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We Have Met the Enemy ...

There are other coffee chains. And damn fine independents. The coffee is good at Dunkin' Donuts ... and McDonald's for that matter. (My next door neighbor will go to the mat defending DD.) Still, Starbucks is sailing in pretty blue ocean to this day. So why is its stock in the tank, why did founder Howard Schultz decide last week to can the CEO and re-take the job himself?

Simple, as I see it. There is an Enemy of inestimable power—moreover, power growing by the day. Incidentally, the same Remorseless Enemy that brought McDonald's to the brink a decade ago. Namely, itself-themselves.

I "like," in a fashion, "the Starbucks case." The company does not have an external enemy worth talking about, or to blame the decline on. And its stock is surging South. Ergo, its enemy must, necessarily, be Starbucks. And if a company that is unchallenged in conventional terms is in a pickle, that bodes poorly for all of us. In fact, it's downright scary.

You see, I think most "strategic analysis," indeed most "strategic thinking," is specious. (Specious being a synonym for "baloney.") Consider GE's troubles before Jack Welch. IBM's pre Lou Gerstner. Microsoft's current troubles—or at least loss of infallibility. Big Pharma's swan dive. Or, take the case of Home Depot, circa 2001.

Of course Home Depot was somewhat flummoxed by Lowe's as Bob Nardelli came aboard in December 2000. I'd judge, with unrealistic precision, that Lowe's was about 3% of HD's problem. Bob N, admittedly with a pronounced "GE bias" about Operational Excellence, was simply staggered by the lack of useful, fundamental systems and measures at a company that logged $50 billion in revenue. Bob made some boo-boos, big ones, and was given the boot. But he also made amazing progress in creating operating infrastructure—getting the company's innards in order in the aftermath of years of Starbucks-like growth. That is, Bob N confronted directly Home Depot's Enemy #1—not Lowe's, but Home Depot.

Yes, to use the oft repeated Walt Kelly quote (from his comic strip, Pogo): "We have met the enemy and he is us." "Innovation" is the business topic du jour. Of course, it's really the "topic du always"—even for 5-year old companies that started with a bang, and took advantage of said bang to undertake expansion. Or, for that matter, those choosing not to expand and graying in place. To use an even more oft used quote by the ubiquitous whomever: "Get thine own house in order first, dude." That is, in, conservatively, eight out of ten cases, I'd judge after 35 years of close observation, it's not a surging competitor with a "disruptive" strategy that generates a star's tailspin, but the star's inherent entropic (remember Newton) drift, away from innovativeness and toward mediocrity; such companies, almost all companies, do not have to learn how to innovate ... they have to learn how to not not innovate. "Data drawn from the real world," said Norberto Odebrecht, founder of the remarkable Brazilian heavy construction giant, Odebrecht, "attest to a fact that is beyond our control: Everything in existence tends to deteriorate." It's the molding innards, not the lousy strategy or uppity competitor, that cause most of, if not all of, the decline. And addressing said molding innards must, simply must, be the new or extant CEO's Job #1. (Or, more accurately, Job # 1, #2, #3, #4 ... at least. Make no mistake—that was Welch's script at GE. A ship sinking under the weight of its own morbid obesity was returned to fighting trim—GE learned to Execute, again, after years, decades, of accrued flab & barnacles.)

The purpose of this Post is not one more "Tom Rant" against "them"—the strategy uber alles clan, no matter how much they clearly need to be ranted against. Instead, it is a simple reminder ... to my professional self, as well as you and those bosses of bumbling giant pharmaceutical companies busy not discovering new drugs. Namely, your problem (my problem, their problem) lies near at hand. Don't necessarily change your strategy—why waste your energy? And don't worry excessively about "the vision thing"—why waste your energy? Worry instead about Execution and Operational Excellence. Worry about the plaque building up in your increasingly clogged arteries—and even capillaries. Worry about policy manuals laden with blubber and still super-sizing and inhaling Big Macs. Worry about not enough customer visits and too many meetings attended by too many people viewing too many PowerPoint presentations. Worry, worry passionately and continuously, about the internal, ever-thickening Walls of Steel that separate and alienate those who must, to succeed, work together. Worry about offices for executives that are bigger than they were 10 years ago—and employee turnover that has grown in tandem with executive office-size creep.

Starbucks' enemy is Starbucks. Tom Peters' enemy is Tom Peters. You and your department's enemy is you and your departmental mates. Make no mistake.

