Starbucks Corporation had reported lower sales in the second quarter of its fiscal year ending March 31, 2024. This led to the coffee chain company’s stock price tumbling by as much as 12% on April 30, 2024. Starbucks’ chief executive officer, Laxman Narasimhan, cited customers abandoning their app orders because of very long waiting times at Starbucks stores.
CEO Laxman Narasimhan had been credited for spending time at Starbucks branches. He immersed himself in the front-line business of Starbucks, as he operated espresso machines, served coffee & food to customers, and held dialogues with baristas. From what he learned, he promised to improve working conditions and customer service. He recognised the difficulties of baristas such as when they needed to serve coffee drinks within company-specified lead times or when they ran out of cups or menu items.
CEO Narasimhan’s initiatives, however, did not pay off before its fiscal quarter ended on March 31, 2024. Sales had dropped together with income as well. And according to observers and Starbucks management, it was not because demand had declined. It was because Starbucks hadn’t been able to serve customers fast enough before they gave up on their orders.
The fall in stock price was a calamity for Starbucks. Executives and stockholders were obviously disappointed as company leaders promised to “speed up service” especially during the morning hours, when customers looked for their daily wake-up drink before going to work. But the idea of shortening service times sounded more like a knee-jerk response than an actual solution.
Was inefficient customer service really a major root cause for the unexpected bad financial news?
Customers clamour for Starbucks coffee products because of their quality, and excellent store service & ambience. But was a failure to maintain that excellence (i.e., serving customers quickly) the primary reason for the subpar quarterly financial performance?
Many executives prepare ready answers when calamities strike their corporations. They immediately identify causes and promise to solve problems. But are the causes they identify the problems that should be pursued?
Starbucks is a global company. Observers had noted that upstart coffee shops had been challenging Starbucks’ market share in China. There have been some price increases in coffee and food items, and prices of coffee beans had also been rising, putting pressure on Starbucks’ profits.
Could the stock price of Starbucks have dropped not only because of the reported lower sales but also because of the higher costs? Higher costs were likely contributing to reductions in income as much as higher prices may had played a role in declining same-store sales.
How do we solve problems? Do we wait for them to happen before we try figuring them out? Or do we anticipate them, ready with our teams to take them on? Or, do we ask questions, gather information, identify them, and figure them out?
We don’t welcome problems. It’s a common message we managers send to our peers and subordinates: don’t give me problems. And because we avoid problems, we only address them when they happen, which is when they manifest themselves as calamities, disruptions, or heaven forbid, catastrophes.
Worse, we are typically impatient in getting anything done. Therefore, when calamities strike, we rapidly seek remedies to mitigate them or just ride them out.
We are reactive, instead of proactive.
Proactive has been a popular buzzword. We say we are proactive when we act without a stimulus. We take initiative from a cause, which we make succinct via visions, missions, goals, & strategies.
The problem-solving approach is a splendid example of proactivity. Instead of waiting for calamities to occur, we seek out and solve problems such that we counteract, if not allay, their impacts. There is a plus side to imbedding such a mindset in our organisations.
But many of us don’t have one.
Most enterprises don’t have a policy, structure, or system which sees us seeking out problems, defining them, and painstakingly solving them. We, instead, tend to solve problems based on what happens in front of us, or more specifically, based on what happens in front of our leaders. Whatever the chief executives decide is the problem becomes our problem to solve.
A problem-solving approach requires a paradigm shift. It requires that we admit that there are problems out there which we have yet to recognise and we make an effort to identify them, clarify them, and find solutions. It requires we accept that we won’t have ready answers but that problems would be showing themselves as indications or symptoms which we should not ignore.
Starbucks had seen the symptoms. There was the growing & thriving demand, the longer lines at stores, the harder challenges baristas were going through in serving customers, and the runouts of supplies & menu items. The symptoms were there, and they indicated problems that were becoming potential calamities. Starbucks management just needed to detect them, dig into the data, and articulate the problems.
Executives immersing into their businesses are a good thing. But it would be a better if they did it with the intent to identify and solve problems. Immersing fosters better relationships with the people of our organisations but we could do a lot better if we also immersed to open our eyes to problems we could solve before they turn into calamities.
Ellery's Essays 
