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What's Brewing at Starbucks?

What's Brewing at Starbucks?

The Supply Times Issue #62

Naseem Malik
August 15, 2024

Hello again, fellow caffeine addicts!

After assuring us for months that everything is fine, a stumbling leader withdraws from the race, making room for a new, energized replacement. As the spotlight turns to the newly appointed figure, the initial public reaction is overwhelmingly positive, and the future looks bright.

No, I’m not talking about Joe Biden’s withdrawal from the presidential election. I’m talking about the Grande-sized drama happening at Starbucks, where embattled CEO Laxman Narasimhan has been pushed out after only 16 months and replaced by Chipotle’s star performer, Brian Niccol. Scroll down for more.

Also, with all the hand-wringing about Quiet Quitting, it’s easy to forget that a culture of toxic overwork still exists in many organizations. The tragic death of a 35-year-old Bank of America investment banker has ignited a firestorm about working conditions and reports of 100+ hour work weeks in the white-collar sphere. The irony is that working oneself to exhaustion isn’t even good for your career.

And hey, my book is finally out! To quote my blurb on Amazon, Fire the Boss, Keep the Love is a must-read for anyone ready to take charge of their career journey and forge an authentic path to success. I’ve shared snippets from the book here in the Supply Times for a couple of months now, so please get yourself a copy if you’d like to get the whole story.

This issue features AI Insights and recommendations for the week's podcasts, books, shows, charts, and tweets, followed by a final chuckle.

Let’s get going.

Industry Highlights: Grounds For Improvement at Starbucks

Sixteen months. With the average tenure of Fortune 500 CEOs hovering somewhere around seven years, it’s clear the board at Starbucks felt drastic action was needed to arrest the coffee chain’s spluttering performance.

Laxman Narasimhan has stepped down as Starbucks CEO, paving the way for Chipotle chief Brian Niccol, who is set to take over on September 9. Investor reactions were swift, pushing Starbucks' stock up by 25% after the announcement.

Narasimhan’s brief time at Starbucks was marked by ambitious initiatives such as the cringingly named “Triple Shot Reinvention, With Two Pumps,” but ultimately saw disappointing earnings and a 22% decline in stock price since March. This contrasts sharply with a 36% rise in the S&P 500, highlighting the urgent need for a strategic direction.

I like Brian Niccol's approach. He brings a proven track record, having led Chipotle from a tumultuous period to significant growth, with its market value soaring from about $8.9 billion to $76.5 billion since he took over in March 2018. This experience positions him well for Starbucks, especially as the company faces significant pressures from various fronts.

Challenges include activist investors like Elliott Investment Management and Starboard Value, who have raised concerns about slowing sales and dwindling cafe traffic. Earlier this year, Starbucks cut its financial outlook for the second time, indicating that improved performance is not just expected but critically needed under Niccol. Activist investors can push for changes destabilizing long-term strategies, which means Niccol’s leadership will require careful navigation.

Poor Narasimhan has had to absorb none-too-subtle critiques lobbed by Howard Schultz, Starbucks' founder, who has been vocal about the company's direction on LinkedIn and elsewhere. This signals the level of scrutiny Niccol is stepping into.

Schultz's endorsement of Niccol adds another layer of complexity to this new leadership dynamic, indicating potential unity in vision but also emphasizing the high expectations that come with it.

Additionally, Niccol must navigate intense competition, particularly in China. The coffee culture there is expanding rapidly, with Starbucks reportedly opening a new store every 12 hours. But this is China we’re talking about, where there appear to be no limits to scale and speed. Local competitor Luckin Coffee is opening a new store every 1.9 hours(!), rapidly eroding Starbucks’ dream of a greenfield market. Luckin has established itself by offering aggressive pricing and tech-driven service, challenging Starbucks to maintain its premium brand while also expanding its market share. Niccol will need to strike a careful balance between quality and growth, ensuring that Starbucks’ values are not compromised in the race for market presence.

