The Power of Subtraction

In a world that’s obsessed with addition (new products, new stores, new everything) it can be difficult to accept that subtraction can be just as important to the success of your business. Sure, pulling products off the shelves and letting revenue slip away sounds like a counterintuitive approach. But as the CVS example showed, it’s not always that black and white.

Sometimes a product stops being valuable to a business’s brand, even if that product is still valuable financially.

For CVS, dropping tobacco was a calculated move, designed to streamline their brand image. And while sacrificing sales for the betterment of the brand might sound financially irresponsible, that’s only if you think of it in the short term. In the long term, a subtractive move could help revitalize your business.

It turns out CVS isn’t the only company that’s used subtraction to move forward.

Starbucks Dumps CDs

To the outrage of smooth jazz fans everywhere, Starbucks announced in early 2015 that it’d be phasing out the sale of CDs in its stores.

The famed coffee chain has a long relationship with the music industry. In 1995, they released their first CD: Blue Note Blend, which was a compilation of jazz tunes.

Then in 1999, they actually bought a record label: Hear Music. In addition to managing Starbucks’ CD business, the record label folks were responsible for coordinating live performances and later running a Sirius XM radio station for Starbucks.

But while jazz might be at the heart of Starbucks’ coffeehouse vibe, the company also stocked their CD shelves with the likes of Paul McCartney, Taylor Swift, Alanis Morissette, and more. Starbucks would often team up with such stars for album launches and other exclusive partnerships.

Until fairly recently, you could even pick up a copy of the Frozen soundtrack — the highest selling album of 2014 — at your local Starbucks.

So why did the coffee chain decide to dump CDs? It’s simple, really: CDs are a dying format. According to Nielsen, CD sales dropped nearly 15 percent in 2014 (while on-demand music-streaming grew by more than 50 percent).

To mirror the shifting behavior of its customers, Starbucks decided to do away with the sale of CDs which had become a staple of the in-store experience. As a Starbucks spokesperson told Billboard magazine:

“ … we will continue to evolve the format of our music offerings to ensure we’re offering relevant options for our customers.”

So, what does Starbucks consider to be a more “relevant option” for today’s latte-sipping music fan? How about a multi-year partnership with Spotify.

This partnership will link together Starbucks’ 7,000 company-run stores + 10 million My Starbucks Rewards loyalty members + Spotify and its 60 million global users to form what the press release describes as a “first-of-its-kind music ecosystem.” I don’t what the heck that means, but it already sounds cooler than CDs.

Whereas CVS’s decision to drop tobacco underscored its principles as a company, subtracting products in this case helped transition Starbucks into a new sphere of opportunity. Leaving the past behind in a definitive way is a common rationale behind the strategy of subtraction.

Netflix Ditches DVDs (sort of)

Remember when “Netflix and chill” meant placing your order and waiting for your Netflix DVD to arrive in the mail … no, not as an email attachment, but as a physical object that a postal worker put in your mailbox?

Those were the days, my friend. The days when the DVD reigned supreme as a movie format. But like its audio counterpart, the DVD is going the way of the dodo.

The folks at Netflix realized this early on, which is why in 2011 CEO Reed Hastings announced that they’d be splitting the business in two: one side of the house would handle streaming services (Netflix), and the other would handle DVD mailing services (the short-lived Qwikster).

While in theory it might have made sense to separate the businesses, to create some separation between the fading technology of DVDs and the emerging technology of streaming, in practice it all went horribly wrong.

You might remember seeing some of the scathing headlines. Here’s a fun one:

“Netflix Announces Qwikster, A DVD Service That Should Die Qwikly”

Instead of coming out and saying, “Look, we’re phasing out the DVD side of our business because we’re a forward-looking company and streaming is the future,” they instead positioned this new Qwiskter service (which required a separate login, separate payment, etc.) as offering more convenience to users.

Long story short, it was a huge mess. Netflix quickly pulled the plug on Qwikster, and Hastings ended up apologizing for how Netflix had communicated everything to customers. And in his apology, the truth behind why Netflix wanted to ditch DVDs (at least from a branding perspective) finally came out:

“For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming.”

Flash forward to today, and I think it’s safe to say that Netflix did end up making that leap. With 60 million+ members of its streaming video service, and a budding reputation for producing acclaimed original content, Netflix has been able to evolve beyond its DVD-by-mail roots.

But unlike Starbucks, which completely abandoned the CD format, Netflix still has some six million customers receiving DVDs by mail — that side of their business just isn’t promoted anymore. And in an effort to separate the old from the new, Netflix has rebranded their DVD-by-mail service DVD.COM.

In some cases, subtraction can’t happen in one fell swoop, as it would cause too much disruption for customers. The alternative? Phase out the product over time. As we’ll see in the next example, you could start by removing the product from the markets where demand is lowest.

Greggs Loses Its Loaves

In 2015, well-known UK bakery chain Greggs stopped selling bread by the loaf at some of its 1600+ stores.

While this might not sound like a particularly newsworthy event, the plot thickens when we consider that Greggs started out as a bakery that only sold loaves of bread. That was back in 1951, when a lot of folks in the U.K. were baking their bread at home.

“Loaves were the future once,” begins a BBC news story covering the changeover.

The founder of Greggs, John Gregg, started out as a yeast delivery man, bringing this key ingredient for baking bread to people’s homes. Then it dawned on him that he could bake and sell the finished product himself, so he set up the first Greggs bakery.

Gregg’s business plan at the time was a simple one: Bake loaves of bread in the back of the shop, sell loaves of bread in the front of the shop.

To the diehard Greggs customer, having the bread loaf — this iconic, foundational product — disappear from store shelves might seem like some sort of sacrilege. As if Greggs is slapping its own history right in the face. In reality, making business decisions that depart from the status quo is actually a truer reflection of Greggs’ history than the loaves of bread themselves.

To Greggs, the equation was simple. In some locations, loaves of bread sell well. In other locations, not so well. To improve the bottom line of each store, Greggs customizes its product offerings based on sales performance.

As a Greggs spokesperson said,

“While loaves of bread can still be purchased in a number of our shops where we see high levels of customer demand, we also understand that customer shopping habits and needs are changing and have adapted accordingly.”

Much like Netflix and Starbucks, adaptation was at the heart of Gregg’s decision to strategically subtract a legacy product.

Adapt or Die

Ultimately, Greggs is OK cutting ties with its past in order to secure a more profitable future. If sales indicate that customers are overwhelming choosing sandwiches and sausage rolls over loaves of bread, it makes sense to evolve the business to reflect those preferences.

If that entails cutting a once key offering from the product lineup, so be it.

The CVS, Starbucks, and Netflix examples all demonstrate how cutting ties with an outdated product, or distancing oneself from an outdated service, can help a business evolve. In some cases that meant causing a big uproar, or sacrificing short-term sales. In other cases it meant being at the forefront of a changing culture.

In all cases, we see how subtraction can play a significant role in shaping a company’s future.

Staying the course, and hanging onto antiquated products and technologies and antiquated ways of thinking might be an easy option, but it’s unlikely the best option.

Just like Starbucks did with its sale of the Frozen CD, at some point you need to let it go.