Lifetime Customer Value Case Study: Starbucks [Infographic] – Business 2 Community

How much is a customer worth to Starbucks? $14,099 http://t.co/Vw9QYXeEZV #customer #leadership #retail #starbucks #cex #custserv #cx #cem

See on www.business2community.com

andrea zehnder

andrea zehnder

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How to Engage the Front Line in Process Improvement – Brad Power – Harvard Business Review

Indeed, thinking about how to involve the front line. Even better, reflecting about engaging your customers in process improvements.

Found at How to Engage the Front Line in Process Improvement – Brad Power – Harvard Business Review.

In my last post, I looked at how Toyota engages front-line workers in process improvement and the challenges for other companies that want to adopt their approach. Based on the organizations I’ve seen, I’m pretty pessimistic that most can do what Toyota does. Yet, I have seen companies such as Kellogg’s, Starbucks, and Chevron succeed with alternative approaches to Toyota’s.

Read all at How to Engage the Front Line in Process Improvement – Brad Power – Harvard Business Review.

 

Photocredit:  tiffanydenise

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How We Built 4 Pillars of Business Greatness

Found at How We Built 4 Pillars of Business Greatness | TerryStarbucker.com.

The 4 Pillars of Business GreatnessAbout 3 years ago, after 20 years in the service business, I came to some high level conclusions about what I thought were the core “pillars” of business greatness.

And then, we went about the task of making sure all our teammates knew what they were, and why they were important.

To be continued at

 

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How Social Media Drives New Business: Six Case Studies

How Social Media Drives New Business: Six Case Studies.

by Leena Rao on Jul 17, 2010

Businesses both big and small are flocking to social media platforms such as Twitter, Facebook, YouTube and Foursquare. The fact is that a presence on these platforms not only allows companies to engage in conversations with consumers, but also serves as an outlet to drive sales through deals and coupons.

And while major brands like Starbucks, Virgin, and Levi’s have been participating in the social web for some time now, the rate of adoption among small businesses is increasing too. According to a recent University of Maryland study, social media adoption by small businesses has doubled from 12% to 24% in the last year.

To be continued at http://techcrunch.com/2010/07/17/how-social-media-drives-new-business-six-case-studies/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+Techcrunch+(TechCrunch)

Heels on Wheels

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Lean and Starbucks: reflections on service

Post found at http://www.leanblog.org/2009/08/defense-of-lean-and-of-lean-at.html

Yesterday’s WSJ front page headline caught my eye, as a frequent Starbucks customer and obvious Lean zealot:

Latest Starbucks Buzzword: ‘Lean’ Japanese Techniques

That above link should go to a free article for non-subscribers (or Yahoo Finance version of the same text here).

The headline is full bodied and complex brew that gives us a lot to chew on before we even get to the frothy body of the article itself (not to mention the lingering aftertaste of internet reaction).

“Buzzword” – Uh oh. Is Lean just a buzzword at Starbucks or is the WSJ just portraying it that way? Digging into the details, John Shook (formerly of Toyota and now with the Lean Enterprise Institute) is advising them. I haven’t talked to John about Starbucks, but I seriously doubt he would be involved with something that was just buzzwords. “Buzzword” makes Lean sound like just another program of the month. I hope not.

The WSJ typically gets it wrong about Lean-related topics, as I’ve blogged about and complained about before in four previous posts. So, I’m willing to assume Starbucks might be on the wrong track and the WSJ is portraying it wrong (starting in the headline!)

“Japanese” – For Pete’s sake, can we quit calling Lean a Japanese system??? Is the Wall Street Journal still stuck in 1981 when people in Detroit (and DC) smashed Toyotas? Lean has spread successfully around the world and has been embraced not just by Toyota in the U.S. (and France, even!), but pretty much every industry, including healthcare providers around the world. Lean is associated with Toyota, of course, but Lean has its roots in Dr. W. Edwards Deming and Henry Ford among others.

Calling Lean “Japanese” is sort of like calling pizza “Italian food.”

So I tried not judging an article by its headline. What’s the meat of the WSJ piece? First paragraph:

Starbucks Corp. built its business as the anti-fast-food joint. Now, the recession and growing competition are forcing the coffeehouse giant to see the virtues of behaving more like its streamlined competitors.

Excuse me, has anyone ever unearthed McDonald’s using Lean methods or thinking Lean? Which unnamed competitors exactly?

