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From Commodity to Transformation: How Selling Coffee Points the Way to the Future of Healthcare Delivery and Why it is So Hard to Get Right
In his 2006 book The Starbucks Experience: 5 Principles for Turning Ordinary Into Extraordinary, Joseph A. Michelli outlines how Starbucks takes a service (preparing coffee) and turns into an experience, a transformation that has not been without struggles and has proven difficult to maintain over time.
In the book, Michelli outlines the hierarchy of sales, showing that the highest margins are from those sales based on experience, using coffee as an example:
Commodity: Coffee beans.
Product: Coffee sold in the grocery store.
Service: Someone pours the coffee for you.
Experience: Going to get coffee becomes something special.
The market sets the prices of commodities. There is little you can do to charge more and you are left to try to move them around as inexpensively as possible. For products, the competition from the other 17 brands of coffee sitting on the shelf next to you mean the margins are razor-thin. Services can have a higher price, even though it costs more to deliver.
When I worked at the Great American Cookie Company in the mall as a teen, a full pot of coffee cost us 20 cents. We sold each cup for 40 cents, and it was our highest margin item. When you add in the experience, however, it allows you to sell coffee, not for a dollar or less, but for $3.45.
Starbucks does many things to move from a service to an experience. From the moment you walk in, there is the rich smell of a coffee house. The different types of drink have special names, and even the sizes are given special labels. When you order, a staffer asks your name, calls you by it, and adds it to your cup. If you are a regular, they know you and treat you, as one would expect from a small-town owner, rather than an international chain. You feel like a friend of the family.
The point Michelli makes is that people are willing to pay for the value of an experience that far exceeds the taste of the coffee. These days, many other outlets have good coffee. McDonald’s is one of them, but unless you are a youngster you are unlikely to be seeking a McDonald’s experience.
Disney World is another great example of the experience instead of the service. Disney charges families for the experience, far more than the services. In effect, Disney is selling memories of a great time. When Walt Disney created his first amusement park his mission was to “make people happy.” They have been consistently able to do that for decades. And they have been able to charge well for it.
In the old world of “Fee-for-Service” health care has been in a service model. That puts it into the category of McDonald’s is in from above. Services have been atomized into procedures, events, and things done to the patients. Often, processes are based on what works best for the system, and not the patients (or even the providers for that matter). The experience for patients and providers has been miserable.
Right now, Health Care providers are looking at the overall outcomes, including the patient experience. I believe this is the right direction, but I think experience, as hard as it is to achieve and maintain, is not the end goal. What the patients as customers want is nothing less than a use of products, services, and experiences that lead to transformations of their lives, a return to the fullest, least restrictive lives possible.
Providing that transformation requires success with the delivery of quality services and exceptional experience. That then becomes the new basic floor. Success in healthcare will be built on that foundation. Providers and employees at every level must be focused on the customers, their experiences, and invested in the effects of what they do, from the doctors to the cleaning staff.
Everyone is part of the transformation team, and that includes the customers and their families. Process need to support people and data needs to drive the process for the customers, as much as for the providers.
Transformation will be the most difficult thing to provide. It will require constant monitoring and change. Each department, and sometimes each customer will require individualized solutions. Technology must be used to provide the customization needed, just as it does with cell phones. When it is our turn to consume healthcare, all of us yearn to be seen as unique individuals. All of us are seeking transformation from sickness to wellness.
It is time for healthcare providers to deliver.
Originally Published at TalkForward.com. © 2018 Bryan G. Stephens
Published in Culture
No, we were able to improve the experience in a government run organization without spending more money, so it can be done.
Hope springs eternal. I’ll leave it to those in the business to hopefully prove me wrong.
From the press release…
Don’t discount the pond and waterfall. This grand edifice is part of a cat fight between Northwestern Medicine and NorthShore…two giant corporations. It is very visible…they cleared out a small forest to make sure it is visible from the highway. When you drive by, all of the glass facing east is on…hallways. This building is so humongous, it dwarfs the original structure–yet it decreased room count from 201 to 144. It has eight operating rooms, Evanston Hospital has 16 expanded and modern operating rooms (a $100 million overhaul to a 100 year old hospital).
When former Senator Mark Kirk was having a stroke, he drove himself to Lake Forest Hospital, who transferred him downtown to Northwestern in Chicago. My son needed to have surgery, they did it in Evanston Hospital, one of a few places in the northern suburbs that can handle children. Other suburban area hospitals have more specialized services (e.g., transplants, oncology, etc.) than Lake Forest. Lake Forest says they have bike paths and video conferencing. I had shoulder surgery in an outpatient surgical center located in an office park behind a Target–and yes, owned by the humongous orthopedic group. Clean, basic…cute, competent surgeon, great staff. All I needed. Then I went home, my favorite environment for healing.
On a related note, the opulence or whatever of that new Northwestern football complex makes me ill.
The Disney Experience is best for people with long hospital stays. All my deliveries involved 3 day hospital stays due to early deliveries and the comfort experience drove my choice in prenatal care.
I’ve had senior coffee, but I prefer fresh.
It will be difficult.
As a Northwestern Alum (Med School) I won’t donate a penny due to this…
Bernardine Dohrn, founder and former director of the Children and Family Justice Center (CFJC), Bluhm Legal Clinic, Northwestern Law School, will retire from the Center and Law School on August 31, 2013.For more than twenty years, Bernardine has been the CFJC’s visionary leader and champion in the struggle for justice for youth. She has advocated for fair sentencing for children, for applying international human rights standards here at home, and for ending the over incarceration of children of color. With Bernardine at the helm, the CFJC has taught, trained and mentored over 500 students and represented hundreds of youth in conflict with the law. Bernardine has played a leading role in systemic reform efforts to eliminate both the death penalty and life without the possibility of parole for children. She has led efforts to restore the Cook County Juvenile Court to its rehabilitative and child-focused origins, and to enhance the zealous advocacy of children. She has long championed the cause of the United States’ adoption of the United Nation’s Convention on the Rights of the Child.
