How to Be Different

Happy new Year!
I've translated the schnitzel article and uploaded a pdf file for nicer printing here.

How to Be Different

"I'm selling this schnitzel like my competitors do." Were they human beings, this is exactly how most of our restaurants would sound like.

I have used the example with the schnitzel in order to demonstrate one of Michael Porter's models used in marketing and strategy.
Business people know Michael Porter as the guy with the five forces.

Michael Porter assumes one has business which makes money by selling schnitzels and concludes that there are only three ways in which one can own a viable schnitzel business:
1. No other competitor is able to make the exact schnitzel we are able to make. Hence we are profitable;
2. We have the lowest cost per schnitzel. Hence we are profitable;
3. We only serve schnitzels which are profitable.

The unequaled Schnitzel

The first approach reckons that a company consequently succeeds to get closer and closer to the perfect product - or at least the perfection sought by the majority of consumers. But true craftsmanship comes when no other competing company can get closer to this achievements.

Everyone evolves at the same pace, constantly selling a better and better schnitzel. This is, I guess, the origin for many of the problems faced by Romanian foodservice companies. In other words, the Romanian foodservice scene is full of decent, easy to copy products.

You might say that only your restaurant sells schnitzels with sesam in their crust but Mr. Porter will tell you that any competitor is able to serve sesam schnitzel as of tomorrow.

Worth emphasizing here, is the idea of sustainable competitive advantage. Not every difference compared to the rest of the market can bring you profit. Here are some ideas capable of really differentiating your product: a secret ingredient - unique to your recipe, a special way of producing the schnitzel - ensuring unique taste or form and - why not - a little bit of both. The important thing here is that our schnitzel is not resembling the one across the road.

And, since we speak of schnitzels, the best example here would be the stake served on hot stones at the "Little Switzerland" for years now. Firstly, it is a unique and fun way of producing the food - other stakes are not that playful. Secondly, it comes with a set of sauces and side dishes which go great together and the meat marinated in a secret sauce. Not beating around the bushes any longer, the swiss stake is cooked exactly after Porter's recipe.

Ok, let us ask the key question: How can your restaurant differentiate, should you not serve a single product such as the one the swiss Hausmann does?

Probably the Most Profitable Schnitzel

The second choice could also be called "the low cost schnitzel". I chose however to talk about it in terms of profits, because I wanted to shift your thoughts away from cheap airline tickets and discuss a sound business model seriously.

In order to be different, a company can bring a unique product to the market, trying to differentiate it from other competitors. A company also can look inside itself for new procedures and ingredients which are able to lower the costs without affecting the core product.
These companies live out the following philosophy: "A schnitzel is a schnitzel even if we fry it in hemp oil."

If I tell you now that McDonald's seems to employ this strategy, you would argue that their brand is highly promoted and that promotion is their source of successful differentiation. However, if we look at how McDonald's does business, we will see that the founders had the passion for consistently finding cheaper ways of getting things done. McDonald's prints their worldwide packaging in the same place and changes design very rarely. The menu is strictly supervised in what regards the number of items offered. This means that the company does not spend money on stocking up fish fingers which are only sold ten servings per week. The standards are so well established that everyone can build a happy meal after only one day of training and this means that anyone can work at McDonald's, hence the wages can be kept low.

Lost in Transition

The third way deals with finding a profitable niche or with selectively minimizing costs. I would prefer not to get into these details because people talk that entering the third way almost always gets companies stuck in the middle.

And I think that this is precisely where Romanian restaurants are: stuck in the middle. We have schnitzels resembling one another like two drops of water and we're trying to sell them. It's clear that we need to pick one way or the other. This would bring us all something good.

Organizations are like people

Organizations_Habits_inspired_buddhism
Originally uploaded by brandlyyours

Organizations are like people: they have both good and bad habits. Brands are, pardon the syllogism, like people too. :) So, this matrix ("Four Right Exertions" of Buddhism) is helpful to all 3 entities.

