Subscribe to Ondisruption.com Update Sept. 2007: MCD vs SBUX six-month chart
Original Post: March 2007
My colleague Paul Paetz, the anti-marketer, examines Starbucks through the lense of competitive disruption.
Despite the firm's tremendous success, it looks like time for Starbucks to disrupt itself, he says.
"Starbucks was a disruptive innovator. It brought flavor, a friendly social setting, quality, plus the consistency that only a chain can do. They brought back the smells, the sensuality, and introduced to Americans a "European experience" -- and, what CEO Howard Schultz has described as the sense of theater...
...More importantly, they've overshot the needs of their customers, and are ripe for disruption.
Premium coffee has become mainstream. It's easy to add a pretty good cup of coffee to the menu. Especially for companies like McDonalds and Dunkin Donuts who already served coffee. They excel at speed and efficiency, and are optimized to process customers in seconds, whereas Starbucks will never get that fast without redesigning every store and adding a lot more baristas. Moreover, they are value-oriented -- i.e. cheap. For McDonalds, $1.25 for coffee is an improvement in margin, but for Starbucks, it's impossible to go that low. So, if I can get something almost as good for 1/3 the price, is that 'good enough'?
More than commoditization, Starbucks' real problem now is that the competition is 'good enough' to be disruptive and undermine their business. That's the real conundrum Starbucks faces. It will be almost impossible to go back."
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