The Memo That Said Starbucks Had Lost Its Smell

On February 14, 2007, the founder of the largest coffee chain in the world wrote a memo accusing his own company of turning its experience into a commodity, and within days the memo was public, as memos that tell the truth tend to be. Howard Schultz had stepped back from daily management. He had not stepped back from noticing.

The memo said, in plain words, what nobody wanted to hear in the middle of an expansion. The automatic espresso machines had "solved a major problem in terms of speed of service and efficiency" and, in the same movement, hidden the baristas from the customers behind a machine. Flavor-locked packaging had brought the loss of aroma, "perhaps the most powerful non-verbal signal we had in our stores". And the stores themselves had come to no longer have "the soul of the past," reflecting "a chain of stores vs. the warm feeling of a neighborhood store". Every one of these was a decision that had looked right in its own column.

A year later Schultz was back in charge, and his answer to his own memo was the gesture everyone laughed at. On February 26, 2008, at 5:30 in the afternoon local time, all 7,100 Starbucks stores in the United States closed at once for about three hours, so that 135,000 people could relearn how to make an espresso. Analysts counted the cost of an evening without sales. Competitors put discount posters in their windows. Schultz said only that the company was passionate about its coffee and would revisit the standards of quality that were the foundation of its customers' trust. Then, in July, came the gesture nobody laughed at, the permanent closure of 600 American stores and 12,000 jobs, most of them opened in the previous few years, in the race for one more street corner.

Of all the layers in this file, the tactical one hurts most, and it matters most to anyone running a company. Growth is the yes that applauds itself. Every new opening looks good in the quarterly report, every machine saves twenty measurable seconds per drink, every sealed bag cuts waste at the warehouse, and all of it is true and provable with numbers in any meeting. What is lost appears in no report, because it is lost in things that have no line item, a smell, a gesture, a glance exchanged across a counter. Nobody ever decided to ruin the Starbucks experience. A few hundred small decisions were taken, each correct in its column, and their sum was a brand that looked like a chain.

And the no that stops this has an awkward order. It shows first in costs, an evening without sales in 7,100 locations, six hundred stores closed, analysts laughing, and only later, years later, does it show in the brand. That order is the reason few executives dare to say it, because the cost is theirs, immediate and measurable, while the gain belongs to the company, late and without a line item. Schultz could afford the gesture because he was the founder and because he had, in a drawer, a memo about what the company meant, written before anyone asked him.

That evening is usually read wrong, so it deserves another paragraph. The three hours were not a training exercise, since any chain can train its people without closing. They were a message, sent at the same moment to employees, customers and the market, that at this company the coffee matters more than three hours of revenue. A brand is built also out of the gestures it allows itself in full view, and the most expensive gesture is the one that visibly costs and measurably returns nothing, because nobody makes that one for show.

The espresso machine has quieter equivalents that any owner will recognize. The reply sent from a template because it is faster, the standard quote that replaces the conversation, the new hire trained in two days instead of two weeks, each with its twenty-second saving and each taking, with no line item, a little of the reason people came to you and not to the place next door.

Fast growth leaves behind things nobody goes looking for. What disappeared from your company in the last year of growth, so slowly that nobody noticed in any meeting? And what is your equivalent of the smell of coffee, the thing with no line item that customers come for and that you could lose to efficiency? I will ask you for one thing. Make a short list of what your company is not allowed to economize on, however reasonable the saving, before the machine arrives, because Schultz wrote his memo late and it cost six hundred stores.