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How Starbucks Recovered from Its Own Success


Starbucks is a poster child of a company that was a victim of its own innovation. The company had grown from 17 to 2, 500 stores in only 12 years in 1999 and grew at an even faster rate in the 21st century. However, its handcrafted coffee drinks meant longer lines until it updated its machinery to make high quality coffee at a faster pace.

When CEO Howard Schultz departed in the early 21st century, competitors came from out of the woodwork, with McDonald’s McCafe and Dunkin’ Donuts sprucing up its coffee. Schultz returned to rescue his company, but was distressed at the need to keep up by creating breakfast sandwiches. Schultz wrote an angry memo about this development, “Where is the magic in burnt cheese?” With the scent of burnt cheese filling the stores, Schultz was concerned his company had “lost its soul.”

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Instead of trying to out egg McMuffin the egg McMuffin, Schultz opted to streamline operations, closed 600 stores and retrained staff.  Coffee making machines moved back to the handcrafted model with customers able to watch baristas making their drinks to the finest detail. By returning to what made Starbucks great in the first place and not trying to imitate competitors, Starbucks regained its edge.



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