Tom Peters posted this on 01/14/08.

Comments

Perhaps dozing at the wheel is just as dangerous as falling asleep. One must be forever sharp or pay the consequences.

Posted by Joel Heffner at January 14, 2008 11:10 AM

Bravo Tom!! I get tired of hearing the phrase "but we've always done it this way" or "It's the (name of company here) way." When in fact if you look at what made the company/organization successful the truth is "we never did it this way until recently."

Posted by Andrew Hayden at January 14, 2008 11:53 AM

Interesting that McD's has plans to adding baristas at 14,000 locations:

http://www.grokdotcom.com/2008/01/09/mcdonalds-bites-starbucks/

Posted by Alex F at January 14, 2008 12:07 PM

It's always gratifying to come to these conclusions in my weekend self-analysis, and then come here Monday morning and get confirmation that I'm not crazy (or, no more crazy than is necessary.)

I hereby resolve to stop holding myself back. Can I say 'bias for action' ?

Posted by Joel D Canfield at January 14, 2008 12:39 PM

Tom,

What a great kick in the pants on a Monday!

Posted by Jack at January 14, 2008 12:58 PM

The enemy is us but we can beat the enemy by learning new things and helping others.

Posted by Dan Schawbel at January 14, 2008 2:34 PM

I am watching the Starbucks drama closely. Can Howard bring it back? Similar to Job's return to Apple? Lutz's return to GM? Not only did falling in love with metrics and rational business plans do them in, but also losing their original ambition. (drive thru's at Starbucks? 3rd place is my car?) I must say there is an awful lot of concern about Nardelli over here in Michigan in the press. Seems he may be positioning Chrysler for another "merger of equals". Sorry, I don't think this tactical strategist with no history in autos can do it. My bet is that Chrysler is history within 5 years. Hope I am wrong..

Posted by Mike Neiss at January 14, 2008 3:36 PM

But Mike, they learned from their mistakes last time and are not doomed to repeat them. After all, in the last merger there were both systemic and cultural differences that were not adequately compensated for through the reactive actions of the global management team. Given that each side was in a position to proactively assimilate and integrate the two organizations operations and manufacturing facilities and systems it was obviously the earlier effort was destined to be a success from the beginning. Unfortunately, there were significant hurdles that the organizations were not able to overcome with regards to management structure, corporate cultures, union activities and design and engineering philosophies. None of this could have been foreseen. ............Oh hell, you're right they're probably toast in 5 years.

Hope you had a great holiday!!!

Posted by Andrew Hayden at January 14, 2008 3:49 PM

Seems to me this may be about complacency among other things. Taking oneâ€™s eye off the ball is another way of putting it. In all aspects of my professional or personal life if complacency sets in then I miss the obvious. I donâ€™t see things I used to see. I donâ€™t even notice my standards have slipped. I see nine stages (there are probably a lot more) stages of rise and collapse of many businesses or indeed relationships as follows;

1 Passion
2 Established
3 Growth
4 Expansion
5 Comfort
6 Complacency
7 Vulnerability
8 Arrogance
9 Death â€“ RIP

Actually I have never been a huge fan of Starbucks but maybe Iâ€™m missing something

Posted by Trevor Gay at January 14, 2008 5:27 PM

Trevor, I will admit a certain fan attraction to the "old Starbucks", when indeed it was the third place. Especially for those that make their living traveling. It was, at that time, fresh roasted coffee, quiet, internet connection, and comfortable. Now, however, I usually take my coffee at small community based coffee shops or at least a chain that offers free web connect. So yes, you may have missed something. In my opinion, it is gone. But who knows, maybe Howard can bring them back. Geez, that company seems awful young to evoke nostalgia. By the way, I read a blurb in the Seattle Times that mentioned one barista actually liked the new automatic espresso machines...she said making coffee the old way was "too hard". Maybe a message in there as well...

Posted by Mike Neiss at January 14, 2008 6:25 PM

Tom, you are a true visionary. If i'm not mistaken, you have predicted the Starbucks down fall about eight months or so ago. Way to go. Good call.

Posted by Gary K at January 14, 2008 6:50 PM

I'm lost. To where does the company called "Starbucks" need to return? I go four or five times a week. I buy coffee. I leave. Duh?

I'm tired of reading how high stock price means successful company. Business media take this approach daily. What if the product sucks and/or no one wants it? Hello, American-based car companies.

Thought today's post was VERY meaningful...

