Monthly Archives: July 2008

Crowdsourcing – Weapons of Mass Creation

A nice, big-picture view of Crowdsourcing a.k.a. Open Innovation, from Jeff Howe of Wired.

The real question keeps coming back to how companies effectively harness this creative energy and create value. Meaning – how do traditional businesses earn revenue and pay salaries when all the value-creation is hemorrhaging out into the crowd?

The example of how crowdsourcing in the area of stock photography reduced the average cost of an image from 300 dollars to one dollar — is terrifying. Similarly The value of 11 newspaper companies traded on the public market since 2005 dove a combined $23.7 billion in the first half of this year. There will continue to be much gnashing of teeth as this creative destruction marches forward.


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Starbucks – Episode 2: The Clone Wars

Starbucks has gotten a lot of attention recently. From the Return of the Jedi, Howard Shultz, come to save the Republic from the evil empire, to the launch of their idea exchange, to the imminent closure of 600 stores.
Peter Merholz of Adaptive Path has the latest, this time on the opportunity of reimagining the Starbucks experience.
Peter’s post really got me thinking. First off, a bit of deconstruction is in order: I think there is an underlying assumption that if Schultz talks about the “Starbucks experience” and “returning to our core” what he really means is, “Let’s go back to what drove our phenomenal growth in order to get more growth” In other words, he only wants to deliver experience that is in the service of growth. I am not sure that ideal customer experience and growth always go hand-in-hand, especially if you are Starbucks in July of 2008.
The complexity of what it actually means for Starbucks to deliver a great in-store experience is what will make it near-impossible for them to succeed. To do it they will need to fight:
Their history, their shareholders, the sources of much of their current revenue. Here is why:
Starbucks’ fortunes rose on a near military-style focus on uniformity – a great café with a great cup of coffee all across the U.S. Then it expanded profits by introducing higher margin junk food options (I am sorry but a “Mint Chocolaty Chip Frappuccino” with a pre-packaged sandwich can’t be what Howard Schultz means when he says “returning to our core…all things coffee”). After junk food, Starbucks brought music (not local but mass market) and convenience store products (gum, breath mints and fancy versions of the candy bar) into the experience to keep growth going… The very products Starbucks now sells diminish the experience into generic “retail” when Starbucks initially succeeded by creating a sense of a hangout, a café. It was never retail in the way that Best Buy is retail. It was a cafe!
From a business perspective Starbuck’s faces stark choices if they want to reorganize around “experience”. (1)They have a business model that no longer remotely resembles a café (and will make any experience design problematic because what if the experience is improved by getting rid of 40% of the merchandise and narrowing the “all things coffee” options? What board is going to agree to that?). (2)They have a very corporate culture and (3) a huge workforce trained by the previous regime. They can’t imagine the experience from scratch in other words. Finally, who says that one customer’s experience in Duluth is what customers want in San Francisco or Orlando? The idea of a pan-world Starbucks experience is probably off-target to begin with…
I imagine something outside of the Starbucks empire: a slow return to the Long Tail of cafes. Small, niche places that have a direct investment in the communities they serve. Designing one-off unique experiences won’t be hard because rather than board members needing to hire intermediaries to follow customers around with clipboards, or create an online idea exchange (as much as I do like them), these owners actually know their community and clientele and want to create an environment for good coffee and conversation. As a sign in my favorite coffee place says, “Good things happen over coffee”


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