Focusing on the Customer Has Its Perks

One of the fascinating things about business is what people are willing to pay for products. You can step into a 7-Eleven or McDonald’s and pay about a buck for a cup of coffee, or you can go to Starbucks and pay around $5.

Obviously, plenty of people opt for Starbucks.

Coffee is essentially a commodity item. Yet, Starbucks manages to go way beyond surviving. It thrives.

In an era where branding is huge, mobility matters, social is crucial and experience defines products, Starbucks assembles all the pieces of the puzzle well. Service is typically excellent, drinks are custom made, it’s possible to pay (and now order in my hometown of Portland, Ore.) via a mobile app, loyalty points are added to the card or app automatically, and content channels supply news, information, music, apps and more.

It’s not a cup of coffee, it’s a lifestyle.

It’s not easy to replicate the success of one company at others, but there are a few lessons learned from Starbucks. It’s critical to tie together all elements of a business in a seamless way and, increasingly, put mobility and an omnichannel approach at the center of everything. Customers want speed, convenience, a cool factor, and they want to feel special.

The march toward commoditization is persistent and ongoing. Over time, it’s the way the marketplace wrings out inefficiencies. Yet, today, commoditization cycles are accelerating. Decades have been reduced into years. Years have been compressed into months. Almost no industry or business gets a free pass.

There are a couple of ways to survive commoditization pressures. Stay on the front edge of innovation so that even a commoditized product–such as a cup of coffee–is perceived to have greater value. Or, be really good at manufacturing or producing items efficiently so that you can squeeze out a meager margin. These days, it’s increasingly necessary to do both really well. Any glitch, gap or breakdown can topple the entire system.

The key, of course, is the effective use of IT to drive greater efficiency and unleash innovation. While virtually everyone has the same coffee beans at their fingertips, not everyone brews it and sells it the same way. The ability to think creatively, take risks and combine technologies to produce a 1+1=3 equation goes a long way toward evolving beyond bean counting and serving up real value.

Samuel Greengard, a contributor to CIO Insight, writes about business, technology and other topics. His forthcoming book, The Internet of Things (MIT Press), will be released in the spring of 2015.