The price of growing up - corporate version
Interesting article at the
LA Times about how companies loose their edge as they expand:
Starbucks' 'venti' problem
Expanding too far too fast can turn companies from offbeat to bland.
Coffee addicts were shaken, and stirred, recently when a memo written by Starbucks Corp. founder and Chairman Howard Schultz was posted on the Internet. Noting with a mixture of pride and horror that Starbucks has gone from 1,000 to 13,000 stores in 10 years, Schultz expressed regret over a "series of decisions that, in retrospect, have led to the watering down of the Starbucks experience and what some might call the commoditization of our brand."
"Some people," Schultz wrote, "even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee."
The memo was seen as a rare example of brutal executive candor. Of course, to this Starbuck's habitué (doppio espresso, no sugar) it would have been more timely, say, five years ago, back when there was still a block in midtown Manhattan that didn't have a Starbucks.
But the Schultz memo is interesting and useful nonetheless, because it shows that even an iconic company that serves a highly addictive product can water down the immense value of its brand by expanding too far and too fast and in too many directions at once. Sadly, this is a fate that befalls many American companies. Time and again in recent years, we've seen small, cutting-edge and quirky brands gain critical mass — only to lose their charm and customer appeal after they engage in breakneck expansion.
A bit more:
Consider the sad case of Krispy Kreme. A beloved icon of the South, Krispy Kreme's chief selling point was a limited selection of sickly sweet doughnuts, made fresh on the premises. When the chain began to expand along the East Coast in the 1990s, exiled Southerners and salivating locals queued on the chilly sidewalks, waiting for the red light to signal fresh glazed gut-bombs.
But after Krispy Kreme went public in 2000, the company, eager to supercharge sales, started making doughnuts in central locations and distributing them, hours or even days later, for sale in convenience and grocery stores. Feh! The store-bought sugar rings quickly got stale. And so did Krispy Kreme. Soon after it was flogged on the cover of Fortune as "America's hottest brand" in July 2003, the stock collapsed.
And one more example:
Snapple, for instance, rode from obscurity to household name in the early 1990s based on its funky flavors and offbeat advertising campaign, which featured Wendy Kaufman, a heavyset employee of the company with a thick Long Island accent. The company's impressive growth attracted the attention of the conglomerate Quaker Oats Co., which paid a whopping $1.7 billion to buy Snapple in 1994.
Of course, the Quaker Oats crowd decided the suddenly big brand needed advertising that was more professional and high-concept. In 1996, when the company unceremoniously canned the Snapple Lady, the backlash in the marketplace was almost instantaneous. Sales plummeted, and in May 1997, Quaker Oats sold Snapple at a fire sale price of $300 million. One of the first acts of the acquirer, Triarc Companies, was to bring back Kaufman as a spokesperson.
There are a couple more examples in the article. It may be hard to preserve the corporate culture as you grow but it can be (and has been) done. The corporate culture is what first brought customers in through the door and if it changes, they may go somewhere else.
Posted by DaveH at March 9, 2007 3:46 PM