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It's February 2007 in the hallways of Starbucks Center, the historic Seattle, Washington building that serves at Starbucks headquarters. Starbucks chairman Howard Schultz storms down the hall toward the office of Starbucks CEO Jim Donald. Howard has just come from a local Starbucks store and he's living it. He barely recognized the coffee shop. It looked nothing like the Starbucks brand he'd worked for decades to build.
Howard bought Starbucks in 1987. He led the company to unprecedented growth and success as its chief executive until 2000 when he stepped away from day-to-day operations and became Starbucks chairman. Howard has done his best to stay out of Jim Donald's way when it comes to running the company day-to-day. But after seeing what he saw this morning, Howard has had enough. He burst since a Jim's office.
Jim? Sandwiches? The sandwiches have to go. What are you talking about, Howard? I just went into one of our stores and all I smelt was burnt cheese. As CEO Jim Donald has pushed Starbucks beyond selling coffee. One of the products he's added to the Starbucks menu is hot breakfast sandwiches. Howard fought the sandwiches from the beginning, but Jim and company leadership are in full support of the new product line.
Howard, I know you don't like the sandwiches, but they're selling really well. I'm not getting rid of them. You're blinded by short-term gain, Jim. I think all of you are. The sandwiches are making money, but they're killing the essence of the stores. Howard, you're overreacting. It's not an overreaction. We're supposed to be a coffee shop, Jim. When people walk into a Starbucks, they should smell the aroma of coffee, not cheese. And I shouldn't be bombarded by the sounds of ovens, beeping every two minutes and baristas yelling to each other that an order is up. What's next? Seriously, hash browns? You're trying to turn us into McDonald's?
Jim takes a breath. He and Howard have had their fair share of disagreements when it comes to the future of Starbucks, but they've always managed to be civil and kind to one another. Howard, I get the trip set, but I want to point out that we have sales goals for this company. And the breakfast sandwiches are helping us meet those goals. That's a myopic view, Jim. By the end of last year, our customers were spending less on an average trip to Starbucks than they had in the past. That's not because of the sandwiches, Howard. You're fixated on this one thing. I'm fixated on the Starbucks experience. Customers come to our stores to enjoy great drinks, a relaxing atmosphere, a sense of community. That's what I built Starbucks on, but yelling the scent of sandwich ovens and the feel of a fast food restaurant is killing that Starbucks experience. We've got to get rid of the sandwiches.
Jim Donald doesn't flinch. He looks directly at Howard. No, Howard. I'm not going to do it. Food makes us money. And I'm not in the business of throwing money away. You are throwing money away, Jim. You and the others are just too blind to see it. Customers are spending less on average. It's a sign they're dissatisfied. If you choose to ignore it, things are only going to get worse. Before you know it, it'll be too late to do anything about it. Howard Schultz and Jim Donald would continue to clash throughout 2007. And eventually Howard would be proven right. Starbucks stock would plummet and the company that enjoyed almost two decades of constant growth would face a dire financial situation.
In early 2008, Howard Schultz would return to save the company he loved from disaster. He would reclaim the title of CEO and do everything in his power to rebuild customer trust and reestablish Starbucks as the biggest coffee brand in the world.
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Howard Schultz's Starbucks story didn't start with his return as CEO in 2008. It started 25 years earlier back in 1982. At the age of 29 Howard got a job as Starbucks head of marketing. He picked up his life in New York and moved to Seattle to work for two of the three original Starbucks founders Jerry Baldwin and Gordon Bocher. For a kid who grew up in Brooklyn, the landscape of the Pacific Northwest felt like another world to Howard. But he quickly fell in love with the region. He even came to embrace the nearly constant Washington rain that his East Coast friends had warned him about.
While settling into his new life in Seattle, Howard got to know the ins and outs of the coffee trade. At the time, Starbucks was a relatively small operation. The business was run out of Starbucks flagship store in the famous Pike Place Market. The company had a giant roasting plant and sold coffee beans, tea, and spices out of five stores in the Seattle area. But they didn't sell coffee beverages. That wasn't the core of Starbucks' founders' business man, and they had no intention of changing.
