Photo Credit: Dogancan Ozturan via Unsplash

Coffee, Culture, Scale

Scaling culture is challenging. Some thoughts inspired by Philz Coffee.

Originally published in Digital Thoughts, my newsletter on Nov. 27.

People who know me in person know that I’m a sucker for a good cup of coffee. But because I write about technology, business and systems there is hardly any opportunity for me to cover coffee. Thus, when the CEO of a Silicon Valley coffee retailer speaks about his company at a premier tech conference, it’s a great excuse to do so for a change.

When I’m travelling, I only buy coffee from trusted sources. But most coffee I drink is self-crafted anyway. My method of choice is the Aeropress. It’s incomprehensible (maybe silly even) to most people I share an office with that I go to great lengths to hand-press each cup. My response: Why would I have a so-so coffee when I can have an excellent one? Of course, the answer I mostly get is some version of time-constraints + convenience + not caring for coffee quality in the first place.

A very similar argument can be made in the case of a company’s culture. Many problems that occur within organizations can be traced back to cultural issues. Sometimes, what ought to be done is not in line with the culture (an umbrella term that includes values, purpose, habits & routines, and communications among others). Sometimes, the culture is just outright a mess. Nobody takes care of it. Time-constraints + convenience + not carring for culture in the first place.

Coffee retail, even the premium segment, is a low-margin, low-skilled work industry¹. Those industries are generally not famous for their great cultures (of course there are notable exceptions). Nevertheless, Jacob Jaber, CEO of Philz Coffee, has the ambition to build a coffee chain that mostly differentiates itself by means of culture. He described his approach in the interview he gave at Code Enterprise last week (transcribed and edited for clarity):

“I think that, especially in urban environments, people are really craving a sense of groundedness. There is a lot of self-discovery, people are not close to their families and friends. They are here to work. I think it would be really cool to create an environment — and that’s not only about the actual location and the space — and a culture that really speaks to welcoming everybody in a great, warm environment.”

In order to do so, Baristas at Philz aren’t only responsible for taking your order but are encouraged to have real conversations, consult customers so they find their favorite coffee and turn the customer experience into an authentic human interaction.

I think this is a very sound strategic assumption. Commerce happens increasingly online and, in general, retailers can’t compete on price, convenience or assortment. But they can compete on customer experience. In order to do so, they need to excel at those experience ingredients which aren’t easily replicable online.² Authentic human interactions definitely qualify.

While you might encounter these at owner-run coffee boutiques, they are rather uncommon in coffee chains.

This juxtaposition leads to the key question of the interview: How do you scale culture? It is a hard, important question. Every founder and every CEO of a growing business has encountered it. Alas (spoiler alert!), neither Jaber nor I have a definitive answer. Still, I think there are a few things one should consider.

In startups culture necessarily emerges from the founders’ mindset and, more importantly, actions. The company and its purpose are their brainchild and most early employees will orient themselves by their example.

First, it’s important founders are aware of this process. Not only is their leading-by-example a huge responsibility but those early days are essential for shaping the culture they end up with later. Second, they mustn’t become bottlenecks once the company grows. Essentially there are two scenarios: Either they manage to consciously set the grounds on which a healthy culture develops or they ignore the issue. In the latter case a culture will emerge naturally but at random and with an open outcome.

Let’s focus on the first scenario. It’s never too early to actively develop a culture. The busy startup environment likely won’t allow for several-day off-sites to work on the issue. Luckily, that’s not necessary. A lot can be achieved by establishing a few guiding principles, addressing the issue in day-to-day interactions and carving out some time with the team. While it’s always valuable to make those guiding principles explicit, you don’t need a neat chart-deck in the early days. What you do need is a common, shared understanding of what kind of place your company intends to be and become.

The aim of creating this shared understanding is to turn the complete early team into ‘representatives’ of your culture. In doing so you establish a ‘culture hub’. Jaber describes the Philz Coffee approach as follows:

“So much of what we do is reliant on our ability to connect really well with each customer. And I believe that instead of investing in scripts and processes we need to first build a strong foundation and a framework for who we are and what we are about. Because at the end of the day, we are our environment.”

The founders will continue to play a vital role in the culture’s development but once they build said ‘strong foundation’ or ‘culture hub’, they are no longer solely responsible. Or rather — because culture is a social process and will inevitably emerge with or without the founders intervention — they establish a baseline which, if successful, shapes the direction of the culture-forming-process.

I also like the part of Jaber’s quote where he addresses not investing in scripts and processes. If you follow my work, you are certainly aware that I’m highly critical of many practices most traditional organizations usually apply, be it budgeting practices, leading by formal targets or most bonus schemes. Instead, I’m an advocate of alternative approaches which are currently developed and applied by proponents of what I dubbed the #neworg movement. From my experience many founders are mindset-wise aligned with the underlying ideas. But it’s all too easy for run-of-the-mill practices to creep into your organization once it reaches the growth stage.

At that stage, the company is in the phase of finding out and defining how it does stuff. It establishes processes and formal guidelines. While this obviously makes sense, the way it often happens doesn’t: The people in the company apply what they’ve learned elsewhere. Thus, the company ends up doing stuff the way most companies do stuff. This might not be a problem in some domains but it certainly is in others. Thus, I challenge every founder and person in a startup to be very mindful in that stage. Actively encourage people to come up with the best solutions for your business. Try out new approaches.

This point might not appear to be directly related to culture but I beg to differ. The way a company operates and its culture are not separate things. They are closely intertwined. A very bureaucratic organization not only acts but feels different than a hip tech startup. You are free to build either but regardless of your choice: The result will likely be closer to your vision if you’re mindful of the process.

So, probably have a good cup of coffee (Philz or otherwise) with your team every once in a while and make sure to build towards a shared purpose. Because: Why would you have a so-so company when you can have an excellent one?

¹ Writing this feels wrong. While you don’t need a college degree to become a Barista it’s certainly a craft that demands skill. There are really passionate and knowledgeable folks who excel at the craft. I wonder if the whole terminology of ‘low-skilled workers’ is flawed and derogatory. On that note see also Jeff Weiner’s interview who addresses vocational training which we are often wrongly dismissive of in my opinion.

² Almost ironically, coffee is probably the retail segment least in need of Jaber’s approach: coffee is not prone to turning into an online business. Hot beverages are simply ill-suited for delivery. Long-term, however, the industry is endangered by the internet. Not because of delivery services for coffee but because of the thread it poses to other retailers. If foot traffic in inner cities decreases, so does the need for (takeaway) cafés. Thus, being a place people don’t only frequent because it’s there but because it’s great certainly matters. But the customer experience challenge is more urgent for other retailers.

About me

I work, think, write and speak about digital business, technology and decentralized systems. If you’d like to connect, follow me here on Medium, or check out my website to find out more. I’m always glad to talk & interested in inspiring discussions. My analog residence is Munich, Germany.