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How To Brew Enlightenment | A Starbucks Case Study

Updated: Oct 11, 2023


howard schultz starbucks case study
Created with MidJourney


Something from nothing


Starbucks emerged out of a vague idea, a glimmering feeling in the mind’s eye that Howard Schultz wanted to create. Through time, Starbucks has metamorphized into a brand that is anything but the feeling it was trying to create, and yet people remember it as so. What comes to your mind when you think of Starbucks? A coffee brand? An espresso bar? A restaurant? It most certainly is not any of the above, and yet in our mind, it encapsulates all of these.


Part of the reason is the wonderful and unexpected journey of Starbucks. It started as a coffee-retail brand, turned into an espresso bar, and is now widely regarded as an American coffee brand. It is funny how the brand has undergone so much change that it is no longer the thing it started out to be and yet holds a significant place in our mind as American coffee. As per the European standards, where the first coffee shop opened its doors, Starbucks is more like a milk company than a coffee company.


Throughout its journey, Starbucks never tried to ‘predict and control’, a common choice of strategy of most companies, but instead embraced the approach of ‘sense and respond’. Many of its competitors tried to make sense of the weird tangents that Starbucks was drawing but emergence can rarely be understood with plain deductive logic. The journey itself corrected the course.


The Emergence of an Idea | Starbucks Case Study


During an enlightening trip to Milan, Schultz formed a strategic hypothesis - the Italian espresso experience could be recreated in America and the public would embrace it. The company describes the store as “both an homage to the city of Milan and a celebration of everything Starbucks has learned about coffee in its 47-year history.”


"My first trip to Milan's espresso bars was a transformative experience. I was struck by the passion and precision that went into each cup of coffee. The baristas were true artisans, carefully crafting each shot to perfection. The attention to detail was astounding, from the grind of the beans to the temperature of the water. It was clear that coffee was more than just a beverage here, it was a culture. I knew then that I wanted to bring this level of excellence to Starbucks and make coffee a true experience for our customers."


(Source: "Onward: How Starbucks Fought for Its Life without Losing Its Soul" by Howard Schultz)


Italy is Europe’s sixth-biggest consumer of coffee, according to the International Coffee Organization, behind only Germany and the Scandinavian countries. Italians drink 6 billion cups of coffee every year. Schultz returned to Seattle and explained his idea to the two owners of the company he worked for - the Starbucks Coffee Company. Yes, he was an employee in the company he would later own. They listened and gave him a small space to try to brew espresso drinks, but they did not share his belief in the project.


If there is anything that signifies the great age of enlightenment, it is coffeehouses. In England, coffeehouses developed a unique culture, far different from that of the taverns of Arabia, where the first coffee was brewed. Newton frequented the Grecian (where he was seen to dissect a dolphin); John Dryden held forth at Will’s. Much later, Adam Smith finished The Wealth of Nations at the British Coffee House (Cockspur Street) that was a London Hangout for Scottish thinkers. Joseph Addison, Alexander Pope, and Jonathan Swift held forth at Buttons.


Things start diverging


More than just opening a coffee shop, Schultz intended to alter American preferences and customs. An entrepreneur needs to possess either unique knowledge or ownership over a valued resource if they hope to profit from their new venture. The delicate part of the case was that Schultz's secret knowledge was merely a glimmer in his mind, a mood, a feeling.


After some time, Schultz left Starbucks to start his own shop (II Giornale). The new shop was a direct copy of an Italian espresso bar. He created the exact replica of an Italian coffee experience. Italian décor with stand-up bars and no chairs, just like the espresso bar he witnessed in Milan. It was an instant hit but Schultz was a scientist and listened extremely carefully to the demands of his customer. II Giornale became more like a laboratory than an espresso bar.


As he learned more and more, he took the Italian off the menu and brought in chairs. He realized that baristas were important but did away with their vests and bow ties. He discovered that Americans were fond of takeout coffee, so he introduced paper cups and introduced non-fat milk in their latte.


The Convergence


In 1987, Schultz bought out Starbucks’ retail operations and adopted the Starbucks name combining the old Starbucks business of selling dark-roasted arabica coffee beans with the espresso experience. The company became profitable by 1990 and went public in 1992 with 125 stores and 2,000 employees.


By 2001, Starbucks became an American icon, with 4,700 worldwide outlets and $2.6 billion in revenue. The bulk of its revenue came from selling coffee drinks and the rest from selling coffee beans and food items. Starbucks slowly become a statement as young professionals frequented the store. People were gladly paying three dollars for pint-sized takeout lattes, as compared to seventy-five cents for plastic foam-cupped coffee.


In 2018, Howard Schultz fulfilled his dream of opening the first Starbucks outlet in Italy, the place where it had all started.


How To Brew Enlightenment


starbucks case study brewing enlightenment
Created With MidJourney

Using a 'sense and respond' approach in business strategy is generally considered to be more effective than a 'predict and control' approach. It is a more aligned and holistic way of navigating the ever-changing landscape of the marketplace. Starbucks has implemented a 'sense and respond' strategy by closely monitoring customer feedback and behavior, and using that information to make decisions and adjustments to their products, services, and overall business strategy.


The 'sense and respond' approach allows a company to be more agile and adaptable to changes in the market and customer needs, as it focuses on gathering data and continuously monitoring and analyzing it to make informed decisions. It allows for a deeper understanding and connection to the spiritual essence of our work, recognizing that the universe is constantly in flux and that we must be adaptable and open to new opportunities. For example, Starbucks uses customer feedback and data analysis to identify popular menu items and trends, and adjust their menu accordingly. They also use customer feedback to determine which locations and times are busiest and adjust staffing and inventory accordingly.


In contrast, the 'predict and control' approach relies on making predictions about the future and trying to control the outcome, which can lead to a lack of flexibility and the inability to respond quickly to unexpected changes. It can lead to a disconnection from the natural flow of things and a lack of trust in the universe's ability to guide us toward our highest potential.


Starbucks avoids a 'predict and control' strategy because it believes in empowering its employees and fostering a culture of innovation and experimentation. This approach allows for flexibility and adaptability in responding to changes in consumer preferences and market trends.


As humanity continues to evolve and expand its consciousness, organizations will also undergo significant changes. The future of organizations will be shaped by a greater understanding of the interconnectedness of all things and a deeper appreciation for the role that humanity plays in the larger cosmic scheme.


One of the key changes that will take place in organizations is a shift away from traditional hierarchical structures. As humanity's consciousness expands, individuals will become more aware of their own power and potential and will be less willing to accept rigid hierarchies that limit their ability to contribute and innovate. Organizations will need to adopt more decentralized and collaborative models that empower individuals to take ownership of their work and make decisions based on their own expertise and intuition.


Another important aspect of the future of organizations will be a renewed focus on the well-being of all stakeholders, including employees, customers, and the broader community. Individuals will become increasingly aware of the impact that their actions have on the environment and on other living beings.


The future of organizations will be shaped by a growing recognition of the spiritual dimension of human existence. As humanity's consciousness expands, individuals will become more aware of the deeper meaning and purpose of their lives and the role that organizations play in this larger narrative. Organizations will need to create spaces and opportunities for individuals to connect with their inner selves and tap into their innate wisdom and creativity.

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