Business Blog: Hoover’s Business Insight Zone

Steve Jobs might be more famous for returning to Apple and rescuing it than for founding it in the first place. At the very least, it was his prodigal-son’s return that helped move him from being a Very Interesting Executive (VIE?) to being regarded as a mogul among moguls.

Michael Dell may be hoping to do the same thing at Dell, where he retook the CEO reins in 2007 after several years serving as chairman-only.

Now Howard Schultz is joining the club, taking over from Jim Donald as CEO of Starbucks.

Starbucks Replaces CEO With Chairman

SEATTLE (AP) — Starbucks Corp. fired Chief Executive Jim Donald on Monday, handing the reins back to Chairman Howard Schultz as part of a major restructuring initiative aimed at pulling the company out of a downward slide.

The move, coupled with plans to close some U.S. stores and slow down opening new ones, comes as the world’s largest chain of coffee houses has seen its stock plummet 50 percent over the last year amid declining traffic in its domestic stores.

This reminds me of stories I read a few years ago, about how Donald and other high-level hires were supposed to help Starbucks as it continued to scale up around the world. In the story just quoted, Schultz acknowledged that those expansion plans may have helped to create the tough conditions that Starbucks now faces:

Schultz acknowledged the competition has gotten fierce and said the company will focus on making changes that will differentiate Starbucks from its growing field of rivals. But he argued competition, rising dairy prices and a faltering economy aren’t the company’s main problems.

He told The Associated Press that Starbucks has spent the last several years “trying to invest ahead of the growth curve — in people, process, infrastructure, roasting plants, coffee buying,” and that focusing so heavily on that has taken attention away from the experience customers are having in its stores.

“This is a problem that I think we’ve created, and as a result of that, that we can fix,” Schultz said.

Some analysts have questioned whether the company has saturated certain markets as it opens an average of six stores a day. Schultz brushed that theory aside, even while conceding it has grown too aggressively.

“I think perhaps we stretched the real estate too far during this economic time, and we’re going to dial it back. But we’re not going to dial it back with the purpose of changing the growth trajectory of the company,” Schultz said.

Here’s what I think: Both Dell, Inc. and Starbucks are facing fundamental shifts in their markets. PCs and coffeehouses were around long before these companies started ramping up their efforts, but Dell and Starbucks took advantage of — indeed, created — new market models. For Dell, that meant fast, direct delivery of customizable PCs; for Starbucks, it meant the rollout of chic and consistent Seattle-style coffeehouses on the McDonald’s model of “one on every corner.” Both of these models were new when they were rolled out.

Now the business models aren’t new. Many invasive competitors have figured out how to emulate and improve upon the key insights that Michael Dell and Howard Schultz first implemented. And just like McDonald’s today — or Ford Motor starting a few decades after it was founded — those conditions imply very different challenges for the companies in the years ahead.

What Schultz, Dell, and Jobs have in common: beaucoup smarts, energy, and competitive drive. But whether either Dell or Schultz will be able to pull off the renaissance that Jobs has at Apple . . . well, I’ll be stunned if either of them pulls it off.