Cost cutting doesn’t work. You want results? Think ‘fix coffee.’

I walked into the offices of this Midwestern restaurant chain expecting a friendly reception. But the staff ignored me.  Instead, they were standing in the hallways, crying.

Apparently the bank had made a visit that morning and said that I, as a former consultant to the company and its new interim CEO, would be preparing the company for sale. And, they said, I’d be firing everybody.

To correct that nonsense, I called an emergency all-hands meeting.

“Nobody in this office is going to be fired,” I said.  “Cost savings won’t work, because the mistakes made here have been strategic, not financial. Since only changing the business will change the finances, that’s what we’ll do: change the business.”

At this point, people stopped crying.

“We’ll define the company’s core products and improve cash flow.” At this, the group brightened even further. We decided to take a break to study our next steps defining the core.

Identity Issues

But, as I expected, the company’s executives initially had trouble identifying the core.

One suggested omelets were core, because they had the highest revenue; one said hamburgers, because they were the newest; another said “breakfast,” because that’s when the most customers were in the stores.

I then did some simple homework to come up with my own, surprising answer.

Before I tell you the core product, let me share the logic: What was causing the company’s poor financial condition?  Lack of profit.  So defining the product that could produce the most profit was the most important step.

And you know what the core product was?

Coffee Talk

Coffee. It produced the most dollars of profit than any other product.  That, apparently, was news to everybody.

And can you guess what the most troubled product was?

Right. Coffee was, unbelievably, a controversial area at the company.  There was lack of agreement on the type of coffee to buy; on how to roast the coffee; how to price it, and how to serve it.

Not only that, but some stores wanted their own equipment, which brought a whole new set of issues.  For example, some stores liked a particular drip system, even though it often left coffee grounds at the bottom of the cup. The system was starting to get negative online reviews on the basics of the product and its delivery. There were also financial control issues around equipment and proper maintenance.

When we got back together and saw how much profit we were leaving on the table, everyone agreed: let’s fix this thing.

So what happened?  I already told you.  We fixed coffee.

We got in a room and got all the data about coffee out in the open.  Then we broke up into two teams—one addressing the buying-coffee problem and the other addressing the making-coffee problem.   We took people from all levels of the company and gave them real deadlines in an effort to make a real difference in the company’s life.

Why It Matters

There will be more on this project later, but I’d like you to remember a few things:

One—determining the company’s core products is the first step to turning it around. That’s because fixing the company is about fixing profit.

And two, identifying the core is not the end of the story. You also have to fix the errors-in measurement or execution–around the core.

And three, setting up teams with real responsibilities gets people used to working together again. It exercises cooperation muscles that may have atrophied during stressful times.

This company survived and now thrives. We didn’t stop the core products or core customer analysis with coffee.  But fixing that one product gave us cash flow—and a model of cooperation—that ultimately saved the company.