At this critical moment, Starbucks is looking to Niccol to stabilize operations and drive growth. As he prepares to take the reins, eyes will be on how he addresses the concerns of investors, revitalizes the brand, re-engages the average caffeine junkie (me), and navigates the complexities of both domestic and international markets.

Will Niccol’s leadership herald a new era of growth and stability, or will his tenure prove to be all froth without much substance? Stay tuned.

Image: X

The Future of Work: Deadly Overwork Won’t Help Your Career

It started in Japan, but overwork is everywhere. The phenomenon called karoshi was first reported in the 1990s, when mostly middle-aged businessmen were working punishingly long hours to the point where they died from organ failure such as a heart attack, or tragically decided to end their lives.

I thought about Karoshi recently when I read about the sad death of a 35-year-old investment banker and former Green Beret from an acute coronary artery thrombus. Perhaps he had an underlying heart condition, but the increasing evidence - and growing outrage - all points to acute stress, which has been linked to thrombosis. According to the NY Post, the banker had worked “100 hours per week for several weeks in a row” on a merger that was completed only three days before his death.

The deceased’s boss is under fire on social media (and recently took down his LinkedIn page), but Bank of America has “no plans” to take any action or investigate complaints of junior bankers forced into 100+ hour weeks. According to the WSJ, bank policies to prevent overwork are routinely ignored and juniors are put under pressure to underreport hours.

This isn’t the first time. You might remember a 21-year-old Bank of America Merrill Lynch intern was found dead after working until 6 a.m. three nights in a row, with the coroner determining the epileptic seizure that limited his oxygen supply may have been triggered by fatigue.

Back in 2021 a group of first-year analysts at Goldman Sachs leaked a slideshow to social media detailing 110-120 work weeks, toxic pressure and deteriorating health. One analyst wrote at the time: “The math is simple: that leaves 4 hours for eating, sleeping, showering bathroom and general transition time. This is beyond the level of ‘hard-working,’ it is … abuse.”

Of course, these are extreme instances. Proven cases of death from overwork are relatively rare, but it’s undeniable that many organizations put way too much pressure on staff - particularly junior employees - that ultimately harms their health and dramatically erodes work/life balance.

In many teams, there’s often a single individual who - perhaps because they can’t say “no” - is known as the office workhorse. This person has a track record for getting things done, but rather than leading to promotion, they find themselves rewarded with … more work.

Even if you’re putting in long hours and picking up the slack for everyone, it’s frustrating to feel stuck in the same spot at work. Many hard workers end up overlooked because all that effort can sometimes drown out the need for visibility and recognition. Experts like Alison Fragale (WSJ) point out that just working hard isn’t enough anymore. To really get ahead, it’s important to change how your colleagues and bosses see what you bring to the table. Sharing your wins and promoting yourself can help you shift from being just the go-to person to being viewed as a strong leader.

Instead of getting trapped in the workhorse routine, try focusing on how you present yourself. Keep track of your accomplishments and make sure to highlight them in meetings or regular updates to your manager. It’s also smart to set some boundaries and say “no” to tasks that don’t really matter, which gives you more time to tackle projects that will shine a spotlight on you. By building a narrative around your contributions—just like successful folks who’ve moved up the ladder—you can reshape how you’re perceived. This way, you’re not just another hard worker; you’re seen as someone who adds real value.

AI Insights

Google launches Gemini Live: Google launched its Pixel 9 series with AI features powered by Gemini, including call summaries and a photo reimagining tool. Alongside, they introduced "Gemini Live," a voice chat feature for Gemini Advanced users, which can respond to interruptions and remember previous conversations naturally. However, it currently lacks emotional intonation in chats, a capability seen in ChatGPT's voice mode.
Nvidia to train 100,000 students and educators on AI: In a bid to solidify California’s efforts to become America’s (and the world’s) center for AI technology, Nvidia CEO Jensen Huang has signed a partnership agreement with Governor Gavin Newsom to train 100,000 students, college faculty, developers and data scientists on AI usage. Focus areas will be on leveraging AI for job creation, problem-solving, and innovation.
Meta and Universal Music Group move to protect human creators: Implicitly acknowledging that AI generated content represents an existential threat to UMG, the two companies have entered into a multi-year agreement to enhance creative and commercial prospects for UMG artists and songwriters on Meta's platforms. The agreement focuses on “safeguarding human creators and ensuring equitable compensation, expanding monetization avenues, and tackling unauthorized AI-generated content.”

