How to grow out of your children’s shoes… Wawee Coffee, Act II

Today I returned to my local Chiang Mai coffee shop after a week on a business trip to Australia. It’s the day Wawee Coffe is celebrating its 5th anniversary. The small coffee chain which I have already written about now has 5 shops and is at a crossroads: It’s growing out of its children shoes. I wonder what I’d do myself at this stage if I were the owner. Would I invest the returns in an expansion or would I invest in a completely different business? Would I extend to other cities or focus on Chiang Mai? Would I look for investors or would I grow organically? Would I grow in a centralized manor or build a franchise?

Well, first of all I would do a reality check. If I were Wawee's boss I would analyze why I have been successful? I wouldn't do it alone, but I would involve the people that deal with customers every single day: my employees. I would do a team exercice reflecting on the following questions:

  • Was it the business model design that brought success? Was it because I am different than the other coffee shops? Then how strong would my competitive advantage be compared to the market? Example from another industry: Skype.
  • Was it simply the market circumstances I came across that brought growth? It is relatively easy to ride a growing market. Then I would have to prepare for harder times. Example from another industry: Vodafone.
  • Was it my execution skills that allowed me to thrive? Exceptional leaders can make almost any business model grow for a while. Then my success could be temporary if my business model was not sound. Example from another industry: Steve Jobs with Apple (will the iPod/iTunes success last?).
  • Was it my team? Sometimes when exceptional people come together in a team success happens on its own. Is the Wawee team different from others? Then I would have to invest in my team and make sure I find similar people. Example from another industry: Google.

Personally, I think Wawee strived based on a combination of sound business model, growing market and good team & execution. This, of course, gives an appetite for expansion. So what would I look at if I were to expand? Some uncooked thoughts:

Brand building

In Chiang Mai the brand is one of Wawee’s strongest assets, particularly among students. I don’t know if energy and money went into brand building or if it just happened (a la “tipping point”). Probably it was mainly the latter. This means it will be very challenging to build a brand image in other cities. Personally, I think a range of “guerilla marketing methods” could be effective. Small online games attached to emails and SMS campaigns could have a viral marketing effect among their core customer targets that include students, yuppies and young aspiring professionals.

People

I believe one of the reasons Wawee is striving are their people, their team. In Thailand I have often missed good service levels. Wawee is one of the rare places where I feel the team is trained to run a business and to serve its customers. I have never understood why Thai businesses don’t invest in good customer service levels. This is the face of the company which the customer gets to see day in day out. When alternatives are available good service is the thing that customers look at – and in the Thai coffee market there are definitely alternatives. A small, well trained and well paid team in each Wawee Coffee will definitely make a difference.

Location

This one seems to be a no-brainer, but nevertheless a challenge. For any new shop that Wawee sets up they have to be driven by the customers they target (where do they go?) and the brand image they want to build (does my brand fit into a shopping center?). This seems obvious, but so many companies are incoherent when it comes to location. They just try to be where everybody else is... following the herd. Being first is the real game: The big names like Yum Brands (owner of KFC) use sophisticated geo-software to test potential new locations as a function of the number of potential target customers. In the case of Wawee I would guess they would want to be close to business faculties and offices of big businesses.

Franchise or Control

One of the challenges if Wawee is to expand is to give away control. Franchising is an often chosen route for rapid expansion. The advantages are obvious: an entrepreneur that buys a franchise often has a bigger interest in making it succeed than a manager that lives on a salary. However, choosing franchisees is a challenge and giving away control means taking risks.

Differentiation

I am still not entirely sure how Wawee can differentiate itself from other coffee shops over the long term. Its main assets seem to be its people, its brand, its style and its locations. Given its target customers I was wondering if adding free Internet would make a difference. Though easy to copy it could be a strong attractor if connected to the Wawee brand. In any case differentiation has to be constantly on the radar screen in a market that is getting so populated.

So what?

My global readers might wonder why I went to such lengths to reflect on a small local Thai coffee chain. But, I think Wawee Coffee is quite an exciting case: It's building a new brand in a growing market that is already dominated by some big players such as Starbucks and Black Canyon Coffee. To disrupt or not to disrupt the Thai coffe market is now the big question.