But a business trip Howard Schultz took to Italy in 1983 would eventually set Starbucks on a new path and change the coffee industry in America forever. While in Milan and Verona, Howard discovered and fell in love with Italian coffee culture. Throughout his life, he would cite this visit to Italy as the inspiration for what Starbucks would one day become. This is the quintessential moment for Starbucks. And as you know, it started in 1983 when I came here as a young man walking around the streets of Milan and Verona and I became enamored with the Italian coffee bar.
After returning from Italy, Howard believed he could see Starbucks' future. And that future meant transforming the company from a coffee bean seller into an Italian style espresso bar. But Howard would have to convince Starbucks' founders to embrace his vision and completely shift their business model. They rejected the idea. So instead of fighting uphill at Starbucks, Howard would strike out on his own, open a new type of coffee shop in Seattle, and lay the groundwork to revolutionize the coffee industry in the United States.
This is the first episode in our four-part series on Starbucks and Howard Schultz, the third place. It's fall 1983, after hours at Starbucks Pike Play Store, 25 years before Howard returns a CEO. Howard is fresh off his trip to Italy and he's excited. He has a vision for the company's future and he's ready to share it with his bosses, Jerry Baldwin and Gordon Bocher.
A two Starbucks founders take a seat at a small table while Howard paces back and forth in front of them. Baldwin glances at his partner and then grins at Howard. You in a New York mode, Howard? Howard chuckles and stops pacing. Howard has fallen in love with Seattle, but he knows he still has a streak of the New York businessman in him. He wears a suit when he's working and when he's excited, he moves fast and talks even faster. Howard often serves as a stark contrast to his more laid-back casual bosses.
Yeah, yeah, I'm just really excited, guys. So I take the trade show in Milan when well. Jerry, the trade show was nothing to write home about now, but spending time in Milan and Verona, that changed my life. Gordon Bocher laughs. Yeah, Italy will do that to you, but you're not here to tell us that Italy is a great place to visit. So, so what's up, Howard?
Howard looks both of his bosses and the eyes. Every day in Italy, I visited local espresso bars. I watched the men and women behind the counter baristas, they're called, make these incredible drinks. Never seen anything like it or tasted it.
What, you didn't know Italy had great coffee? It wasn't just a coffee, Jerry. Every morning and afternoon, people gathered to sip espresso shots, lattes, cappuccinos, they sat and talked to each other and to the baristas. It was a ritual for them. Those espresso bars, they're a place somewhere between home and work for these people, a sort of third place. It's where they relax, where they find inspiration, where they connect with their communities.
Bocher, somewhat amused, tries to move the meeting along. Howard, we've all been to Italy and we've seen this. Why are we talking about Italy? The Italian style espresso bar is the future of Starbucks. We can change the entire American coffee business.
Baldwin shakes his head. He's a fan of Howard's enthusiasm, but finds it's exhausting at times. Howard, we already served coffee at our U-District store. It's a nice perk for the college kids, but it doesn't make us nearly enough money to be a focus.
That's just coffee, Jerry. I'm talking about perfectly crafted espresso drinks. I'm talking about revolutionizing the way we think about our stores. We create loyal customers who make us part of their day every day.
Do you know how naive you sound, Howard? Spending hours in an espresso bar is part of Italian culture. That's not what Americans want. Americans have never had the opportunity. Not the way I'm talking about. Once they really experience espresso in a welcoming environment where they can talk or read or listen to great music, they'll fall in love with it.
I don't know. Look at Pete's Howard. They're doing something like this. Embaraged sales don't even account for 10% of their revenue. The money is enroasting coffee. Pete's coffee and tea is a successful business founded in Berkeley, California. The company's founder, Alfred Pete, is a friend of Starbucks's founders and played an integral role in helping Starbucks get off the ground way back in 1971. Starbucks continues to use Pete's as an aspirational business model, but Howard dismisses the comparison. Jerry, you're talking about basic coffee again. The beverages aren't afterthought on it, Pete's. So of course, they're not a substantial part of sales. We can create something new in America that has the potential to make more money than selling coffee beans ever will.
Gordon Boaker stands up. He's heard enough. Howard, Jerry and I have no intention of getting into this service business. I'm glad you had a good trip to Italy, but you're getting way ahead of yourself. Gordon, you're going to regret passing on this. You don't get many chances to shape the future.