Posted by nextgenradio at January 14, 2008 7:36 PM

A quote from my previous experience in martial arts springs to mind...

"When you see a worthy person, endeavour to emulate them. When you see an unworthy person, examine your inner self."

Has a few interpretations but certainly the most pertinant is that the flaws we often see in others are more about ourselves than them.

Posted by Peter at January 14, 2008 10:09 PM

Thanks Mike - Awwwwww!! 'Nostalgia' - you are so right, seems to me that word now means anything older than a couple of years. Reminds me of my friend who said he canâ€™t remember the last time he changed the paper roll in his FAX machine.... I remember when faxes were the cutting edge new tomorrow...

Yours forever young and nostalgically :-)

Trevor

Posted by Trevor Gay at January 15, 2008 7:25 AM

Ahh but Trevor...can it go too far? The machines at my health club actually email if I go off schedule...:) I think they are working in cahoots with my wife...Best to you Trevor

Posted by Mike Neiss at January 15, 2008 9:28 AM

Hate to be a nay-sayer here, but if I'm reading Tom right, the high-contrast message is forget stfrategy, just execute, execute, execute via operational excellence. While I will admit that a mediocore plan violently executed is likely more successful than a brilliant plan poorly executed, I'm not sure I believe it's an EITHER/OR trade-off that has to be made, as compared to an AND approach, where an adaptive strategy approach needs to be tightly integrated with actual execution.

Don't compromise and accept mediocrity in one dimension of your business- strive for excellence across both strategy & execution....

Posted by gregggallagher at January 15, 2008 10:15 AM

Cheers Mike - I'm looking for a cell phone that mows the lawn :-)

Posted by Trevor Gay at January 15, 2008 10:16 AM

I kind of agree with you gregggallagher

The problem in my experience is that writing a strategy becomes the purpose for living for some managers. In the UK National Health Service there are some brilliant plan writers â€¦. The problem is strategies are mostly fiction â€¦ whilst the non fiction guys just get on and do things.

Having said that â€“ a plan without a vision (I prefer the word â€˜visionâ€™ to strategy) is like searching for your shoes at 3am in the dark when you are drunk.

Posted by Trevor Gay at January 15, 2008 10:26 AM

Trevor (congrats on the NYT mentio btw)

Love your summing it all up: "The problem is strategies are mostly fiction â€¦ whilst the non- fiction guys just get on and do things."

One of my pet peeves is strategic planning that is neither strategic nor planning. And, trying to pick up the pieces for clients who have blown big bucks on a consultant to help them with the planning (Hello? What about implementation?)

"In preparing for battle I have always found that plans are useless, but planning is indispensable." ~ Dwight D. Eisenhower

As for searching for the enemy - here's a wacky idea - what if - instead of focusing on growth at all costs (which often actually ends in losses) - companies focused on doing more of what they do best and then doing it even better? Oh, there I go again, being unrealistic! ;-)

Posted by Mary Schmidt at January 15, 2008 10:49 AM

Maybe it's much simpler than that. Perhaps people are just tired of Starbucks?

Posted by PaulH at January 15, 2008 11:14 AM

Tom,

Excellant post - well grounded and timely. Another path that the Starbucks "root cause anlaysis" may take us down is leadership (or lack of it).

Being an effective leader and maintaining the leadership position amongst your peers means constantly challenging the norm and stepping out of the comfort zone. So the leader does need to balance the need for sustaining whats working and improving whats not working. The leader has access to all kinds of metrics that raise the red flag on what is not working as planned. Its all about "being the best at what you and everything else will fall in place".

Instead of spending precious dollars on consultants to give you a strategic road map or competetive analysis, ask them to blow holes in the various organizational functions and processes. IMHO, that would provide you more actionable data and in the long run, better value to the stakeholders.

Posted by Uday Kumar at January 15, 2008 1:01 PM

Of course Operational Excellence and Execution are essential. But on their own, they're not enough: if your product is rubbish, flawless execution won't cover it; if it's great and your service is poor - same result.

Over the last 2 years, we've seen attention paid to design, innovation and a host of other ideas. Surely the point is that ALL these things are essential. R&D has to be executed to the highest standards. You need a supply chain of new products and services to go with them. At the same time, the current business has to be executed magnificently. The Balanced Scorecard concept probably gets short shrift from people here but it surely indicates that the various functions of a business have to be co-ordinated and pulling together. (And I include in that an obligation for some C-suite guys to ensure there are also sufficient skunk works projects coming down the line!)

