Experience Over Expedience
Why Starbucks Is Backpedaling, Third Places are Rising, and Costco Will Never Change Hotdog Prices
On a crisp Seattle morning in 1981, Howard Schultz stepped into a small coffee shop in Pike Place Market. The rich aroma of freshly ground beans filled the air, and the rhythmic drum and grinding of espresso machines provided a comforting backdrop to the chatter of customers.
This wasn't just any coffee shop — this was Starbucks.
Little did he know, Schultz was about to embark on a journey that would transform not just his life, but the way millions of people around the world experienced coffee.
As Schultz sipped his first cup of Starbucks coffee, he experienced what he would later describe as an "epiphany."
This wasn't just about the quality of the coffee. It was about the experience.
This sip of coffee brought a sense of community through the unique connection between the baristas and their customers.
In that moment, Schultz came face to face with the soul of what Starbucks could and would become.
Today, Starbucks has grown from that single storefront to a global behemoth with over 37,000 locations in 83 countries. It's a growth story that would make any business school professor proud.
But amidst this remarkable expansion, a crucial question looms: How do you scale care?
Growth is often the only measure of success. Many companies face a critical challenge: how do you maintain the very essence that makes you special in the first place – the soul of the company.
What is Soul?
It's important to understand what the soul of a brand really is.
Howard Schultz puts it beautifully:
"The soul of a brand is an intangible, but yet you know it when you see it, and so endearing when you feel and experience it."
This is the fundamental truth about what makes certain brands resonate so deeply with people. A brand with soul isn't just selling a product or service; it's offering an experience, a feeling, a sense of belonging.
Danny Meyer has called this “restoration” in the restaurant space — food and beverages renew and restore.
It's about creating something authentic that connects with people on a deeper level.
It’s likely why so many of these businesses describe themselves as being in the people business vs. the business in which they sell goods.
Howard Schultz believes that soul "doesn't emerge from the company's strategy or tactical execution. It's born out of love, of passion, and the responsibility of its leaders to simply do the right things."
You can't fake soul. You can't create it in a boardroom or through a clever marketing campaign. No one on Wall Street can pay for it.
It has to be genuine, and it has to permeate every aspect of your business.
The Starbucks Story
Starbucks' journey from a local coffee shop to a global brand is a masterclass in building a company with soul, at least for most of its history.
From the beginning, Schultz understood that Starbucks wasn't just selling coffee — it was selling experience. The idea of the "third place" – a space between home and work where people could gather and connect – was central to his vision.
This focus on experience extended to every aspect of the business. Starbucks invested heavily in its employees (or "partners" as they're called), offering benefits like health insurance and stock options even to part-time workers. They sourced high-quality beans and focused on crafting excellent drinks. They designed their stores to be welcoming spaces that encouraged lingering.
All of these elements combined to create a brand that resonated deeply with people.
As Schultz notes:
"We are a company of five plus decades of history and storytelling. From eleven stores and a hundred employees (not yet partners) in 1987, to thirty-seven thousand stores and five hundred thousand partners today."
The company's commitment to its values and its focus on creating a unique experience allowed it to scale care in a way that few other businesses have managed.
The Challenges of Scaling Care
However, Starbucks' journey hasn't been without its challenges. As the company grew, it faced what every scaling brand experiences: increasing pressure to prioritize efficiency and profitability over experience.
The introduction of drive-thrus, for example, while great for convenience, arguably detracted from the "third place" experience that was so central to Starbucks' identity.
More recently, the company has faced criticism for its handling of unionization efforts and for losing touch with its roots. The massive success of mobile ordering, while convenient for customers, has depersonalized the Starbucks experience.
This is the deeply difficult reality of scaling care.
As companies grow, they all face pressure to standardize and optimize, which can come at the cost of the personal touch that made them special in the first place.
It's a delicate balance, and even a company as focused on its values as Starbucks has struggled at times to get it right. When standards and optimization turn into depersonalization, something is wrong.
What Happens If You Don’t Scale Care
Charles Schwab launched his company with a powerful insurgent mission. As John Kador notes in his book Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry, "Chuck started the firm out of a deep sense of personal outrage that the brokerage industry systematically exploited its customers."
Schwab's mission was to bring financial services to the independent investor for the first time, offering the lowest rates in the industry.
Initially, this mission drove the company's growth and success. However, as Schwab expanded, it began to lose touch with its roots. The company created a complex bureaucracy with numerous customer segments, each with different offers and services. This complexity not only made the business harder to manage but also diluted the clear, customer-first mission that had originally defined the company.
The culture shifted from one of innovation and customer service to one focused on avoiding downside risk. As the authors of The Founder's Mentality observe, "People became more concerned with keeping their job than with doing it right."
The ability to grow always comes back to what's happening inside the company.
The problems that inhibit a company's ability to adapt, to decide and act quickly, to embrace new ideas, to keep costs down, or to scale its ability to serve customers are most often internal.