The Supply Aside

📕 Read - Fire the Boss, Keep the Love: 10 Jobs, 10 Exits, 10 Lessons

I'm thrilled to announce the release of my book, Fire the Boss, Keep the Love: 10 Jobs, 10 Exits, 10 Lessons.

As a practitioner of both supply management and talent advisory, it was fun to share my experiences in the professional world. Writing this book has been exciting yet daunting. While recounting some of the lessons learned was nerve-wracking, it’s been well worth the effort.

This isn't just another career memoir. It's a roadmap for navigating professional growth, built on my journey through corporate America and validated by industry titans.

So, what makes this book unique? Each chapter doesn't just end with my insights. It concludes with wisdom from top executives – think of it as your personal masterclass with multiple successful leaders.

Some of the things I cover in my book are: :

Career transition strategies
Building lasting professional relationships
Tips for thriving in diverse corporate cultures

Whether you're starting your career or a seasoned pro, this book offers fresh perspectives and actionable advice to help you level up.

More to come on the ten leaders who so generously contributed to this effort.

Fire the Boss, Keep the Love isn't just about my story – it's about empowering you to write your success story.

I was delighted to see today that it shot to #2 on the Amazon bestseller list in the career and job advice category.

Link to the book below - please check it out. Thanks!

https://www.amazon.com/Fire-Boss-Keep-Love-Lessons/dp/B0D88BKST4/

What Else I’m Reading

GE Appliances’ supply chain restructure pays off: A $2 billion effort to remake its supply chain has helped GE Appliances double revenue since 2017. The Louisville-based company has added manufacturing capacity, opened seven new distribution centers and implemented digital tools to streamline operations.
Duolingo making $500 million per year: The secret to success? Duolingo has an impressive track record of leveraging AI and A/B testing to keep users hooked - you don’t want to lose that streak!
JPMorgan Chase president’s powerbase has been dismantled: Speculation is rising that Daniel Pinto, long seen as the potential successor to CEO Jamie Dimon, will leave the $4tn company after a restructure saw top jobs going to three executives not favored by Pinto.

📺 Watch - Pete Stavros advocates for employee ownership

Private equity executive Pete Stavros has emerged as an unlikely champion for empowering and enriching the rank and file. In this 60 Minutes interview, he says giving workers a stake in their companies is good for them, and good for business. My thoughts: there are several models for employee ownership, and the idea proposed by Stavros is more like employee “shares” of the profits from the PE turnaround rather than “ownership.” The other point is that employee ownership schemes should never become a substitute for real wage growth.

👂 Listen - Howard Schultz on the Acquired Podcast

Well before the leadership machinations described in the main story above, the retired Howard Schultz sat down with the hosts of Acquired to tell them the whole story of Starbucks. It’s an incredible tale, considering Starbucks had only six small stores when he took over in 1987 and now has 40,000 locations worldwide and half a billion global customer purchases per week.

💡 Think - When Journalists Become the Story

The recent release of Wall Street Journal reporter Evan Gershkovich has me reflecting on the changing landscape of journalism. As someone who's been reading the WSJ for over two decades, including the print edition, this story had my attention.

Gershkovich's 371-day detention in Russia and subsequent release through a prisoner swap highlights the complex challenges journalists face today. It's a stark reminder of the risks taken to bring us accurate reporting, especially from less-than-friendly corners of the world.

While I'm relieved to see Gershkovich return safely, I can't help but wonder about the implications. Does this set a concerning precedent? How might it affect the crucial role of global reporting in keeping us informed?

As I flip through my daily paper, I'm newly appreciative of the work that goes into each article. I especially loved how Gershhkovich, on his final release application from the Russian prison, asked to interview Putin as a final act.