Taylorism or Lean (Toyota-ism)?

This is off to a bad start. True Lean thinkers think of it as being a method for engaging the entire workforce in continuous improvement. Far too often, though, the general public might associate Lean with Taylorist tomfoolery, such as “efficiency experts” from corporate lording over worker bees with stopwatches and top-down improvements. Fast food has more of an association with top-down Taylorism, not real Lean, don’t you think? When the WSJ wrote about Starbucks and their efficiency experts in 2005, it didn’t sound like Lean to me. It sounded like “leave your brain at the door” Taylorism.

Still, some baristas fear the drive will turn them into coffee-making automatons and take away some of the things that made the chain different.

At my currently-local Starbucks store in Boston, the employees already look, mostly, like disgruntled automatons. There aren’t many smiles. When your drink is ready, they pretty much slam it on the counter without making eye contact with anyone. It’s not the usual Starbucks experience.

These are not happy, engaged employees focused on customers. Or so it appears.

And this is the state of things, without Lean, we should ask “why?” Really, the store managers and Starbucks leadership chain should ask “why?” Are they not listened to? Is there too much waste, so employees are overworked and they don’t have the time to really take care of customers?

Engagement or Automaton-ization?

If Starbucks is truly embracing Lean, employees really shouldn’t fear becoming an automaton. The idea comes up again later in the article:

Starbucks has faced some resistance to the program. “They’re trying to turn workers into robots,” says Erik Forman, a barista in Minneapolis. “It’s going to essentially turn the cafe into a factory. They want to control our every move in order to pinch every possible penny.”

Of course, the Starbucks VP of Lean, Scott Heydon (who knew they had one), discounts that idea, as does John Shook, pointing out that Lean is about getting ideas from those who do the work. Those of you who visited here with an anti-Lean bias, please read those quotes (if you’re even still reading this). And see this quote about how Toyota engages people.

Robots…. turning us into a factory…. this sounds A LOT like what we always hear in healthcare. That’s not the case when Lean is successful in hospitals and it shouldn’t be the case at Starbucks either. We’re not trying to turn anyone into a factory – Lean isn’t all about moving assembly lines and “andon cords.” Everyone likes to say “we’re different,” as I recently wrote about here.

One of my classic stories from healthcare was being told by a medical laboratory technologist “I feel like a robot.” This was BEFORE anything Lean had been done. She complained that her work had gotten very automated over the last 25 years and she was like a robot because nobody (management) never asked her what she thought — about anything.

Lean, of course, takes things in the opposite direction. Start thinking, identify waste, implement your ideas to make things better.

Lean makes you LESS like a robot, if management has the right mindset and they are able to give up top-down control of every little detail. If your organization has a tradition of command and control behavior, any change is going to make employees fear more top-down B.S.

But, the actions have to match the language.

Now, baristas are required to grind beans for each batch and timers buzz every eight minutes to signal when it’s time to make new coffee.

Required? Is there any room for variation in this process? The WSJ wrote about this new coffee brewing method back in June. The goal is a good one — making sure customers always get what they want (meet demand) while having minimal wasted excess coffee (keeping cost low).

The WSJ described it as:

Currently, baristas decide when to brew fresh batches “based on multiple signals ranging from demand (quantity), to expiration and timing,” the new documents say, explaining that the revamped process “reduces this complexity by eliminating many of these signals.”

Now, depending on how busy a store is at a particular time, baristas will use 24-, 12- or eight-minute “cadences” to brew coffee so that no variety runs out.

Now I can’t say which process is better, not being a barista. There was A LOT of complaining about the new method on the “Starbucks Gossip” blog where disgruntled baristas tend to hang out online.

There could be one of two problems here:

  1. The new method is NOT really better (and it’s being forced on Starbucks “partners”)
  2. The new method IS better and it’s just not being explained well to the partners

Either way, if something is clearly better and people have been trained properly — they’ll adopt it. What’s the problem behind the problem with the new method?

The way Starbucks handles this will speak volumes about their approach. Is it top-down Taylorism (“we figured this out, it’s right, you MUST brew every 8 minutes!!”) or Lean with employee participation (“8 minutes is probably right, but you can use your judgment within these boundaries… or come up with a better way”). I was taught that, in the Toyota mindset, if you MUST give a directive, it’s the leader’s job to explain “why” and make sure the employees understand. You must very rarely rely on your “because I’m the boss” formal authority.


