor can be credited with the success of Starbucks, Perseverance, timing careful planning and a touch of luck have all contributed to the lucrative business that exists today.
To Schultz, dreaming and vision required caution; to be an entrepreneur does not mean acting recklessly and taking unnecessary risks. On the contrary, Schultz articulated an initial vision for the company that he has since adhered to faithfully.
Schultz’s goal was for Starbucks to become the leading North American retailer of specialty coffee. Toward this end, he focused on cautious growth. He began by taking many steps backward recalled Schultz. We were willing to lose money for however long it took to build a foundation rather than sacrifice long term integrity and values for short term profit. And he did. Starbucks suffered through three consecutive years of losses, with more than $1 million lost in 1989 alone. But we had tremendous conviction that this was the way to build a company and that the losses were going to end, said Schultz.
And they did. Soon Starbucks was back on track toward financial success. And without having to take shortcuts that would have undercut Schultz’s vision. For example, Starbucks could have adopted franchising agreements – many people approached Schultz, but he turned them all down, so as not to “dilute the integrity of the product and our people”, said Schultz.
At the same time, demographic trends supported Schultz’s vision. Baby boomers have money they are sophisticated and they’re consuming less alcohol, said John Rohs, a restaurant analyst at Wertheim Schroder & Company Inc. Now baby boomers can name drop coffees such as Jamaican Blue Mountain instead of wines like Chateauneuf- du- Pape.
Starbucks sees itself as competing in the markets for both true gourmet coffee and premium coffee. Between 1983 and 1989, the gourmet coffee market grew from almost $210 million to just over $675 million, and was expected to grow to $ 1.05 billion in 1994. Between 1983 ad 1989, the premium coffee market grew from not quite $90 million to more than $275 million, and was expected to surpass $680 million by 1994.
Starbucks competes against a vast array of rivals, including supermarkets, specialty retailers and specialty coffee stores, as well as against all restaurant and beverage outlets that serve coffee, including espresso stands carts and stores.
The tenet, only perfection will do, lies at the heart of Starbucks’ management. Last year 80,000 pounds of coffee beans were to charity because the beans no longer met the company’s standards for freshness. Starbucks employees search the world over for top quality Arabica beans, from the best, high altitude farms.
Bait An Intrapreneurial Venture:
One of the firms that has success with internal innovation and development is Du Pont. An interesting venture was the creation of a new multimillion dollar crawfish bait business within the existing company. The idea for the venture originated at a Du Pont polymer plant in Louisiana with a plant employee who loved crawfish. When he set out his bait traps, he had to replace them every two days because the bait would disintegrate. It occurred to the crawfish lover that Du Pont polymer could be used to hold the bait together longer. He worked with one of the plant’s chemists who provided him with samples. The collaboration resulted in development of bait that would not disintegrate for five days. The product was marketed using Du Pont’s agricultural product division to manage distribution and sales. Although the financial risk was low, the project clearly involved a new market and entrepreneurial management.
At Du Pont such activities can lead to both non-financial and financial recognition. After the fact discretionary bonuses are awarded to venture champion as well as teams. Du Pont is known for giving organizational support to its members. There is voluntary support, both formal and informal, from different parts of the organization as well. Innovators are encouraged to seek assistance from people outside their immediate area of activity. Often people will actually perform technical work on a voluntary basis.
Intrapreneurship requires special attention from managers, because by design it cuts against the grain of established organizational activities. Thus, we might expect that the following are important to support intrapreneurship:
1. Explicit goals for intrapreneurial processes.
2. A system of information exchange between managers and intrapreneeurs.
3. An emphasis on individual responsibility and accountability
4. Rewards for creative effort.
More recently, “innopreneurship” has been used to describe what others call intrapreneusrship; still others refer to “internal corporate venturing. Senge talks about new “disciplines” of leadership that managers can employ to shape their organization in times of flux. No matter what you call it, the central idea is that managers must be capable of reinventing the patterns of relationships that make up their organization.