Also a U of I
Chicago Alum. They don’t get a penny because of Bill Ayers….
Here’s another thing that makes me ill: The gigantic octopus of the University of Iowa Hospitals and Clinics and the University of Iowa. There can’t be a ratio of small town to gigantic, decadent buildings index that is worse. I hope it’s good for mankind. I doubt it.
It is best for people with non-complicated issues.
I can’t provide a Disney Experience for people who are demanding about every single little thing (too much ice, too little ice, the hospital is too loud, the curtains aren’t thick enough, the mattress is uncomfortable, the doctors don’t spend enough time with them, the nurses aren’t doing all of the vital signs and toileting, there’s no predictable rounding schedule…the list goes on).
I can provide a Disney Experience for a patient with minimal issues. But these are not the patients that are in hospitals.
I am a devoted fan of Joseph Michelli. I have not read the Starbucks book, but I read his book on the Ritz-Carlton , and another book he wrote on Zappos, and both are excellent, filled with humorous stories.
He’s a great writer.
You can do what you can do. I think organizations need to do more to up their game. As I say in my essay, what I am calling for is the hardest thing to deliver.
I have to say though, if I am in the ED, I think I am going to be as demanding as I am able. I am at my highest level of distress. Getting offended at patients in the ED being demanding is like being offended a hound dog barks.
Amazon is not the best example. As Jeff Bezos utilized his monies to utilize lobbyists who convinced Congress that selling Jeff the US Post Office would be in everyone’s best interests.
http://ricochet.com/504296/how-a-dem-majority-congress-sold-jeff-bezos-the-us-post-office/
This is why I like taking care of really sick patients. They aren’t demanding at all. They are trying not to die.
False.
Half of those people are there because they have a cold or a UTI and couldn’t see a doctor. The other half have actual issues. 85% of the time they’re on their cell phones, eating a sandwich asking for dilaudid.
Not at all in their highest level of distress.
These are both good examples. What the owner does with the money after the fact does not matter.
Walmart has made an art out of doing more with less. Now, Walmart is not in the experience or transformation business. They are in the “Sell at the lowest cost” business. That is a different business model. In fact, in my EMBA Program, we studied this very strategy.
You are right that the ED has many people who could not see an MD and came in for treatment. That is not highest level of distress. I am right that if I am there, I am not going to be one of those people, and I am going to be in my highest level of distress, or concerned I am about to be there. There are too many stories of ED staff failing to address issues out there, for me to trust the ED to get it all right. The best way to get good medical care is not to be compliant mindlessly, but question and understand what is going on as much as possible.
The rest of my statement, that to get offended people are demanding is like being offended a hound barks, stands. It is who is going to come into the door. If 85% of the people are seeking routine medical care, then that is just how it is. Getting mad at them does not do anyone any good.
One of the things I worked with my staff on, is that in the treatment of people with severe mental illness is that we went home at 5 (or whenever), and they had to live with themselves. The patients using the ED as a primary care facility are, for the most part, not living lives of joy and self-actualization.
I also preached and tried to practice self-care. Compassion fatigue is a real issue. If we grow to have contempt for our clients, then we cannot give them the best care. Unconditional Positive Regard is a hard thing to maintain, and we all fall short. This is why part of making a health care setting one of transformation is so hard. The culture needs to support the providers, instead of chewing them up.
I think what you point out about the difficulties you face, show just how hard what I am calling for will be to put into place. However, on another post recently, another member talked about how a unit at a hospital had reduced the secondary rate of infection with respirators to zero. They did this by involving everyone in making sure patients were at the right elevation. The rest of the hospital did not believe it was possible and had to be shown. I bring this up as an example of how a small group decided they would make a change and did, even when the accepted wisdom was that “nothing could be done”. Small groups making small steps can change the world. I’d like to see the big players encourage that.
We will have to agree to disagree.
I imagine running out of drugs is very distressing.
Yes it can be. And pain sucks. And I know RN has chronic pain issues. Life can be painful.
More psychologically distressing than anything else. Most of our patients wouldn’t die from withdrawal. They’ll just really, really, really hate life.
A reason for compassion.
Not really. At least not from staff.
It is required from staff.
You mentioned compassion fatigue earlier. If compassion is a limited resource, it probably shouldn’t be spent in vain.
I’m compassionate during the week. I come here to get real about the challenges in healthcare. Addiction is a huge problem and is often (in my patient population) a reason for hospital admission. These people are not respectful and are dual diagnosis patients. They belong in a psych ward more than a medical unit. Their problems largely stem from the drug use. These are also the patients most likely to assault the staff.
And no amount of Disney-like service changes that.
Depends. Are they screaming for dilaudid while you’re doing compressions on someone else?
I have to say that my compassion level goes down significantly when people are literally screaming for jello and dilaudid while playing on their phones or laughing with people bedside. It goes down significantly when people are actively drug seeking and acting obnoxious despite not being able to breathe a moment before (narcan is so much fun!).
We understand a lot about these people; they’ve burned out their ability to even get pain relief from the most strong of opiates. Some of these people are in neurological nerve pain where opiates simply cannot help. We understand and feel for their pain and hurt for our own helplessness to help them.
But more and more nurses are getting sick of being verbally and physically abused by people who think that you are their personal slave. The addict community and some ethnic groups tend to behave that way.
People who are not compassionate do not last long in healthcare in the US.
I agree. That would not be.
I am sorry if you don’t think I am being real about healthcare.
I did.
My friend who is still a therapist is.