Customer Intimacy and the Case of the Small-Town Starbucks

By November 16, 2018Business, Leadership

Not long ago, I was driving through rural Illinois on the way to a client’s headquarters. I had some extra time on my hands, so when I saw a sign for a Starbucks, I decided that I might as well take the opportunity to order my usual drink (specific order and sugar content redacted).

When I got there, I learned it was not only the first Starbucks to open in the small town, but the first dedicated coffee shop of any kind. As the only out-of-towner in Starbucks that day, I witnessed a series of enlightening interactions.

It is widely believed that for a company to be successful, it must focus on one of three disciplines:

  1. Customer Intimacy: Developing a responsive relationship to customer needs and desires.
  2. Operational Efficiency: Managing products and services to be as cheap and efficient as possible.
  3. Product Leadership: Innovating new products or services and being first to market.

Much has been made of the fact that the Starbucks business model focuses on customer intimacy. The company does this by creating a recognizable and uniform environment in which customers feel at home in any store location around the world. Likewise, they make highly customizable drinks that can be replicated anywhere.

As I stood in the Starbucks, I realized the other discipline that Starbucks has mastered: product leadership. A half-dozen customers entered this new Starbucks as I was there, and each asked to have the product described to them. “If you like sweet drinks, you’ll like this,” a certain employee told several new customers about the Frappuccino.

I had gotten so accustomed to the Starbucks lingo that I had forgotten that I ever had to learn terms like “Grande,” “Venti,” and “Frappuccino.”

Black coffee is an acquired taste, whereas sweeter drinks at Starbucks are instantly palatable. By packaging coffee in a way non-coffee drinkers enjoy, Starbucks can ease the barrier to entry for drinking coffee. Then, after customers are hooked, Starbucks is the main (or only, at least in this small town!) game in town.

Most companies will pursue more than one of the disciplines outlined above, but a mastery of at least one of the disciplines is the best way to ensure long-term success.

I would suggest that mastery of two of the disciplines is the way to take a company from successful to gigantic. Here are a few of the clearest examples of this phenomenon:

  • Starbucks (customer intimacy and product leadership)
  • McDonald’s (operational efficiency and customer intimacy)
  • Apple (product leadership and customer intimacy)

After witnessing the product leadership on display at the small-town Starbucks, I hopped back on the highway, excitedly thinking about the businesses I was passing and the operational disciplines they embodied. I hope my excitement wasn’t driven entirely by caffeine!

THE TAKEAWAY: When considering your own organization, what is the discipline that most closely aligns with your business model? How well does your organization execute that discipline? Extra credit: what is the second discipline that could align with your business model?

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