There are common symptoms of companies that are losing their soul as they grow:
Losing touch with customers
Becoming too bureaucratic
Increasing complexity in all aspects of the business
Employee fatigue and loss of purpose
Slow decision-making processes
Loss of clear direction beyond short-term financial targets
Some might argue this is inevitable as companies grow. I don’t agree.
I believe there is a way to actually scale care — but the effort is often Herculean. It requires a founders mindset that is repulsed by the common trends of modern-day management that is driven solely by share price.
Learning from Setbacks
Starbucks' recent challenges provide valuable lessons in the importance of staying true to your core values. The company's disappointing earnings report in early 2024 led Schultz to write an open letter emphasizing the need to refocus on the company's soul.
In this letter, Schultz argues that Starbucks is at a crossroads, facing an opportunity for "a reset, for self-renewal and re-invention." He emphasizes the need to protect and preserve "the center" — the soul of the company and brand.
This ability to recognize when you've strayed from your core and to course-correct is crucial for any company looking to maintain its soul over the long term.
As Schultz puts it: "There are no quick fixes. But the path forward should be what has guided the company over decades of financial success: Inspire your people, exceed the expectations of your customers, and let culture and servant leadership lead the way."
Costco, Chickens and Care
While Starbucks provides an excellent case study in the challenges and opportunities of scaling care, they're not the only company to have navigated this journey successfully.
Let’s consider my beloved Chick-fil-A.
Like Starbucks, Chick-fil-A built its brand around more than just its product (although this absolutely started with a great product).
Truett Cathy founded the company and was known for his commitment to customer service, often going above and beyond in ways that created loyal customers and viral stories of exceptional experiences.
Chick-fil-A has managed to maintain this focus on service even as it has grown to over 3,000 locations. The company invests heavily in training, emphasizing not just technical skills but also soft skills like courtesy and attentiveness. All while being closed on Sundays, a practice that might cost significant revenue, but reinforces the ultimate commitment to core values.
Unlike Starbucks, which owns most of its stores, Chick-fil-A relies on Owner/Operators who embody the spirit and leadership of the founder — people who keep operating on founder mode, so to speak.
It’s through this “secret sauce” that they have managed to instill their values and approach to service across this network, demonstrating that it's possible to scale care even in a more decentralized model. Scaling care through representatives who have a founders mindset are key for the long-term health and success of the brand — company owned, franchised, or anything in-between.
A final example of a company that has successfully scaled care is Costco.
Like Starbucks, Costco has grown into a retail giant, but with a very different business model. While Starbucks sells an everyday luxury, Costco focuses on providing value through bulk purchases. Yet, despite these differences, both companies have managed to maintain a strong sense of identity and purpose as they've grown.
Costco's soul is deeply rooted in its commitment to treating employees well and providing value to customers. The company is known for paying its workers above-average wages and providing excellent benefits, much like Starbucks' approach to its partners. This investment in employees translates into low turnover rates and high customer satisfaction, demonstrating that caring for your workforce can be a key driver of business success.
What's particularly interesting about Costco is how it has resisted the temptation to boost short-term profits at the expense of its core values.
For instance, Costco has maintained its famous $1.50 hot dog and soda combo despite inflation, seeing it as a symbol of their commitment to customer value.
Costco's co-founder and former CEO, Jim Sinegal, once famously told analysts who were pressuring him to raise prices: "If you raise the [price of the] effing hot dog, I will kill you."
That’s the founder’s mindset on full display.
Costco has managed to scale its culture across a vast network of warehouses, much like how Starbucks has tried to maintain consistency across its thousands of stores. This shows that it's possible to create a strong, values-driven culture that can withstand the pressures of rapid expansion and scale.
Like Starbucks, Costco faces ongoing challenges in maintaining its soul as it grows.
The company's expansion into e-commerce, for instance, presents similar challenges to Starbucks' mobile ordering push — how do you maintain the essence of your brand experience in a digital format?
The Ongoing Challenge of Scaling Care
It’s clear that scaling care is an ongoing challenge. It's not something you solve once and then forget about – it requires constant attention and effort. The dangers of losing your soul lurk on every corner.
This is particularly true in today's fast-paced business environment. The pressure to grow quickly, to embrace new technologies, to optimize for efficiency – all of these can pull companies away from their core if they're not careful.
The rise of mobile ordering at both Starbucks and Chick-fil-A is a perfect example of this. While it's undoubtedly convenient for customers and has driven significant growth, it's also changed the nature of the dining experience in ways that the companies are still grappling with.
The key, it seems, is to approach growth and innovation always through the lens of your company's soul.
As you consider new initiatives or expansion opportunities, we must all ask: Does this align with our core values? Does it enhance or detract from the experience we want to provide our customers? Does it support or undermine the culture we're trying to build?
