David Louis Edelman David Louis Edelman

The Ever-Expanding Brand

News flash: Starbucks expanded too fast.

Or at least, so says Starbucks founder Howard Schultz in a memo that circulated on the Internet recently. The chain went from 1,000 to 13,000 locations in a decade. As a result, Starbucks has gone from the epitome of cool — which it really was, back when grunge was the hip thing — to, well, Starbucks. I think I literally pass about 15 Starbucks on my way to work in the morning, and those are just the ones that are within half a mile of the highway.

And yet, it’s easy to forget that Starbucks practically invented the modern coffeehouse. When I was in high school, there were no hip coffeehouses to hang out in. If you wanted to hang out and gab with your friends in a public place, you went to the mall. If you wanted to drink coffee, there was the Folger’s brand dreck you buy at the supermarket, or there were fancy-schmancy imported European brands. The first Starbucks were a revelation. Great coffee, great eye for design, quirky attitude, and socially responsible too! (Or so we believed then.)

Daniel Gross wrote a fascinating piece in the L.A. Times this weekend about companies, like Starbucks, that expand too quickly and sacrifice their brand magic. Other case studies of the trend, according to the article, include Krispy Kreme, Restoration Hardware, Snapple, and California Pizza Kitchen. All once exclusive — nay, magical — consumer experiences, all blanded down by Wall Street’s push for ever-expanding profits. Remember the first time you walked into Restoration Hardware? It was awesome. Now? Not so much. I might add to this list The Sharper Image, Tower Records, Boston Market, the Olive Garden, TGI Friday’s, and IKEA.

Extend the concept to television, and you’ve got Seinfeld, Who Wants to Be a Millionaire, and Star Trek. Film franchises? All I have to say is that Lethal Weapon was considered edgy on its release in 1987. The Batman and Superman series fell into self-parody and both needed expensive reboots. (Star Trek is supposedly next in line for a reboot, with Matt Damon, Adrien Brody, and Gary Sinise reportedly in line to play the young Kirk, Spock, and Bones. I kid you not.) Books? I would argue that Orson Scott Card has screwed the pooch on the marvelous Ender series with his increasingly wretched (and seemingly endless) series of Bean books and tie-in stories. (I could even go so far as to suggest the United States is subject to this phenomenon as well, but I don’t feel like getting political today.)

I wrote about this phenomenon in Infoquake. In fact, this arc of rise, bloat, and fall is one of the principle themes of the Jump 225 Trilogy. It seems to me that this is simply the way the world works. Brands, like people, like companies, like everything, are only allotted so much time on this Earth. Marketplace pressures demand that they expand quickly, and then the same marketplace pressures will pull them back down again. Nobody has yet found the magical formula to extend a company indefinitely, just like nobody has yet found the magical formula to extend people indefinitely.

Think of the brands that have stood the test of time. Coke, Sears, J.C. Penney, Ford, KMart. The only reason Coke continues its market domination, I’m convinced, is because of the virtual monopoly on the soda industry it shares with Pepsi, and that mostly has to do with distribution. There’s not a major stadium or movie theater chain or fast food franchise in America that doesn’t carry either Coke or Pepsi products. Give consumers a real choice and I’m betting that many of them would opt for R.C. or Virgin. Sears and Penney’s will soon go the way of Montgomery Ward, and Ford’s and KMart’s futures aren’t exactly looking promising.

Other companies survive for a while by remaining boutique brands — the L.A. Times article mentions In-N-Out Burger and Trader Joe’s, two companies that have resisted the impulse to line their stores along every freeway offramp in America. But it seems to me that this strategy only has so much currency too. Keep your company small, and you remain more vulnerable to economic shifts and shareholder revolts. Keep your company family owned, and eventually the family dies off. Small missteps (which are inevitable) can have drastic consequences.

The brand that I find most fascinating to watch today is Apple. Somehow, they’ve gone from being the coolest thing on Earth (the original Mac) to a lame also-ran (during the Sculley/Amelio days) to the coolest thing on Earth again (iMac, iPod, MacBook, etc.). There’s no doubt in my mind that Apple will one day fall — and it’s probably going to be in our lifetimes. In the past decade, Steve Jobs has wisely steered the company towards a more exclusive brand strategy that seems to be working pretty damn well. Keep the prices high. Don’t quite fulfill all the demand. Emphasize the coolness factor. Keep your audience relatively small. Why else would Apple enter the cell phone market with a $500 base model that only the Cool People will be able to afford?

But what happens when Steve Jobs retires or goes to that big Trash Bin in the sky? What happens the next time he makes an expensive blunder and the suits push him out to make way for some bland, faceless middle manager?

For now, don’t let the rhetoric fool you: Apple is very happy where they are. People watch the series of “I’m a Mac, I’m a PC” ads bashing Windows Vista and think that Apple’s really going to steal a lot of market share from Microsoft now. But that would be Steve Jobs’ worst nightmare. He doesn’t want 85% of the desktop market, or even 60%; once Apple is no longer the cool, hip alternative, they become — well, Microsoft.

They become Starbucks.

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  1. Brian on March 5, 2007 at 12:56 pm  Chain link

    But that would be Steve Jobs’ worst nightmare. He doesn’t want 85% of the desktop market, or even 60%; once Apple is no longer the cool, hip alternative, they become — well, Microsoft.