3 bullets on an uncountable noun

It's
*unique = 1 signal from 1 source to 1 recipient delivered at 1 moment in time
*a gift if delivered and received properly = open mindness needed from both giver and receiver
*something that nourishes growth and improvement processes = literary feeds the business

It's feedback.

PS: I hope, I'm not the only one having trouble giving and receiving it :)

Take care of your brand

An internal memo written by Starbucks' CEO leaked and receives a whole lot of attention these days. Starbucks confirmed the authenticity of the text and stressed:

"We do not embrace the status quo and constantly push for reinvention."

The underlying issue is however a conundrum for each and every business in transition from start-up to corporation. How can you cope with growth? Is the organization behind you as a leader and contributing to the brand experience? Are you losing brand focus favoring revenue growth?
What do you do when operations run amok? Whaterver your answers are, the text bellow actually shows that branding and brand guardianship are top executives' responsability. In other words: business strategy.

Enjoy the text.

From: Howard Schultz
Sent: Wednesday, February 14, 2007 10:39 AM Pacific Standard Time
To: Jim Donald
Cc: Anne Saunders; Dave Pace; Dorothy Kim; Gerry Lopez; Jim Alling; Ken Lombard; Martin Coles; Michael Casey; Michelle Gass; Paula Boggs; Sandra Taylor

Subject: The Commoditization of the Starbucks Experience

As you prepare for the FY 08 strategic planning process, I want to share some of my thoughts with you.

Over the past ten years, in order to achieve the growth, development, and scale necessary to go from less than 1,000 stores to 13,000 stores and beyond, we have had to make a series of decisions that, in retrospect, have lead to the watering down of the Starbucks experience, and, what some might call the commoditization of our brand.

Many of these decisions were probably right at the time, and on their own merit would not have created the dilution of the experience; but in this case, the sum is much greater and, unfortunately, much more damaging than the individual pieces. For example, when we went to automatic espresso machines, we solved a major problem in terms of speed of service and efficiency. At the same time, we overlooked the fact that we would remove much of the romance and theatre that was in play with the use of the La Marzocca machines. This specific decision became even more damaging when the height of the machines, which are now in thousands of stores, blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista. This, coupled with the need for fresh roasted coffee in every North America city and every international market, moved us toward the decision and the need for flavor locked packaging. Again, the right decision at the right time, and once again I believe we overlooked the cause and the affect of flavor lock in our stores. We achieved fresh roasted bagged coffee, but at what cost? The loss of aroma -- perhaps the most powerful non-verbal signal we had in our stores; the loss of our people scooping fresh coffee from the bins and grinding it fresh in front of the customer, and once again stripping the store of tradition and our heritage? Then we moved to store design. Clearly we have had to streamline store design to gain efficiencies of scale and to make sure we had the ROI on sales to investment ratios that would satisfy the financial side of our business. However, one of the results has been stores that no longer have the soul of the past and reflect a chain of stores vs. the warm feeling of a neighborhood store. Some people even call our stores sterile, cookie cutter, no longer reflecting the passion our partners feel about our coffee. In fact, I am not sure people today even know we are roasting coffee. You certainly can't get the message from being in our stores. The merchandise, more art than science, is far removed from being the merchant that I believe we can be and certainly at a minimum should support the foundation of our coffee heritage. Some stores don't have coffee grinders, French presses from Bodum, or even coffee filters.

Now that I have provided you with a list of some of the underlying issues that I believe we need to solve, let me say at the outset that we have all been part of these decisions. I take full responsibility myself, but we desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience. While the current state of affairs for the most part is self induced, that has lead to competitors of all kinds, small and large coffee companies, fast food operators, and mom and pops, to position themselves in a way that creates awareness, trial and loyalty of people who previously have been Starbucks customers. This must be eradicated.

I have said for 20 years that our success is not an entitlement and now it's proving to be a reality. 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.

Finally, I would like to acknowledge all that you do for Starbucks. Without your passion and commitment, we would not be where we are today.

Onward…