Read the stories in the UK today about the latest Starbucks results and you’d be forgiven for having no idea that they are running a Lean Thinking improvement programme.
Starbucks managed to TRIPLE their profits, whilst increasing dramatically their Customer Satisfaction, so not a bad result by any measure, I’m sure you’ll agree.
The BBC claimed ” The firm has cut thousands of jobs and shut hundreds of under-performing stores over the past two years to trim costs”, whilst The Guardian reported “When he [Howard Schultz] retook control, he checked the company’s breakneck expansion, took out almost $600m in costs, closed nearly 1,000 stores, mainly in the US, and shut up shop for a day to retrain its legions of workers.”.
I would say blink and you’d miss any reference to Lean, only there aren’t any, not in anything I’ve read, heard or seen today.
Type “Starbucks Lean” into Google news and you get exactly 1 Hit (22.30 GMT 21/01/10), maybe this blog will make it two?
We looked for references to lean as we wrote this post Barista to Fashionista back in May, when we learnt of Starbucks foray in to Lean Thinking, and we were intrigued to find out what effect it had on their results.
Go to the Starbucks Earning Call and the fuller story comes out.
Troy Alstead, CFO, claimed that “US store operating expenses were 36.6% of total revenues, a 350 basis point improvement over last year primarily driven by the continued application of lean principles in our store operating model plus the effect of company operated store closures.” So admittedly not Lean on its own but the improvement is hardly just due to cost cutting and store closures. Note it was the CFO talking about it too, how refreshing is that?
Howard Schultz, Chairman of the Board, President & Chief Executive Officer and Founder, commenting on what Starbucks will do in their international markets ” Now that the US business has come back the way it is and we feel it is healthy and on solid ground we’re doing two things, one is we’re doing a comprehensive audit of all the things that we did in the US business that worked, that got our customers back, that put lean in our store and things that not only were consumer facing but also behind the customer as well…..a store, is a store, is a store and we believe that we can provide many of the opportunities throughout international that we brought to the US business.” So Starbucks are convinced that lean is part of their future in the US and Internationally.
Howard Schultz also commented on the vast improvement in Customer Satisfaction “I will point out here that we improved labor management and labor costs in our stores over the past year at the same time we have seen a dramatic improvement in customer satisfaction scores.” Now I can’t be certain but I’m not sure that closing stores improves Customer Satisfaction scores or that traditional cost cutting programmes often lead to improved Customer Satisfaction and as Lean is the improvement project Starbucks refer to then I’d chance a guess that it was Lean that drove up the Customer Satisfaction. Our experience at ResQ tells us that this often happens, along with all the other benefits. (faster customer service, order delivery, higher levels of output, improved quality, increasing employee engagement etc)
So if you’re a Starbucks employee or customer outside the US then it looks like Lean is coming to a store near you and you’ve nothing to be afraid of and if you’re a competitor, how could you TRIPLE your profits and improve customer satisfaction…………?
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