by Adam Hartung | Nov 1, 2004 | In the Rapids, Innovation, Leadership
Starbuck’s has been breaking the rules ever since it was brewed up in the mind of founder Howard Schultz, and it looks like they are doing so again. Many of Starbuck’s innovations have been product-related breakthroughs such as Frappuccino and adding Music CD’s to the store’s inventory. These have been profitable innovations, but the first time the company really challenged its success formula is when it added wireless internet connectivity. Now the company is opening dozens of “media bar” stores that will enable customers to listen to and burn custom CD’s while they slurp down that Venti no-foam non-fat caramel Latte. This is a dramatic entrée into a new success formula that speaks loudly of Starbuck’s commitment to reinventing itself.
How are they able to do this when other companies struggle with even small innovations? I think there are three key elements. The first is the company’s commitment to ongoing innovation. CEO Schultz has created a climate where innovations are valued and can come from anywhere in the organization. For instance, the idea for Frappuccino came from two store managers who were experimenting with a frozen coffee drink.
A second factor is that the identity of the company is sufficiently large that many different strategic directions are possible. Rather than narrowly define itself as a coffee bar, Starbucks sees itself as a “third place”—a destination where people can escape from the rat race and other troubles, relax and experience a sense of well-being and community. Music is a natural addition to the sense of leisurely self-indulgence.
The third element is passion. I think passion is the secret ingredient in every really great success story. Why? Because business is about people, and people are passionate to their very core. Employees who are passionate about the business will give more energy, more creativity and will be more productive than the norm. Customers can tell when passion is in the air—it’s infectious and they start to catch it too. Passionate customers inspire employees in a positive feedback loop. Passionate customers also breed new customers. Someone who is crazy about your business will tell their friends and very nearly drag them to your store. In practically every early morning meeting I attend, someone is drinking from a Starbucks cup and telling somebody how they “never miss their Starbucks run in the morning.”
How much passion do you have for your business? How much passion do your employees and customers have for your business? In my experience, passion is something that leaders must consciously nurture. And it’s rare. I mostly experience it in growing companies that are still in the Rapids. Most mature organizations feel dead and (gasp!) business-like to me. Yuck! I want to feel a buzz in the air, some excitement, and people who are really happy to be doing their job that day. I get that sense at Starbucks, at CiCi’s Pizza, and at Discount Tire. It’s missing at McDonald’s, Pizza Inn, and Firestone. I’ll pick the first three over the second three at every chance, and I’m betting that most of you do too.
by Adam Hartung | Oct 31, 2004 | Leadership
There are signs of lock-in all around us, and also signs of leaders that overcome lock-in to create a new success formula for the betterment of their organization.
At a recent high school playoff football game the half ended with one team down 21 to 0. The down team had a coaching staff that had worked together for 20 years. Just two years ago they had gone to the state finals. But today, the opposing team “had their number.” There was enough predictability in the game that the scoring team had shut off the down team’s offense completely. The crowd was listless, as the students and parents attending sat through the half time show expecting the season to be over for their team.
With their backs against the wall, and their season ending in just two quarters, the down team needed a miracle. But they got something better.
When the leading team kicked off to start the second half, the last thing they expected was a reverse. But that’s exactly what the down team did! Completely “against type,” they ran a reverse and it yielded them a touchdown on the first play of the half. Less than 4 minutes of game later, the score was unchanged and the down team found themselves with the ball on their own 35 yard line with a 4th and 10. Time to punt.
But, again, against all expectations (and some would call common sense) when the snap got to the punter he immediately took off on a dead run. He got 30 yards (20 beyond the line of scrimmage). Three plays later, the down team was in the end zone and the game was within one touchdown of a tie. And there was plenty of game left. Sure enough, over the rest of the game the down team scored two more touchdowns while the team that was so far ahead at the half was unable to score even one point. The team everyone gave up for lost was the winner – and on to their next playoff game in another week.
What happened was a fantastic example of leaders recognizing their success formula had been “smoked out” by the competition. They realized they wouldn’t win the game if they kept doing the same thing. So they changed. They changed the way they played. And they so confounded their competitor, which had manhandled their team the whole first half, that the competition was “on its ear” for the rest of the game.
