blog from the ceo & superbarista of phoenix coffee, home of the best baristas in cleveland, ohio

Saturday, December 08, 2007

The death of R & D leads to a seminar on "where the money goes"

In July of this year, we created the first ever Phoenix Coffee Research and Development Committee. Our first meeting had an air of enthusiasm and excitement, the table was full of multiple volunteers from each store, about 10 people I think, brimming with ideas. We laid out an ambitious goal of developing new products that would be more sustainable, use local ingredients, be unique, tasty, healthy, attractive, well-marketed, and profitable. And, the roll out of these new items would be well-communicated, clear, complete, consistent. It was going to be something of which we were all proud.

Here we are, six months later. The meetings have gradually become more and more sparsely attended. Most of the members have taken on more responsibilities at the stores and are now overcommitted... Liz started making soups. Renee took over the cost analysis spreadsheet, and became part of the management at South Euclid, and learned how to roast coffee. Theresa is taking over some company-wide training responsibilities. Felicia, Caitlin and Wes are the management team at Lee Road. So it's down to me and Marcie, the manager of the Coventry store. I love Marcie, but this isn't much of a committee. We have lost any kind of grass-roots feel here. And there's something about our process that hasn't been all that attractive to either one of us, and obviously not to the members of our committee, either.

So the Phoenix R & D team is officially dead.

We've got to rethink this thing. Do we re-form the committee or do we re-form the whole Research and Development initiative in general? I am leaning towards the latter. Kill the committee. Who wants committees anyway? As soon as you hear the word committee don't you just know that you're dealing with a cumbersome process that probably doesn't work?

What we really want is a lean, nimble system like they have on Toyota's production line where workers make about 50 changes to their workflow in the course of two and a half shifts. That's about a change every 22 minutes. To acheive anything close to this rate of innovation, we would need constant, instant communication between the baristas. Our new employee blog started in July (that's where I've been expending my blogging energy for the past six months) and while it gets a lot of use, it still isn't the rapid-fire communication tool that it could be. We also would need really educated baristas, who not only know how to pull a shot, but who know how to cost out a new item and think through their own ideas and their execution. Cost analysis isn't for everyone, but a little bit of info can go a long way. When that great idea for a new drink is going to require us to sell it for $6 per cup, wouldn't it be good to think about that early on in the process? Marcie was telling me how much of a difference it made to her when I first shared our profit & loss statement with her. It changed how she thought about the company, just knowing where all the money goes.

So that will be Step 1 towards a new process for embracing barista innovation, all-day, every-day. We will have a seminar called "Where the Money Goes" during which I will share with employees exactly how every $100 or $1000 that comes in gets spent... why we need to allocate 28% for payroll, 34% for Cost of Goods, whatever the percentage is for rent, linen service, towels, debt service, etc and hopefully a 10-20% profit at the bottom.

When I sat down to figure out what the next incarnation of R&D would be, I never thought it would lead back to the money. But apparently that's Step 1. Step 2 and 3 might be further education about logistics, marketing, efficiency, and even business strategy. It could be a tall order. But neither Toyota nor Rome was built in a day. Nor does the caterpillar turn into a monarch overnight.


Blogger George Nemeth said...

Whoopie! I can actually post stuff to BFD from the Phoenixer blog now. I've been reading it ever since you told me about it.

I'm reading Naked Conversations (no, it's about blogging, not that!). One the takeaways from it is that blogging is about direct access. Your customers have direct access to you, but you also have direct access to them. Let them help you develop new ideas.

5:33 PM, December 08, 2007  
Blogger Sarah Wilson-Jones said...

George! I'm scared! We post controversial stuff on the Phoenixer blog! Won't we destroy this "safe space" for communication that we've created?

10:30 PM, December 08, 2007  
Blogger George Nemeth said...

Controversial stuff? Like green tea videos? I don't think that'll threaten your core business processes. Joking aside, sure there's a risk, but the point of NC is that the risk of not being open, transparent, and engaging is greater.

5:15 PM, December 10, 2007  
Blogger scott the beast said...

This comment has been removed by the author.

3:15 AM, December 23, 2007  
Blogger scott the beast said...

miss sarah,
i'm sad to hear that the r&d enthusiasm gassed itself. i suppose that it's hard to keep up with such an infrastructure through multiple stores, especially in terms of thinking through the cost and return of a innovative drink. it's probably very difficult to create innovative and equally sustainable ideas that the market is willing to accept, the relationship between "creative" and "economically feasible" being the hardest part.
however, i hope the idealism of your efforts hasn't been entirely crushed by the bureaucracy of a committee or the daunting numbers of the bills.

and if i ever make it up to cleveland, yours will be the first cafe i visit.

3:41 AM, December 23, 2007  

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