Starbucks’ As The Best “3rd Place” – A Love Letter

Starbucks’ new CEO is off to a good start to learn what to fix/keep/reinvent. Hopefully, he sees beyond the nuts and bolts of operations to fix what’s really wrong. This insight explores Starbacks’ reinvention as the best third place for customers who like spaces away from home.

Introduction

Starbucks has a new Chief Executive Officer (CEO) at the helm with Laxman Narasimhan assuming the role on October 1, 2022, along with joining the coffee chain’s board of directors. He is replacing founder and outgoing CEO, Howard Schultz.

New Starbucks CEO Laxman Narasimhan

“I am humbled to officially step into my role as Starbucks chief executive officer, leading our incredible team of more than 450,000 green apron partners around the world. The foundation Howard has laid – building from scratch an iconic global brand fueled by a lasting passion to uplift humanity – is truly remarkable, and I am honored to have the opportunity to build on this deep heritage,” said Narasimhan. “As a human connection business, we have limitless possibilities to deliver for our partners, our customers, our investors and our communities through every cup and every connection. I am excited to work alongside our partners worldwide to unlock the limitless future of Starbucks.”

When it comes to innovation, the brand introduced a new category at the same time named OleatoTM that infuses olive oil into different coffee drinks.

Starbucks’ Reinvention – It’s Personal

For me this one’s personal. Most of my career has taken place around a daily Starbucks. Stressful day? — two trips. Can’t figure out a strategy? — I nail it on the walk to Starbucks. Nerves before a speech? – a brisk Starbucks run does wonders. I’ve been a loyal customer and business advocate for over 20 years, so it’s with a heavy heart that I confess my consumption has shrunk drastically.

Not because I don’t want my usual latte, but because I’ve hated seeing this company falter. So here’s a love letter to the new CEO from a loyal customer who wants this company to succeed:

Starbucks was built on the idea that people needed a “3rd Place” in real life between work and home. The products, cafe design, the smell of coffee and warm baked goods, and employee banter were crafted to make customers feel welcome to sit/chat/work/read/meet. How many meetups became marriages? How many tests were passed, jobs landed, or friendships made in a Starbucks?

Retail Mashup explored customer loyalty and branding via Starbucks in an earlier podcast.

The need for this third place tapped into a deep truth that consumers embraced and even relied upon for decades. Take that away and Starbucks becomes just another fast food chain, much the same as its competitors — but with higher prices. You can’t optimize a brand to success.

Today the company is centered more on stock price than people. Convenience and speed come first. Employees are trained and measured on efficiency, not engagement. Visit any Starbucks now and staff is head down, frantically filling orders from the drive-thru and mobile app.

In-person orders have become an inconvenience. This has opened the door wide to competition. Today Mcdonald’s tops Starbucks in Europe and is neck and neck in the United States. As inflation continues, more customers are less inclined to pay a premium for a quick-service restaurant experience.

Laxman Narasimhan brings a strong operations pedigree to the company. But getting back to the soul of the company must come first. It will be important to automate drink personalization, and cold beverages — the labor-intensive tasks that keep staff too busy to engage.

Final Words

But it will be equally important to invest back into being that 3rd Place. This is their strongest asset, greatest differentiator, and unbeatable loyalty builder. Redesign the business around customers rather than herding them through what’s operationally efficient. This will solve both the long and short term and is the only way Starbucks stays relevant going forward, earn loyalty, and produce more revenue.

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