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University of Massachusetts Amherst

Family Business Center

Lessons from Ritz-Carlton, Starbucks, and Pike Place Fish Market

by Shel Horowitz

How did a struggling fish market not only start thriving but become world-famous? A big part of the turnaround was bringing in a young doctoral student, Joseph Michelli, to consult. Michelli not only helped the market's owner, John Yokoyama, turn the enterprise from a near-bankrupt purveyor of "slimy dead things" to a shopping and entertainment experience worldwide, but he and Yokoyama collaborated on a best-selling book, When Fish Fly: Lessons for Creating a Vital and Energized Workplace from the World Famous Pike Place Fish Market.

Later in his career, Michelli wrote a book about another Seattle company, a little coffee business you might just have heard of: Starbucks. He's currently chronicling the success strategies of the Ritz-Carlton hospitality chain.

Michelli brought his expertise, and the strategies of these three world-class companies, to the Family Business Center's
December meeting at the Delaney House.

For Pike Place Fish Market, the strategy began by listening to employees—and it was an employee who said, "'boss, let's become world-famous.' As we listened more, it was not hiring Saatchi & Saatchi [a top advertising firm] but a simple customer-centric solution: let's treat everyone as if they are world-famous. Let's not worry about selling fish, and worry about uplifting people, making people's lives better and [making them] feel as if they mater. They engage people in a lifeless product by being a mirthful place." And now, Yokoyama gets $50,000 to make a keynote speech.

Also in Pike Place Market, a block and a half down the street, is the original Starbucks. When it opened, with no seats, it sold only ground coffee; you couldn't get a cup to drink. And just as it took milkshake mixer salesman Ray Krok to recognize the possibilities in the McDonald's concept, so it took Howard Schultz, who noticed that Starbucks bought a lot of the high-end coffee grinders he sold, to bring the company, kicking and screaming, well past grinding and bagging coffee:

"He sees that they're passionate about the goods. He's gone to Europe and he's experienced the Europe coffee culture. He thinks, 'I can elevate this and deliver a service of brewed coffee. But they don't ever let him. Finally, they said, 'OK, you can open an espresso line but don't let it get in the way of our core business.'"

Schultz's original café was too successful for the store's owners, and they shut it down. But when Starbucks came up for sale a few years later, he organized the investors who bought it.

Schultz's dream was to create a "third place, where people can come for things that are too formal for the home and too informal for work." And a place where personal preferences matter; you can get 17,632 different varieties of coffee drink in a Starbucks.

Since then, Starbucks' core offering has been "affordable luxury"—and that stretches to every detail. When the accountants pointed out that the company could save enormous amounts of money just by switching from two-ply to one-ply toilet paper, the company rejected it; one-ply toilet paper sabotages the experience of affordable luxury that justifies a four-dollar cup of coffee whose raw ingredients might cost three cents—and a corporate juggernaut that opens six new stores a day, sometimes across the street from its existing location.

And like the fish market, Starbucks listens to its employees. Frappucino, accounting for half the chain's profits, was invented by Dina Campion, a line employee in the Santa Monica store.

Michelli identified five strategies that contribute to Starbucks' success:

  • Make it your own
  • Everything matters
  • Surprise and delight
  • Resistance
  • Make your mark

At Ritz-Carlton (now a division of Marriott), the touchstone is "'we are ladies and gentlemen serving ladies and gentlemen.' We are obligated to serve. We are creating a guest experience much like the experience they had at their mother's hotel—but I don't have to get my own sheets out of the drier."

The mission to create a personal touch extends a wide latitude to its employees, who are carefully screened and then thoroughly trained. Employees feel special, and they make customers feel special. Employees already have authorization to spend up to $2000 per guest to create this specialness. That astonishing figure is more understandable if you know that the Ritz quantifies the average lifetime customer value at $200,000!

And this leads to an experience like mentioning to the bus boy at dinner that the TV remote in your hotel room is broken, and getting this response: "'I'm so sorry that happened to you. I will make sure that is taken care of' (while the guest is sitting at the table right now). The bus boy owns it to its satisfactory completion, and says to the dinner guest, 'your TV remote in your room is fixed, and by the way, I'd like to comp your dinner for you.' It's a 'wow moment' in a world where people blame you for breaking the TV turner in your room."

Or how's this for a 'wow moment': if a staffer "overhears you tell your child, 'no I don't think they have Rice Dream here,' someone listens and goes out and buy some. And if you do that for a kid of mine, I'm loyal for life.

"If you empower people and treat them with the dignity of a customer experience, they tend to live up to that expectation."

For Michelli, the idea that every person matters is deeply personal. He began his talk with a story of holding an abandoned girl in a Chinese orphanage. He closed by revisiting that incident through his own brush with abandonment: "I was an unwanted out-of-wedlock child, left in a trash can. And I held that Chinese girl in the orphanage, and I was more transformed than her.

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