After their initial meeting, Howard continued to push Baldwin and Boaker to give the espresso bar concept a chance, but they didn't want to change the Starbucks business model. By 1985, Howard's frustration with his bosses started to boil over. Howard believed he could see the future of coffee in the United States. He decided that if Baldwin and Boaker weren't on board with this vision, he'd have to do it on his own. Within a year, Howard Schultz would part ways with Starbucks, open his own version of an Italian espresso bar, and slowly start to change the way Americans viewed their morning coffee.
In 1986, after leaving Starbucks, Howard Schultz put together a group of local investors to help him launch his first espresso bar. He opened Il Giornalli, a name taken from the Italian word for newspaper in the Columbia Tower Building in downtown Seattle. And while Howard had parted ways with Jerry Baldwin and Gordon Boaker, the three remained close. Il Giornalli even used Starbucks' beans to craft its espresso-based beverages. But Howard was committed to doing what Starbucks had been unwilling to do. When he opened his first store, Howard vowed to create an environment that reflected his favorite espresso bars in Italy. In his first memo to employees, Howard laid out his vision. Il Giornalli will strive to be the best coffee bar company on Earth. Our coffee bars will change the way people perceive the beverage.
The memo made Howard's passion for coffee and coffee culture clear. But that wasn't all of it. Howard used the memo to put in writing what would become a guiding principle for him throughout his career. He wrote, we are genuinely interested in educating our customers, and we will not compromise our ethics or integrity in the name of profit. Howard had come to believe that business, like all aspects of life, should be about the relationships you create. He wanted his customers to feel like they had a strong connection to his coffee shop and to everyone working there. As a leader, Howard thought it was his responsibility to help the people who worked for him in any way he could. Believing that his employees were as integral to the operation as he was, he believed this so strongly that he referred to the people working for him as partners, not employees, and Howard viewed the baristas and store managers as the heart and soul of the company.
Howard's commitment to customer and partner relationships paid off. Within months, Il Giornalli expanded to five stores around Seattle. It's comfortable seating, classical opera music, and high quality espresso drinks helped the founding chain build a loyal following. Howard noticed that many of his customers made a trip to one of his stores a daily ritual. It was just like he'd witnessed in the espresso bars in Milan, and it was exactly what he'd been dreaming of. Il Giornalli was evolving into the third place that Howard often talked about, the spot where people would gather for a break, and to share a sense of community when they weren't at work or home.
By the beginning of 1987, Howard's five stores were gaining popularity. Howard intended for the company to slowly expand around the city and then move into other cities around the country, but Howard's career was about to take a major turn.
In 1984, Baldwin and Boca had purchased Pete's coffee and tea. By 1987, managing the Pete's brand in California's Bay Area and the Starbucks brand in Seattle had proven to be too much of a strain on Baldwin and Boca. They decided to focus on Pete's and sell Starbucks. They wanted to give their friend and former employee Howard Schultz an opportunity to purchase the company before anyone else.
Baldwin called Howard and the two men quickly worked out a deal. Baldwin and Boca would give Howard 90 days to raise money to buy Starbucks for $3.8 million. Howard got to work. He knew buying Starbucks would get him closer to his dream of bringing Italian-style coffee bars to people across the United States.
At the time, Starbucks had six successful locations and still maintained its own coffee roasting plant. And the Starbucks brand carried over 15 years of recognition and goodwill with Seattle consumers.
Owning Starbucks would allow Howard to grow his business much faster than he could as Il Giornalli. Howard went to his previous investors and local entrepreneurs and raised over half of the $3.8 million in almost no time. He was confident he could raise the rest but Howard got another call from Baldwin that sent him reeling.
Baldwin had said one of the Il Giornalli investors had gone behind Howard's back to outbid him for Starbucks. Baldwin told Howard he'd give him a little more time to raise the money to buy the company because he knew Howard was passionate about Starbucks and would cherish the brand.
But Baldwin told Howard he nonetheless had to act fast, or he and Boca would have to jump on the new deal. Desperate to stave off an attack from his own investor, Howard called his friend Attorney Scott Dreamberg for advice.
Dreamberg said the senior partner at his law firm was a man who could take care of any problem. William Gate's senior was a legal titan, civic leader, and father of Microsoft founder Bill Gates. Gates was highly respected. He had business and government connections at every level and at six foot seven he struck an imposing figure two.
