The first thing I felt like doing after reading Onward, Starbucks founder Howard Schultz’s comeback autobiography, was to grab a cup of Starbucks coffee.
And that’s only because Schultz’s passion and description of the process of coffee-making is so exhaustively detailed all through the book that you want to see what finally comes out of all that effort.
Sample Schultz’s own words: “The selection of the high-quality Arabica beans” roasted at the right temperature and for the right length of time — that’s the roasting philosophy. Then there is the “blending of speciality coffee, by mixing different kinds of beans, often from different regions. For instance, the Full City roast calls for roasting beans longer than most others so as to pull out the beans’ ‘honest richness, flavour, and acidity, or brightness’.”
Not surprisingly, when things began going downhill for Starbucks in the mid-2000s, Schultz itched to take an executive role once again. He says he couldn’t bear the frustration of slowing sales, rising discontent among the company’s partners (employees) and a “deteriorating customer experience”.
So Schultz began plotting a takeover, most of the planning for which took place in his Seattle home, culminating in a bloodless coup. But the exultation of homecoming was soon thwarted by the economy. As Schultz crafted his comeback strategy, 2008 happened and an economic slowdown began that started tearing into coffee sales. The stock price dropped, Wall Street began growling and the inevitable lay-offs and store close-downs followed, all for the first time in the company’s history.
For those who came in late, Schultz discovered the “magic of coffee” during a business trip to Italy in 1982 while working for a small coffee company (Starbucks, which he later bought out). A chance visit to a coffee bar in Milan exposed him to the ritual of coffee-making: grinding coffee beans, steaming milk, pulling shots of espresso and making cappuccinos, chatting with customers all the while. That, to Schultz, was what coffee-making ought to be. “By no stretch of the imagination did Starbucks introduce the world to coffee...but I do think it’s fair to say that Starbucks exposed many people to coffee’s magic,” he writes.
So why did Schultz hand over to a CEO (he became Chairman & Chief Global Strategist) in the first place? According to him, by 2000, he was ready to take on new challenges. Schultz had run operations for nearly 15 years, the company was doing very well, there were 2,600 stores in 13 countries and revenue was close to $2 billion. Since 1992, Starbucks had grown at a compounded annual rate of 49 per cent.
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But then, as the years passed, he began feeling differently. In 2006, Schultz says he visited hundreds of Starbucks stores in cities around the world. And “the entrepreneurial merchant in me sensed something intrinsic to the Starbucks brand was missing.” Then the complaints from colleagues started increasing.
In February 2007, Schultz wrote his famous email titled, “The Commoditization of the Starbucks Experience”. In it, he argued a variety of points, ranging from the loss of aroma in Starbucks stores — a vital ingredient to the coffee experience — to the missing image, thanks to taller, automatic espresso coffee machines, of people scooping fresh coffee from bins and grinding it fresh in front of the customer.
Even design did not escape his eye. “We’ve had to streamline store design to gain efficiencies but stores no longer have the soul of the past”. And nothing “piqued” him as much as the smell of burnt cheese from sandwiches being warmed up. Which in turn drowned out the coffee fragrance. And this would become a battle royale between Schultz and his team, because customers were buying sandwiches too.
As it turned out, the memo, sent to a handful of top management folks, leaked almost immediately triggering a chain of events, inevitably culminating in the chairman becoming CEO (Schultz spells it as ceo, in lower case) again. That was in January 2008.
Once back, Schultz, along with his team, wrote a Transformation Agenda that hoped to “re-ignite an emotional bond with customers”. “People come to Starbucks for coffee and human connection”. Starbucks’ mission if you wanted to know is: “To inspire and nurture the human spirit one person, one cup, and one neighbourhood at a time”. Starbucks also says it ensures each store blends with its neighbourhood in design and architecture.
To some extent the new agenda, combined with downsizing, retraining and realigning the product offering — Via, an instant coffee offering, was a big success — worked. That the economy began rebounding a little after the worst of 2008 surely helped too.
Onwards brings out several facets of Schultz’s way of building and running a business — for instance his split-second instinct in decision-making, buying companies and hiring talent on the basis of one meeting or an observation. Like buying a new espresso machine that smells just right or hiring from outside the industry. He hired Don Valencia, a cell biologist who dropped off a packet of experimental “instant coffee” in a Sacremento store. (Incidentally, Via is named after Valencia, who died in 2007.)
Schultz seeks advice and insights from all, beginning with the baristas and store managers at Starbucks stores all over the world, from Seattle to China and pores through mails directly addressed to him. His comeback strategy was partly influenced by Dell Chairman Michael Dell who staged a comeback in his own company (January 2007).
Another takeaway from Onward clearly is in how to instill a passion for a business that goes beyond sales numbers. It’s also about keeping a ear to the ground and finding out when things are going wrong and figuring how to fix it. But mostly, it’s about an entrepreneur’s determined quest to build and then preserve at all costs an idea that went beyond the simple act of brewing and serving coffee.
ONWARD
How Starbucks Fought For Its Life Without Losing Its Soul
Author: Howard Schultz (with Joanne Gordon)
Publisher: Wiley
Pages: 336
Price: £14.99