This doesn't mean never changing or evolving. Both Starbucks and Chick-fil-A have embraced new technologies and expanded into new markets. But they've done so in ways that (for the most part) reinforce rather than detract from their core identity.
The temptation would be to ignore any warning signs and believe that everything is “all good.”
Every successful brand needs to retain their founder's mentality in order to continue to thrive.
The Rewards of Maintaining a Company's Soul
While maintaining a company's soul as it grows is undoubtedly challenging, the rewards for doing so are significant. Companies that manage to scale care often enjoy stronger customer loyalty, more engaged employees, and a more resilient brand.
Despite its recent challenges, Starbucks remains one of the most recognized and respected brands in the world.
Its stumbles have been noteworthy precisely because people expect more from Starbucks. They've created a brand that people care about, one that's about more than just coffee.
Chick-fil-A's commitment to its values and focus on customer service has helped it become one of the most successful quick-service chains in the U.S., despite being closed one day a week and having fewer locations than many of its competitors.
These companies demonstrate that it's possible to be both big and soulful, to scale successfully without losing what makes you special. It requires constant effort and vigilance, but it's achievable.
Strategies for Preserving Soul During Growth
Based on Starbucks' experiences, both positive and negative, we can identify several key strategies to maintain their soul as they grow:
Maintain the Founder's Mentality: Even as companies grow, it's crucial to maintain the passion and purpose that drove the founders. This doesn't mean the founder needs to stay in charge forever, but rather that the company needs to stay connected to its original mission and values.
Invest in People and Culture: As Schultz often says, "At Starbucks, culture is the currency of the company and its internal operating system." Investing in employees, treating them well, and making them feel part of something bigger than themselves is crucial to maintaining a company's soul.
Focus on Customer Experience: Never lose sight of what made your brand special to customers in the first place. For Starbucks, this means maintaining the "third place" experience even as they expand into new channels like mobile ordering.
Stay Connected to the Front Lines: As Schultz advises, "Senior leaders—including board members—need to spend more time with those who wear the green apron." Leaders need to stay connected to the day-to-day realities of their business to ensure they're not losing touch with what matters.
Be Willing to Evolve While Staying True to Your Core: Companies need to be able to adapt to changing markets and customer needs, but this evolution should always be guided by the company's core values and purpose.
Conclusion
As we look to the future, the ability to scale care will likely become even more important.
In a world where products and services are increasingly commoditized, the experience a company provides – the feeling customers get when they interact with your brand – will be a key differentiator. Hospitality is going to be gold in this new landscape.
Companies that can maintain their soul as they grow will be better positioned to create these meaningful experiences. They'll be able to forge deeper connections with their customers, inspire greater loyalty from their employees, and ultimately build more sustainable, successful businesses.
The journey of Starbucks shows us both the possibilities and the pitfalls of this approach. It demonstrates that it's possible to build a global brand without losing your soul, but also that maintaining that soul requires constant effort and attention.
As Howard Schultz puts it:
"It's the integrity and standards of excellence of a company's values and culture that must stand the test of time, while recognizing its innate responsibility to all those (none more important than its people) who are relying on its well-being."
This, perhaps, is the ultimate lesson from Starbucks' journey: Building a company with soul isn't just about creating a nice place to work or a brand that people like. It's about recognizing the responsibility you have to your employees, your customers, and your communities.
It's about creating something that matters, something that makes a difference in people's lives.
As leaders and entrepreneurs, we would do well to keep this lesson in mind.
Growth is important, but not at the cost of your company's soul. By focusing on scaling care alongside scaling operations, we can build businesses that not only succeed financially but also make a positive impact on the world.
And in doing so, we might just create something truly enduring – a brand with soul that stands the test of time.
References:
Schultz, Howard. "Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time." Hyperion, 1997.
Meyer, Danny. "Setting the Table: The Transforming Power of Hospitality in Business." HarperCollins, 2006.
Schultz, Howard. Open letter to Starbucks leadership, February 2024.
Kador, John. "Charles Schwab: How One Company Beat Wall Street and Reinvented the Brokerage Industry." Wiley, 2002.
Zook, Chris and Allen, James. "The Founder's Mentality: How to Overcome the Predictable Crises of Growth." Harvard Business Review Press, 2016.
Starbucks Corporation. Annual Report, Fiscal Year 2023.
Cathy, S. Truett. "Eat Mor Chikin: Inspire More People." Looking Glass Books, 2002.
Sinegal, Jim. Quote from 2018 Mental Floss article, "Why Costco's $1.50 Hot Dog Combo Has Cost $1.50 for Decades."
Starbucks Corporation. Press Release on Mobile Order & Pay feature, September 2015.
Schultz, Howard. "From the Ground Up: A Journey to Reimagine the Promise of America." Random House, 2019.
Thank you to
for his feedback on this piece. Go follow him!
Good to see you in my feed today Tim, and excellent article. Loved the anecdote about Jim Sinegal's death threat over raising hot dog prices. That small story communicates a lot.