In Seattle, nobody messed with William Gate's senior. So Howard went to Gates's office. While Howard would never publicly reveal the name of the investor who was trying to outbid him, he did tell Gates who it was.
Upon hearing the name, Gates simply said, we're going for a walk. Gates led Howard on a ten minute stroll to the investor's office. Dismissing any pleasantries, Gates stared down the investor and said, you should be ashamed of yourself that you're going to steal this kid's dream. Gates made it clear to the investor that he was not going to let that happen.
After the meeting, the investor withdrew his bid for Starbucks. Howard went back to work and raised the remainder of the money. In August 1987, Howard Schultz bought Starbucks for 3.8 million and became the company CEO. Howard used the Ilshornali model and the Starbucks name to expand his concept of the espresso bar.
At the age of 34, he had 11 stores under his charge, but he had plans to quickly scale and spread throughout North America. By the end of 1987, Starbucks opened stores in Chicago and Vancouver. Other cities quickly followed. By 1991, there were 117 Starbucks stores across the United States and Canada.
And throughout the 90s, under Howard's leadership, there was no slowing down. Starbucks opened stores in Europe, Asia, Australia, New Zealand. By the end of 1999, Howard had successfully opened 2,600 Starbucks worldwide and his company was taking an annual revenue of close to $2 billion. Howard had turned his vision of the coffee bar and the third place into a reality.
Still, Howard wasn't satisfied. He never forgot his claim in that first Ilshornali memo, we will not compromise our ethics or integrity in the name of profit. Howard believed his company's ethics should be his top priority.
In 2000, Howard stepped down as Starbucks CEO and took on the role of chairman. He said he wanted to give up control of day-to-day operations to focus on the big picture. And for Howard, the big picture was about making his company more socially conscious and helping the people who worked for him.
Howard Schultz had changed America's perception of the coffee shop, but that wasn't nearly enough. He believed it was Starbucks' responsibility to take care of those who had helped the company achieve such staggering success. Howard would now strive to show that a successful business had to give back to their employees, their customers, and their communities.
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It's early 2001 in Howard Schultz's office at Starbucks Center in Seattle, Washington, seven years before Howard returns as CEO. Howard sits at his desk, sipping his morning coffee and looking at the window at his stunning view of Seattle. He's waiting for Starbucks CEO Orrin Smith to arrive. Howard is excited for trepidaceous. He has big plans for Starbucks future, but he knows those plans are going to ruffle some feathers.
场景发生在2001年初,位于华盛顿州西雅图市的星巴克中心内 Howard Schultz的办公室里,距离他重返星巴克首席执行官的日子还有七年。Howard坐在桌子前,喝着早上的咖啡,望着窗外震撼的西雅图景色,等待着星巴克的首席执行官Orrin Smith到来。Howard感到兴奋和战战兢兢,因为他对星巴克的未来有着宏伟的计划,但他知道这些计划会引起一些不满。
As Starbucks chairman, Howard is committed to making the company more socially and environmentally conscious. Two things that usually cost more money than they make. If he's going to make the changes he envisions, Howard needs Orrin Smith's support.
Morning, morning Howard. Good morning, Orrin. Have a seat. Orrin Smith has been with Starbucks since 1990 when he joined the company as Chief Financial Officer. Howard considers Orrin one of the most affable and thoughtful people he knows, which is why Orrin was Howard's top choice to replace him as CEO when he stepped down.
You know why I love this building, Orrin? Because you grew up in Brooklyn and you like old buildings? Well, yes, but also because it's part of the community feels like it belongs to the landscape. As part of the company's growth, Starbucks purchased this historic building in Seattle's industrial district and converted it into their headquarters in 1997. This building has been a part of Seattle for 85 years and I hope it'll be a part of the community for at least 85 more.
Why don't you getting on at Howard? Starbucks is part of Seattle, but we're a global company now. We need to be a part of all the communities we're in. We've made commitments to cities all over the world. Howard and partners at our stores donate money and volunteer time. We're raising millions for youth literacy programs, other education efforts. We're doing the work. I'm proud of what our partners do, but I think we need to think bigger. I think we need to go to the source and change the way we do business.
The source. Yeah, the producers and farmers who grow our coffee. We need to do more for them. Well, we already offered the farmers a better price in our competition. We're doing really well by then. No, it's not just about the money. We have to make sure the coffee we're buying is ethically sourced and produced. We have to make sure the people working for our growers have rights and are protected. We have to take care of the land they're working on.
