From ground up: A journey to reimagine the...

Learning from the greatest business leaders of the world

Howard D. Schultz was born in New York, on July 19, 1953. When he was three years old, his family moved to Brooklyn. Schultz was a natural athlete, leading the basketball courts around his home and the football field at school.

In 1970, he received a football scholarship to Northern Michigan University. In 1975, he graduated with a Bachelor degree in communication. Thereafter, he found work as an appliance salesman for a company that sold European coffee makers in the United States.

He gradually rose through the ranks and in 1981 became Director of Sales. While going through an analysis of his customer base, he noticed that one of his best customers was Starbucks Coffee Tea and Spice Company, a small operation in Seattle, Washington. Schultz decided to make a visit to the dealer and get to know him better.

At that time, Starbucks had only been around for only 10 years and didn’t exist outside Seattle. The company’s original owners were three friends. They had a logo of a mermaid.

A year after the meeting, Howard Schultz was hired as Director of Retail 0perations and Marketing for Starbucks, which, at the time, only sold coffee beans.

In 1983, while travelling in Milan, Italy, Schultz was struck by the number of coffee bars he encountered. An idea then occurred to him: Starbucks should sell not just coffee beans but coffee drinks.

“I saw not only the romance of coffee but a sense of community meeting one another

over a cup of coffee,” Schultz recalled.

Schultz’s enthusiasm for opening coffee bars in Starbucks stores, however, wasn’t shared by the company’s creators. Nevertheless, Schultz was persistent until finally, the owners let him establish a coffee bar in a new store that was opening in Seattle. It was an instant success, bringing in hundreds of people per day and introducing a whole new language - the language of the coffeehouse - to Seattle in 1984.

Yet, the original founders did not want to go in the direction Schultz wanted to take them. They just didn’t want to get big. Disappointed, Schultz left Starbucks in 1985 to open a coffee bar chain of his own, Il Giornale, which quickly garnered success.

Two years later, with the help of few investors, Schultz purchased Starbucks, merging Il Giornale with the Seattle company. Subsequently, he became CEO and Chairman of Starbucks (known thereafter as Starbucks Coffee Company).

At the time of its initial public offering on the stock market in June 1992, Starbucks had 140 outlets, with a revenue of US $ 73.5 million, up from US $ 1.3 million in 1987. By September 1992, Starbucks’ share price had risen by 70 percent to over 100 times the earnings per share of the previous year.

In 2000, Schultz resigned as Starbucks’ CEO. Eight years later, at the Board’s request, he returned to head the company. From mid-2005, Starbucks stock was sliding and a crisis has erupted about the future. Schulz realised the company had become obsessed by growth. Schultz was urged by the board to cut back on employee health benefits and to drop prices; he did neither. He closed 900 underperforming stores and set out to trial a range of innovations to increase profitability.

His R&D team began searching for a lighter-tasting coffee because their research told them that 40 percent of U.S. coffee drinkers preferred their coffee that way.

Schultz led the acquisition of a fresh juice company and a specialist bakery to experiment with new offerings. In 2008, he bought a coffee-making equipment company who were manufacturing exclusively for Starbucks.

Schultz’s return to the CEO’S role has resulted in a dramatic restoration of the company’s fortunes: 2012 saw the company delivering best-ever results, with global sales in the region of US $ 13 billion. In an interview with CBS, Schultz said of Starbucks’ mission, “We’re not in the business of filling bellies; we’re in the business of filling souls.”

By 2014, Starbucks had grown to encompass more than 21,000 stores in 39 countries around the world and its market capitalisation was valued at US $ 60.0 billion.

In early June 2018, Howard Schultz retired. At the time, the chain had grown to include more than 28,000 stores in 77 countries. He currently resides in Seattle, Washington, with his wife and two children.

What lessons can we learn from Howard Schultz?

1. Have a mission

Starbucks has one simple mission: to inspire and nurture the human spirit: one person, one cup and one neighbourhood at a time.

That mission statement has served the company for more than four decades, because Starbucks is more than just a coffeehouse. It’s become an escape for anyone needing a break from the daily grind.

2. Inspire and challenge

When Schultz returned to Starbucks, the company was amidst trouble. He noted then the company had lost its way.

“The pursuit of profit became our reason for being. We’re in the business of exceeding customer expectations,” he said. He took 10,000 managers to New Orleans for a fourday conference to help inspire and challenge employees. Two years later, Starbucks was reporting record profits.

3. Stay closer to core business

When Howard Schultz returned to the company, he found Starbucks selling teddy bears to increase same store sales. He quickly put an end to that offering. Starbucks does try new things but tries not to stray too far from the core business.

“We won’t abuse the trust people have by going off and doing things not consistent with the heritage of coffee,” he said.

4. Focus on people

Schultz clearly believes that the focus on people is the primary reason for the success of Starbucks. Schultz is also very focused on developing and maintaining a strong company culture and improving teamwork. Starbucks offers stock options and health insurance to both full and part-time employees.

5. Take your business personally

Starbucks is not in business for Schultz. He says that the company will evolve and survive long after him, because it’s built for that.

He adds, “I love this company so much. My emotional state in relation to the company is beyond normalcy. It’s a fanatical feeling.”

6. Choose right partners

Over the years Starbucks has entered a number of partnerships to help expand its business. For example, the company partnered with Barnes & Noble to serve its products at the bookstores nationwide. The company also works with a number of organisations that help serve and advance communities. These include the American Red Cross, Global Green USA and Save the Children.

7. Admit failure, takes accountability and keep learning

Schultz is quick to own up to his own missteps and a much publicised near disaster. When Schultz resigned as CEO, Starbucks developed so rapidly that it lost the signature “neighbourhood feeling” that had made it so successful.

Schultz came back as CEO in 2008 and realised he had to take drastic action. He scaled back, closing 900 stores. And he took action to regain the “neighbourhood feel”.

8. Everything matters

Pay attention to every detail. Why? Because everything matters. When accountants informed the company that it could save money by switching from two-ply to one-ply toilet paper, the idea was rejected. Starbucks felt that having one-ply toilet paper wouldn’t jibe with the brand’s image as “affordable luxury”.

9. Be consistent

Consistency is one of the best ways to create loyal customers. Starbucks has done an excellent job of offering customers consistent products and services. If you walk into a Starbucks to order a mocha latte, you can expect exactly the same product in New York City as in London.

(Lionel Wijesiri is a retired company director with over 30 years’ experience in senior business management. Presently he is a freelance journalist and could be

contacted on lawije@gmail.com)