Re Starbucks: I've made the point before but when I walk into an airport lounge and see a Starbucks bar jammed into a corner and open plan, I have to ask myself why. The coffee may be good, that's a matter of taste. But it's still a noisy, cramped venue that devalues the experience you get from a store. I think they need to pay more attention to where they site themselves and if needed, retrench.

Posted by Mark JF at January 15, 2008 3:05 PM

Thanks Mary â€“ appreciated - hope you are well.

I love your final sentence

'Oh, there I go again, being unrealistic! ;-)' -

Do please keep going in your unrealistic way â€“ it is the best way. The late great Anita Roddick â€“ my business icon of the 20th Century - always said go in the opposite direction to everyone else and you won't go far wrong â€¦. So you are following in the footsteps of a wonderful role model in business - of course sadly no longer with us - more's the pity.

MarkJF â€“ Happy New Year â€“ and on Starbuck we agree 100% - that must be some sort of record :-)

Posted by Trevor Gay at January 15, 2008 7:04 PM

I totally agree with Tom's opinion.
Yes. The enemy of Tigerwoods is Tigerwoods. But it should have a meaning for those so called, Lovemark Brand.

-from Korea

Posted by taehyuk Lee at January 15, 2008 10:27 PM

I just found this in The PSF50. It is Tom quoting from Gordon Mackenzie's book Orbiting the Giant Hairball: A Corporate Fool's Guide to Surviving with Grace. (Incidentally, the Tom Peters Company UK group hand out this book to attendees at some of their conferences.) The quote nails the Starbucks dilemma, as described by Tom in this blog post:

â€”Passion begets success
â€”Success begets success formula
â€”Success formula begets isolation from passion, vision, and innovation
â€”Isolation begets atrophy, decay, a fading away

Tom's been saying the same things over and over for a very long time. But he's right, and he's also right when he says that repeating these things over and over is the only way to put the point across. But, some people just don't listen.

Posted by cathy mosca at January 16, 2008 10:58 PM

Thanks, Cathy. This is sheer beauty!

Posted by Judith Ellis at January 17, 2008 10:47 AM

Starbucks has maxed out. Stores are everywhere. There is no way to increase per-store revenue at this point, except to add more product lines. (And music and coffee makers is not helping). They are certainly in a Blue Ocean in that there isn't another coffee house chain like them, but people sit there a long time. Long lines at prime times. It's maxed out.

Posted by Peter Radizeski at January 17, 2008 11:51 AM

just found this in The PSF50. It is Tom quoting from Gordon Mackenzie's book Orbiting the Giant Hairball: A Corporate Fool's Guide to Surviving with Grace. (Incidentally, the Tom Peters Company UK group hand out this book to attendees at some of their conferences.) The quote nails the Starbucks dilemma, as described by mike in http://aishwaryaraifanclub.net blog post

Posted by aishwarya at January 17, 2008 11:22 PM

Tom,

With respect to your comments regarding Bob Nardelli's tenure at Home Depot, as a consumer, brand marketing exec. obsessed with the customer experience, and shareholder, I would agree with you in part. Yes he did provide HD with a much needed operational infrustructure and yes, the empty shelves starting looking well, full. He did broaden the inventory resulting in some more interesting products. He probably would have been lauded as a hero if only he had been COO.

But he was CEO and in that role, he forgot two fundamental tenets of great companies: 1) His employees, and; 2)the customer. Actually, #1 is really about the customer too, so I and the many others who swore they'd never set foot in a HD again, got hit with Bob N's omissions twice. When you apply your vision to a company but neglect to tell the employees (or train them, tell them what you're putting on the shelves and how it gets there, or get them invested in the vision),you get a bunch of very unhappy, angry, employees. When you neglect to invest your customers in the vision, you also get a bunch of very unhappy, angry customers.

Although not interchangeable, neither are #1 or #2 easily replaceable. For that, it was right that Mr. Nardelli was shown the door. And to that end, had it been up to a former customer, me, he would never had gotten a contract that rewarded him so generously having done so. That was an insult to both #1 and #2. And although I agree Lowe's was not the enemy, he chose to confront only part of Home Depot's demons and left out the two most important.

Goes to show all those future CEO's (and boards that do the search) that (1) Great consumer and B2B executives are not necessarily good at leading both and; (2) being a brilliant "functionalist" does not a CEO make.

Posted by Bkrafte at January 27, 2008 4:37 PM