Cost Cutting or Total System Improvement?

Back to the barista, quoted above. He also sounds afraid that Lean is just another cost-cutting program. I hear that in hospitals all the time. Lean is about improving processes, identifying customer value and providing it more effectively — better quality and lower cost. The two pillars of the Toyota “house” are basically flow and quality. They go hand in hand.

When costs go down at Toyota or a hospital that’s implementing Lean, it’s the END RESULT of improved quality and better flow. This is not cost-cutting in a traditional sense.

Waste of Motion

There are plenty of examples of waste in the article — focused on wasted motion for employees. You can see this type of waste in your local Starbucks any morning.

Syrups aren’t stored in a good location — too far from where the espresso drinks are made. Partners have to bend down to get beans from underneath a cabinet. People are running back and forth too much when putting supplies away.

This wasted motion doesn’t serve the customer effectively. It increases costs because it increases required labor time. It harms customer service because a minute spent running around to get soy milk from an inconvenient place is a minute not spent interacting with a customer in a friendly way. Plus, labor cost is a big proportion of Starbucks’ total cost, so it’s the right “top down” direction to try to help reduce that. Top down direction is appropriate in a Lean model, but the ideas for how to execute and reach the goals need to come from the people who do the work.

Parallels to Healthcare

Believe it or not, this reminds me of the Lean focus with nurses in hospitals. If a nurse is only able to spend 33% of their time with patients (a number that comes up very consistently in different studies around the world and in my own Lean work), that’s bad for patient satisfaction and quality of healthcare outcomes.

Organizations like Virgina Mason have nearly DOUBLED the amount of time that nurses can devote to patient care. This is done by making sure supplies, equipment, medication, and information are never missing — making sure the processes and systems SUPPORT the nurses so they can take care of patients.

That could be a part of the Starbucks formula, even if the stakes are lower.

Better Processes = Less Waste = Lower Cost and Better Service

In my hospital Lean work, there are two areas of focus — staff observation AND patient flow observation. Starbucks seems to be focusing on the staff side, which is OK. But, they should make sure they are also focusing on the customer value side of things, not just waste reduction.

Another issue left uncovered in the WSJ article — what happens when Starbucks improves efficiency? Will *all* of the time go to better service? Taking care of more customers? Will Starbucks make a “no layoffs as a result of Lean” pledge as many hospitals have done (like Theda Care, Virginia Mason, and Avera McKennan)? If partners are fearful for their jobs, they are unlikely to participate in waste reduction and process improvement. I’m sure Starbucks turnover is relatively high. It’s more acceptable to not replace or backfill partners who naturally leave, IF the process is truly more efficient as the result of Lean.

What about Customer Needs and Value?

Another question that the article beds: Is Starbucks meeting customer needs in terms of product and waiting time? How is product quality and service quality? Quality can improve because of Lean operations (more consistent drink prep and more time for customer service), but you can’t come up with the whole picture by just following the staff with stopwatches. Lean should start with the customer, not just the worker. Maybe the article didn’t cover that part of the equation, or Starbucks is being completely employee focused.

Final Thoughts

One final thought on the staff observation — I wouldn’t have the Lean person from corporate holding the stopwatch. No matter how nice you are and how much you’re asking partners for input, this is intimidating. When I worked with hospitals, I teach the nurses (or medical technologists) to do the observation and time study themselves. This way, it’s more peer to peer. Starbucks could maybe adopt this same approach. Just an idea.

I’m raising some issues and maybe being critical, but again, to summarize, I’d guess that Starbucks has the right idea and is headed in the right direction if John Shook is involved. It may take time, but I’d guess Starbucks is on the right track if they can influence enough people fast enough.

That’s enough for today… over the weekend, I’ll write another blog post focusing on the “interwebs” reaction to the story and how much misinformation or misperception there is about what Lean and TPS are really about… and we can discuss why that’s the case. When people fear Lean, it’s often because they have only been around “L.A.M.E.” For now, you can check out the reader comments on the WSJ article. That’s one of the things I’ll comment on in my upcoming post.

What were your reactions to the Starbucks story?

Jon Miller (from the Pacific Northwest) also blogged about this today.

http://www.leanblog.org/2009/08/defense-of-lean-and-of-lean-at.html

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