Coffee, The Grand, and Government

Rakesh Wadhwa
The Himalayan Times, 30 Aug, 2004

Unbelievable as it may sound, Starbucks, specializing in serving a variety of coffees to its customers, has become a US$ 19 billion chain. Its shares are listed on the Nasdaq stock exchange in the US.

Starbuck's founder Howard Schultz made a fortune serving coffee. How is it possible? Doesn't every restaurant, hotel, supermarket chain, store, home, and office in the US serve coffee?

Yes, anyone who has ever been to the US knows that coffee is the national drink of the Americans. Coffee is available in every establishment. The coffee maker is ubiquitous and more a symbol of America than its flag.

The answer just lay under the eyes of everyone in the US, but only one man, Schultz, had the vision to see the possibilities offered by this simple stimulant. He recognized that though everyone drank and served coffee, no one specialized in doing it. He said let me serve the finest and largest variety of coffees to my customers and they will pay me three times more than they pay other coffee vendors. Starbucks did just that and the rest as they say is history.

That is the power of specialization. A legendary Japanese industrialist once said, 'it doesn't matter if I just make and sell noodles in a village, I will merely make sure that I sell the very best'. This example may resonate well with us in Nepal where noodle-makers have done such a tremendous job that Nepal with barely 2.5% of India's population consumes as much as 50% of the noodles consumed in India.

Recently, while in Delhi, I had idlis and dosas, both at 'The Grand' hotel and at the lowly 'Madras Cafe', a small, largely unknown South Indian restaurant which specializes in these southern dishes. The idlis and dosas at 'The Grand' were just what they are in a 5 star establishment: dosas rather tasteless and idlis just a little too hard; 'Madras Cafe', served them near perfect.

Was there anything wrong with 'The Grand' management? Why can't they serve idlis and dosas like Madras Cafe, and coffee like Starbucks? They cannot and in their defense I might add that no other 5 star establishment can either. Why not? Because, dosas, coffees and idlis is not the core product which these hotels sell. Their competence lies in providing accommodation, ambience, and style to their customers and that they do.

Starbucks would not survive with bad coffee - that is its core product. Madras Cafe would not survive if it sold the kind of dosas and idlis which are routinely offered at five star hotels.

This shows that irrespective of money and resources, one can't be best in other than a very few services or products. Therefore, the need for specialization is obvious. And this has profound lesson for how governments; it shows how they ought to be run.

It is impossible for governments too to be all things to all people. Governments must understand that trying to run airlines, airports, hospitals, sugar companies, cement companies, banks, finance companies, newspapers, TV stations, hotels, and simultaneously trying to mange its core task of providing law and order, a justice system, and a national defense is a sure recipe for disaster.

Accept that it is impossible to do so many things, accept that people and businessmen can handle airlines and the like better, accept that governments responsibility is to fulfil its core functions, and, we will see the birth of a new nation which will prosper in no time at all.

Some people will dispute what I say. To them I say, 'lets do a poll and find out if people are satisfied with the functioning of the law courts and the police force. If and when 75% of the people say, 'We are satisfied', then and only then should the government venture out to do more. Until such time let our government concentrate on what it is supposed to do and leave the rest to us.

(The writer an economist and a proponent of free markets contributes to leading international dailies. Contact e-mail: everest@mos.com.np)