Starbucks Lean Process Improvement: Why Now? [video]

Starbucks Lean Process Improvement: Why now? – this article attempts to put some rationale on why lean makes sense for the company at this time.

This post is part of a series on Lean Manufacturing at Starbucks. The series of posts can be found here:

A Burning Platform

Most organizations need a burning reason to begin their lean journey.

For Toyota, the company that codified the Toyota Production System, which was popularized in America as Lean, began in World War II because they had no cash to pay for inventory. As a stroke of innovation, they worked with suppliers to provide just the right amount of inventory needed, in the time they needed it, the correct inventory they needed – and all marching to the drum beat of customer orders. This practice was later formalized as “just in time.”

From that practice, we get the helpful tools of Kanban, Visual Management, Heijunka, and others.

It’s important that we go back in history to see the conditions that led up to Starbucks considering, then choosing, then adopting Lean as a company strategic initiative.

Starbucks, Business Conditions

In late 2001 and early 2008, Starbucks entered a very challenging period in its history: sales had slowed down, customer visits had declined, and the stock was tumbling. Amidst all the very public challenges, Howard Schultz the founder and Chairman of Starbucks, returned to run the company and the current CEO left.

In his words, this is why Schultz returned:

If we take an honest look at Starbucks today, then we know that we are emerging from a period in which we invested in infrastructure ahead of the growth curve. Although necessary, it led to bureaucracy. We will now shift our emphasis back onto customer-facing initiatives, better aligning our back-end costs with our business model. We are fortunate, though, that the challenge we face is one of our own making. Because of this, we know what needs to be done to ensure our long-term future success around the world (source: goo.gl/aagb).

In that snippet, we get a glimpse as to why Schultz and team believe to be the root causes of their troubles:

Bureaucracy
Misaligned Back-end costs
Lack of focus on the customer

In all of that, he squarely plays the blame on himself and reiterates that they were all involved in making the decisions that led them to the troubles in which they find themselves.

By taking accountability, he shows vulnerability and that creates trust.

Later, in an internal memo, Howard Schultz said:

Let’s be smarter about how we are spending our time, money and resources. Let’s get back to the core. Push for innovation and do the things necessary to once again differentiate Starbucks from all others. We source and buy the highest quality coffee. We have built the most trusted brand in coffee in the world, and we have an enormous responsibility to both the people who have come before us and the 150,000 partners and their families who are relying on our stewardship (source: goo.gl/TCKf).

As part of the Starbucks transformation, Howard Schultz outlines the agenda (source: goo.gl/aagb):

Improving the current state of the U.S. business: by giving our store partners better training and tools, launching new products”some of which will have an impact as significant as Frappuccino® products and the Starbucks Card”and introducing new concepts in store design, among other enhancements to the Starbucks Experience.
Reigniting our emotional attachment with our customers by restoring the connection our customers have with you, our coffee, our brand, and our stores.
Building for the long term, which has two distinct pieces: realigning Starbucks organization and streamlining the management of the organization to better support customer-focused initiatives by ensuring our support and planning functions”from back-end IT systems to store operations”are most effectively dedicated to the customer experience. This will help us to make smarter decisions about new products and initiatives and bring them to market more quickly than ever in our past.
Expanding our presence around the world, by building a profitable business outside the U.S., and capitalizing on the enormous, untapped potential for our brand.

As we see above, business conditions led Starbucks to enter a transformational period. Howard Schultz then outlined the reasons why and the actual transformation agenda, which is above.

Starbucks, Why Lean?

Lean doesn’t occur in a vacuum. There must be a reason for it. For Starbucks, as far as I can tell, Howard Schultz’s transformation agenda – the 4 points above – clearly point to Lean as one part of the solution to helping Starbucks achieve their goals.

Within the context of the Starbucks Transformation Agenda, we can partly answer the “why lean?” question:

Lean can … provide store partners with better training and tools.
Lean can … improve store design and customer flow, along with other industrial engineering approaches such as Queueing Theory.
Lean can … reignite emotional attachment with customers by restoring the connection customers have with the barista, the product, the brand by helping the barista spend less time on making coffee and more time in connecting with the customer.
Lean can … help guide organizational redesign to bring leadership closer to the partners and customers; doing so, allows the Starbucks leadership to be closer to the Gemba, reduces the time-lag in the feedback-loop, and allows Starbucks to more quickly listen to and respond to customer feedback and concerns.

It’s clear that Lean is not a panacea; but taking the Starbucks Transformation Agenda and asking how Lean fits into the broader picture, we get a better sense of why Starbucks chose Lean. This argument, if I’m right, also dispels any notion that Lean was chosen strictly as a cost-cutting measure.

In the next post, we’ll look at the early results from Starbucks lean transformation and assess whether those results are aligned to the original transformation agenda set-forth by Howard Schultz.