10 Jan 2011

Much Ado about Starbucks


Nancy F. Koehn
James E. Robison Professor of Business Administration

Starbucks made a splash heard round the world last week when it showed off the new version of its logo. For Harvard Business School business historian and branding expert Nancy F. Koehn, that sort of reaction is perfectly in keeping with the company's approach to branding.

Last Wednesday, Starbucks unveiled a new logo, and the world has not been the same since. The change—a simpler, cleaner version of the mermaid (or, if you will, mythological "siren") minus the border and company name—launched a war of words on blogging sites all over the internet.

I have been studying and writing about Starbucks for 15 years (and drinking its coffee almost as long), and I'm not sure what is more interesting—the company's decision to change the symbol of its powerful brand or the intensity of the reaction to it. What I am certain of is that Starbucks and its CEO, Howard Schultz, have a history of breaking new ground with the company's brand, and that one of the core attributes of this brand is customer engagement. Seen from these two vantage points, I'm betting that Starbucks will come out a winner with this move.

Schultz bought Starbucks from its founders in 1987 and began to build what became "the Starbucks experience." In doing this, he and his company helped create the market for specialty coffee—a market that changed consumers' daily rhythms and their attitudes to paying premium prices for what previous generations had regarded as a "cuppa Joe." In addition, they begat a new field of competition (think McDonald's McCafes or Dunkin Donuts Coolattas) and created a brand that is continually ranked as one of the world's most powerful.

Along the way, Starbucks broke all kinds of rules. They refused to franchise, for example, instead pouring profits back into an infrastructure of company-owned stores. And they opted to build the brand from the ground up, focusing all their marketing resources on their stores, their employees (who received health care benefits if they worked more than 20 hours a week), and the customer experience.

By focusing on the customer experience in company-owned stores, Starbucks created widespread consumer engagement not only in what the company was offering—specialty coffee served as the customer specified—but in the actual creation and promotion of the brand itself. There are few better examples of the power of customer word-of-mouth in entrepreneurial brand building than Starbucks. And this engagement helps us understand the passions aroused in the current debate about the logo. Whatever your opinion about Starbucks and its new logo, you are not likely to be indifferent or blasé.

None of this is to say that Starbucks has consistently gotten it right. Schultz is the first to admit that he has made some important mistakes, including falling prey to the hubris that he believes contributed to the company's poor performance in 2008 and 2009. But seen from the perspective of the company's longer track record, his often controversial decisions, in tandem with his palpable entrepreneurial passion for what his company is up to, have given rise to far more successes than failures.

About Harvard Business School

Founded in 1908 as part of Harvard University, Harvard Business School is located on a 40-acre campus in Boston. Its faculty of more than 250 offers full-time programs leading to the MBA and PhD degrees, as well as more than 175 Executive Education programs, and Harvard Business School Online, the School’s digital learning platform. For more than a century, faculty have drawn on their research, their experience in working with organizations worldwide, and their passion for teaching, to educate leaders who make a difference in the world. The School and its curriculum attract the boldest thinkers and the most collaborative learners who will go on to shape the practice of business and entrepreneurship around the globe.