Starbucks is in Trouble
Starbucks is in trouble. The founder thinks so, the shareholders believe so, and most importantly, the customers and employees think so.
On August 13th, Starbucks replaced its CEO. The new leader is Brian Niccol, a topper coming off a successful run at Chipotle.
Joe Pine and Louis-Étienne Dubois describe its demise in compelling terms in their recent HBR article.
In 1996, Fred Reichold taught us the causal relationship between employee loyalty, customer loyalty, and shareholder value. It always starts with the employee and customer experiences. Shareholder value should never be a target manipulated by CFOs; it should be the earned result of good leadership.
XLAs as a Management Instrument
My thesis is that if Starbucks’s frontline were governed by XLAs (Experience Level Agreements), it would be in much better shape. XLAs essentially inform us whether a designed experience succeeds in creating time well spent or time well invested, as experienced by employees and customers. The experience management expert Tony Chapman explains in his recent LinkedIn post that by focusing on time-less wasted, Starbucks is no longer a ‘place to be’ but has become a ‘place to buy.’
When company executives run their organizations as if they were in the service economy and not the experience economy, a car-crash in slow motion is almost inevitable. Focusing on ROI, same-store sales, productivity, and utilization are innovation and growth killers. Once you go this route in the experience economy, profitability can only be secured through endless optimization cycles as companies commoditize themselves. As you execute this cycle, the heritage staff leaves, and the customers lose interest.
Build versus Run
The great experience designers of our time are often creative project-oriented artists. They rarely concern themselves with the semi-permanence of the staged designed experience on completion. This can pose a challenge when we need to scale the experience, like a destination store (40,000 of them if you are Starbucks) or a global travel experience (think Marriott or Hilton.)
The XLA Stack
XLAs translate the designed experience into experience indicators and underpin them with operational, technical, and cultural indicators—not just surveys! With this XLA stack, we create an XRM (Experience Reference Matrix) that we can use to monitor and manage the sentiment concerning the designed experience. The XRMs feed into dashboards used in an XMO (Experience Management Office) for analysis and recommendation.
The XLA helps us anticipate declines in experience (Gravity of Average Performance) as people’s valuations change. It also allows us to spot flaws in the design and identify unreported and underreported events that matter.
If Starbucks had used frontline XLAs, it would have seen the impending commoditization. XLAs would have shown changes in sentiment among staff and customers. They would have acted as a counterbalance to the flawed financial logic emanating from many boardrooms.
The XLA is especially important when the original experience strategy is handed off. When Walt Disney, Elon Musk, Steve Jobs, or Howard Schultz ran the company, they were the XMO. However, I suggest that when the more operationally or financially expert executives take over, like Bob Chapek or Tim Cook, companies need a mechanism to replicate what the founders instinctively did regarding experience. The XLA should be a part of that mechanism.
Conclusion:
- Running any business in the experience economy requires a different skill set than running a business in the service or manufacturing economy.
- If you don’t have a designed experience, you don’t have a predictable experience.
- If you don’t have an XLA, you don’t have a managed experience.
- Because all experiences have a life cycle, when your employee, supplier, and customer experiences change, your entire organization is at risk for volatility and demise, which might seem random but is always predictable.
