Learning from Starbucks and Ford

I have recently been reflecting on discussions we have had at our annual leadership retreats over our 10-year-history regarding the characteristics of successful companies and great leaders. At our first leadership conference in June of 1999, I indicated that I believed Ford Motor Company and Starbucks were beginning downward spirals which, if not reversed, would cause them major difficulties in the future. Today, it appears this prediction was correct. Therefore, I think it might be beneficial for us to review why we predicted for the last nine years that these “Journeys to Mediocrity” would occur, and the continuous learnings and implications for CHRISTUS Health.

Based on my experience at the Henry Ford Health System and my early visits to the Henry Ford company, I saw and then reported that I had concerns about several things:
1. They were touting quality as “job number one," and yet were recalling about 400 cars a week for poor quality at that time (1993). The number of recalls have steadily increased since then. I have always been concerned that they were not being honest with themselves nor looking at the data which--even in the 1990s--was showing that Toyota and Honda were gaining market share in the U.S.
2. They were blaming all their expense increases on their health care expenses, and I reminded them that they should also be looking at what I deemed excessive benefits for their employees and retirees (i.e. 230 days of rehab services a year for alcoholics). I also reminded them that in 1996 they had an equal number of retirees and active employees with a significantly under-funded retirement program.

With regard to Starbucks, in 1994 I began to see a significant and rapid elevation of their charges (i.e. almost $3 for a cup of coffee which they reported only cost them 20 cents). I assumed that someone would finally be able to produce an even better cup of coffee and make the pricing much more reasonable. (We do that now in our Healthy Living coffee shops.) Their drive to increase their profits was based on their desire to open more and more stores in the U.S. and the world at large. My concerns were:
1. Their "family" was growing too quickly and they were not taking time to create the Starbucks culture in each of their new locations.
2. They were implementing the same price increases that we saw were slowly destroying health care. For example, a Complete Blood Count (CBC) now costs us 6 cents to perform, and we still charge between $12-$24 (and some heath systems charge much more). As these processes have become more automated, the cost to us has decreased, but our price has not. The rule that your pricing structure must in someway parallel your cost structure or eventually you will reach an impasse is being violated in this case.
3. Also, I saw Starbucks continuing to not only grow the family excessively but diversifying the family too quickly by getting in the food business and the music business and therefore losing focus on the Journey to Excellence in the coffee business.

So what are the implications and learnings for us from Ford Motor and Starbucks?
1. We must never decrease the intensity of our focus and work on our Journey to Excellence.
2. We must continue to be transparent with all of our metrics, both internally and externally. This means we must never think we are better than we are, and will give us an opportunity to continue to share best practices from the best performers and continue to develop actions plans to reach our outstanding goals.
3. Our work to diversify our portfolio to include 1/3 acute care, 1/3 non-acute care and 1/3 international care must continue with health care and wellness programs, making sure we have the diverse leadership and expertise to lead these ministries which all connect.
4. We must continue to seek further understanding of our cost structures and increase to parallel our pricing structures to them. We must remember that you can not continue to fund growth with prices that a majority of people will be unable or unwilling to pay.

As move toward our 10th Anniversary on Feb. 1, 2009, we must maintain our commitment to being a “learning organization,” making sure we continue to transition CHRISTUS Health to being one of the best and future-looking health care systems in the world. Pausing to reflect on our conversations about the Ford Motor Company and Starbucks over our 10-year-history and reflecting on where they are today and the resultant learnings is an important part of our continuing Journey to Excellence!