It’s hard to change a success formula. Especially if it gave you a championship. But it’s better to win than to defend what you did, but lose. In a dynamic world, winning often means changing in order to upset the competition.
by Adam Hartung | Oct 28, 2004 | Leadership
It is ironic that Blockbuster would announce the extension of CEO John Antioco’s contract for 5 years on the same day that they reveal a $1.42 billion loss.
Reuters: The company posted a quarterly operating profit well below analysts’ estimates even before $1.5 billion in one-time charges, as it faced falling movie rental demand and higher costs to counter competition. The company’s shares were down 6.35 percent at $6.64 on the New York Stock Exchange.
Antioco has been credited with saving Blockbuster time and again as the company repeatedly fell on hard financial times. And now he’s trying to do it again. The trouble with heroic leadership is you never know when luck will run out and the heroism won’t be enough.
Businesses cannot survive for long depending on heroic leaders and yet the business press constantly celebrates them. At almost any time, you can find a headline asking “Can Joe Blow Save XYZ Company?” The need for heroic leadership points to a deeper problem that gets masked over by the short-term successes won through the efforts of a few individuals. Why did the company need saving in the first place? What has happened to the company’s Success Formula that put it in such dire conditions, and what’s being done about it? These are the questions that should be asked when someone trumpets a heroic turnaround.
What’s the alternative? What companies need to do is develop a culture based on ongoing reinvention—from the top to the bottom. It is only when the organization systemically renews itself before it has to, that it can quit relying on heroic leadership to fly in and save the day. That’s what it means to adopt the Phoenix Principle and make it a foundational element in your company’s success.
by Adam Hartung | Aug 27, 2004 | Defend & Extend, Leadership
As the world watches the Olympics this week, I was struck at how different sporting competition is from business competition. Those business leaders that make positive analogies are doomed for problems – and most likely failure.
The Olympic gymnast is a great athlete. Designed and practiced to be the best at his sport. He might have been a great baseball player, or swimmer, but he is, today, a finely tuned athlete capable of competing – and winning – at gymastics.
Likewise, the Olympic Greco Roman wrestler is a great athlete. He too is practiced to be the best at his sport. And, he too could have been a football player, or other competitor. But today, due to repetitive practice and a determined focus he is ready to compete in his one sport of wrestling.
Both of these are potential gold medal winners. But which is the more “fit”? That is impossible to say, for each is now finely tuned to a narrow field of competition. What would happen if the coach asked them to switch sports? It would be disastrous. They are capable of winning at one game, and have limited competitiveness in any other area.
What will become of these athletes when the game ends? Both will hope for endorsements and great fortune. Perhaps they will have one – at most two – more possible trips to the Olympics. And endorsements may last for a year or two. But they are almost sure to not compete in any other athletic endeavor. For, as good as they are, they are so highly specialized that their skills are not transferable to compete in another game. They will have to find entirely new careers in short order.
For business this is a recipe for disaster. Specialization leads to obsolescence. Any business that optimizes itself to compete so specifically will find itself upset by another competitor that makes a slight alteration in the “rules of the game.” The dynamism of markets, and competition, assures us that no highly specialized competitor can survive long. Glory may reign for a short time, but the specialized competitor will be upset in short order.
Today’s business success requires adaptability in the face of changing market conditions and competitors. New rules are created often, and the abilty to move across markets with wide skills is required for any business to remain powerful for more than a few years. Even great size, as with the wrestler, will not protect the competitor when the rules change slightly favoring speed or agility over size.
Business is not an Olympic sport. We should not confuse the testosterone laden thrill of a gold medal with the success of creating returns for shareholders. Instead, we should remember that Olympic winners are the 1 in 100,000 that made it to success. The odds were stacked far against them before they began. In business, the ability to change the competitive rules means that the odds can be stacked in your favor – as long as you remember to be adaptive in thinking and behavior in order to keep your competitor guessing and yourself in the lead.