I want us to make a commitment to purchase one million pounds of fair trade certified coffee. Fair trade is an organization committed to improving the lives of small producers and farmers around the world. If a product is fair trade certified, it means the people producing it meet qualifications regarding sourcing, sustainability and employment practices. Buying fair trade products will be more expensive for Starbucks, but Howard believes it's worth the cost. And frankly, a million pounds should just be the start or I want us to work toward purchasing 10 million pounds. 11, 12, 20 million pounds. I want Starbucks to be the biggest buyer, roaster and retailer of fair trade coffee beans in North America.
Oh, God, Howard. I mean, I want this company to be socially and environmentally conscious as you do, but there's going to be pushback. We can't just increase spending without a clear financial benefit. Oh, that's in the short term. What I believe customers want to do business with companies that care about communities in the apartment. There are bigger issues than the bottom line. Well, you'll hear no argument for me on that front. Then I need you to help me prove it. While I'm working on this, I need you to find new ways to move the company forward and add revenue. So everyone on the board who might try to stop us won't get very far. I believe Starbucks can make money and do the right thing at the same time. So please, help me show everyone I'm not crazy for thinking that.
In 2001, Chairman Howard Schultz and CEO Orn Smith worked in tandem to change the way Starbucks did business. To start, Starbucks purchased 1 million pounds of fair trade coffee and then quickly committed to increasing that purchase to 10 million pounds. Soon, Starbucks would become the largest provider of fair trade coffee beans in North America just as Howard had hoped. Howard didn't stop there.
In 2004, Howard teamed up with an organization called Conservation International to create even more stringent environmental and humanitarian guidelines when it came to sourcing Starbucks coffee. Starbucks launched a program called Cafe Practices, an acronym for Coffee and Farmer Equity. Cafe was designed specifically to have a positive impact on the livelihoods of coffee farmers, their communities and the environment. Howard wanted to ethically source all Starbucks coffee. He knew it would take time to get there, but years later, Conservation International would acknowledge that Starbucks had achieved its goal. Conservation International is proud to recognize Starbucks for ethically sourcing 99% of their coffee, making them the largest coffee retailer to reach this milestone.
Howard knew Starbucks could only implement programs like Cafe and poor money into global and environmental policies if the company continued to thrive. And that's where CEO Orrin Smith came in. While Howard focused on improving lives in the Starbucks community around the world, Orrin looked for new ways for Starbucks to grow, innovate and increase its revenue. And one of Orrin's ideas proved to be a gold mine. Orrin wanted to put Starbucks in hotels. Howard loved the idea. The initiative started humbly enough with Starbucks providing coffee in the rooms of Hyatt's and Marriots, but this store within a store concept, as Howard called it, quickly expanded. Between 2001 and 2005, Starbucks standalone kiosks sprung up in hotels, grocery stores, barns and nobles bookstores, and airports across the country.
Even as Howard pushed Starbucks toward more socially and environmentally sound business practices, revenue skyrocketed. By the end of 2004, Starbucks had over 8,500 stores worldwide, pulling in an annual net revenue of over $5 billion. And the company's market capitalization, the value of its outstanding stock, was $20 billion. Together, Howard Schultz and Orrin Smith had proven that a business could work ethically and strive to benefit local and global communities, all while still making huge profits.
But in 2005, things were about to fall off a cliff. Orrin Smith would step down a CEO, and the coffee company that looked unstoppable would fall into decline. In 2005, after 15 years with Starbucks and five years as its CEO, Orrin Smith retired. Howard was heartbroken to see him go. He had continually put his trust in Orrin to steer Starbucks day-to-day operations, and Orrin had continually earned that trust. Howard didn't think the company would be the same without him.
But when the board appointed Jim Donald as Starbucks new CEO, Howard committed to giving Jim the same freedom to lead the company that he'd given Orrin. But that freedom would eventually lead Jim to make decisions that would put him directly at odds with Howard. Jim Donald, the former head of grocery operations at Wal-Mart, had served as Starbucks head of North American operations since 2002.
In addition to his leadership experience, Jim was well known for being a truly kind man who took a real interest in everyone who worked for him. Howard had high hopes for Jim, and at first, those hopes seemed warranted. Jim loved to go into Starbucks stores and talk to the baristas and managers. Howard still viewed those Starbucks partners as the heart of the company, and he was thrilled that his new CEO shared that view.