  2. Josh on March 5, 2007 at 3:20 pm  Chain link

    I wonder if people would be able to handle any level of permanence in products or a company. We’re so adjusted to constant shift, replacements and upgrades that I am curious whether we’re just going over-complicate and over-develop ourselves to death. It seems to be a part of our constant drive to reach further, jump higher, dig deeper. Boredom is the great Satan of today, and we sprinkle the holy water of constant distraction to keep him at bay, no matter whether there is any actual substance involved in our development. We’re saying screw the consequences…just keep us entertained, keep our hunger for the next new thing satisfied and we’ll walk off the cliff for you. Have we, as a world of consumers, taught companies to satisfy us this way, or have companies taught us that this is the only way we’ll ever be happy? Or is it one of those nasty cyclical things?

  3. Brian on March 5, 2007 at 10:47 pm  Chain link

    Hunh. My comment was truncated in some fashion. I had something about .. oh i no longer remember. It was great, great I tell you!

  4. David Louis Edelman on March 5, 2007 at 11:39 pm  Chain link

    I wondered what you were getting at there, Brian, but I figured I’d give you the benefit of the doubt because you’ve been a booster for my book. I’m sure it was Earth-shattering.

  5. Brian on March 6, 2007 at 12:19 am  Chain link

    I’ve finished Infoquakeby the way. Since then work got insane for a few weeks, there was a death in the family .. life happened. And I do owe you a review. It’s pretty nifty.

    As it happens a few minutes ago I found the entire comment in my rss reader from my cocomnent feed. It’s not genius but it’s better than the truncated comment. Was it Hemmingway that lost a suitcase with his first novel in it?

    But that would be Steve Jobs’ worst nightmare. He doesn’t want 85% of the desktop market, or even 60%; once Apple is no longer the cool, hip alternative, they become — well, Microsoft.

    If the conversation I heard today is any indication – no worries.

    Consultant Abe is talking with DBA Bob about upgrading to Vista. Abe spent the entire weekend buying a new laptop, returning the laptop, installing Vista on the thing, buying a copy and installing for his other machine .. in summary bending over backwards to get the thing to simply work. As of today he’s only got it to boot in 640×480 mode. The returned laptop? Met the specs for Vista – had the sticker but Vista claimed components were not suitable. Oops.

    He’s not letting this stop him – he’s determined to get the thing to work. Bob is going along – he’s a guy who likes his tools to work but doesn’t much care what form they take.

    They went through this upgrading from 2000 Pro to XP a few years ago, btw.

    This isn’t to bash Microsoft but just to point out that the tools they perceive they need are worth the pain of upgrading – at leastan entire lost weekend, probably more by the time it’s all said and done.

    But yes, brands. I’m not sure there is a way out. The market seems to demand growth – but what if your niche is just fine without growth?

  6. Matt Jarpe on March 6, 2007 at 8:47 am  Chain link

    I read an article in the Boston Phoenix last week about Dunkin Donuts. It’s been around since the early 50’s (we sometimes go to the original location, still operating in Quincy). We have four of them within a mile of our house, no Starbucks in sight. According to this article Dunkies became part of the New England self identity about the time Starbucks showed up. Real New Englanders drink Dunkies, posers drink that Seattle crap. Krispy Kreme never had a chance here. (I whatever coffee is free or closest to hand. The only bad thing about Dunkies is trying to get the person behind the counter to understand that I don’t want milk or sugar. “Small coffee, black, no sugar, please.” “Is that extra milk and three sugars?” “No, black, no sugar.” “Was that second coffee with cream and sugar or just sugar?”)

    Anyway, Dunkies is taking off in other places too, mostly fueled by transplanted New Englanders. It will be interesting to see how that brand’s trajectory differs from Starbucks or Krispy Kreme. It’s already a much longer arc, but I wonder if the drop will be as steep once it reaches market saturation.

  7. […] What do Star Trek and Starbucks have in common? They both used to be cool, perhaps edgy, and maybe even revolutionary. What killed them both? Over-extension of the brand. Put more simply: NextGen, good; Voyager, bad; 100 Starbucks, good; 10,000 Starbucks, bad. That, according to opinions-aplenty sci-fi author David Louis Edelman. You think this has nothing to do with IT? Think again, as Edleman brings it full circle: […]

  8. Geoffrey Allan Plauche on February 10, 2008 at 12:39 pm  Chain link

    Great article. I pretty much agree.

    A similar kind of cycle affects states and civilizations too, although with much less benign consequences.

    Regarding Coke vs. Pepsi: I actually prefer Sam’s Choice Cola (the Wal-Mart brand). To me it’s just the right mean between Pepsi’s sweetness and Coke’s dry kick. It’s also a lot cheaper.

    I haven’t Infoquake yet, but I’m putting it on my list. I think I came upon your blog through SF Signal, but I can’t remember for sure.

  9. Geoffrey Allan Plauche on February 10, 2008 at 1:00 pm  Chain link

    Oops…I left out an important verb there at the end.

    “I haven’t read Infoquake yet[.]”

  10. David Louis Edelman on February 10, 2008 at 6:18 pm  Chain link

    Thanks, Geoffrey. I look forward to your comments when you do get around to reading the book…

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