And Jim impressed Howard with exciting new ideas to expand the Starbucks brand. One of the first major initiatives Jim oversaw as CEO was to get Starbucks into the entertainment game. Customers had long-commoned how much they enjoyed coming to Starbucks to listen to good music or read while they drank their coffee. Jim jumped on this aspect of the Starbucks experience and pushed the stores into selling books. He followed that up with introducing music bars where customers could download songs to make their own CDs or playlists. From there, Starbucks moved fully into the entertainment industry. The company started producing its own CDs and DVDs, and at first Howard loved this new direction.
If you'd Starbucks as a taste maker, whether that was taste in coffee or music, literature, or film, but Howard quickly started to change his tune. Along with pushing Starbucks into new industries, Jim Donald wanted to rapidly open more stores. By the end of 2005, Starbucks was operating over 10,000 stores worldwide, with no signs of slowing down the expansion. And under Jim's leadership, those stores were selling a range of new products from CDs to warm breakfast sandwiches.
Howard continued to give Jim the freedom to run day-to-day operations, but he thought Starbucks was getting away from what it did best, making high-quality coffee and espresso drinks in a relaxing community environment. And now, increasingly, Howard thought the company was adding stores and products simply because they could. And he believed the Starbucks experience was suffering because of it. Customers agreed.
In 2006, Starbucks sales started to decline. Howard raised concerns, but company leadership argued it was simply the result of a shifting economy, and Jim Donald remained confident in the direction he was leading the company. But by summer 2007, Howard wasn't the only one who thought Starbucks was in trouble. Long time baristas and store managers sought out Howard in private. They complained that they couldn't keep up with all the changes.
They said the practice of making drinks, the thing Starbucks prided itself on, was rushed and sloppy, as baristas struggled to make breakfast sandwiches, manage music purchases, and more. Customers recognized the drop in service and store traffic dropped to historically low levels. Continued rapid growth only compounded Starbucks problems. Areas were now saturated with too many Starbucks stores, with many sitting near empty throughout the day. Howard worried things were only going to get worse. And it seemed Wall Street agreed too. As 2007 came to an end, Starbucks experienced an annual drop of 42% in a stock value.
Howard knew it was time for Jim Donald to go. The only question was who would replace him. He needed someone who would immediately recognize the company's problems, take bold steps to fix them, and who would truly understand what Starbucks stood for. Howard would soon come to realize that there was only one solution. It was time for him to take back the reins of the company he loved. Howard Schultz would return as CEO, work to regain his customer's trust, and pull Starbucks out of its financial freefall.
Is December 2007 on Hawaii's Kona Coast, less than a month before Howard returns his CEO? Howard excels and feels the burn running through his legs as he pedals his bicycle up a hill. Howard is in the middle of a three hour bike ride with his old friend Michael Dell, founder of the successful computer company, the Bears' name. The two friends have spent most of the ride catching up. Their families are both vacationing in the area, but Howard needs Dell's advice.
Yeah, and for a few years with Warren happening in the ship, you were successful. But look how quickly things went sound. You're the only person who can get in there. Pick up the pieces and put it back together. Trust me, I know what I'm talking about.
He does. Michael Dell served as Dell CEO for 12 years before stepping down and taking on the role of chairman. But after that company experienced a series of financial struggles, he stepped back in as CEO in the beginning of 2007.
Who was the only decision, Howard? Saved Dell. It's the same for you and Starbucks. It's not anything crazy. Even jobs knew Apple couldn't survive if he didn't come back.
The two men ride on in silence for a few minutes. Howard takes in the lush, Hawaiian landscape, breeze in fresh tropical air. He knows Michael Dell isn't the only one who thinks he should reclaim the CEO mantle. Several members of Starbucks leadership have already approached him with the same idea.
If I do come back, I'm going to need the hip ground right. Where hall is already world. I have to get our partners and customers excited the best Starbucks again.
Yeah, but you can't expect things to happen overnight. When I came back, I laid out what I called a transformation agent. You like that, Chris? Yeah, I created pillars for how we are going to transform Dell and write the ship. My core beliefs, goals of the company, stated simply and clearly, I still want to focus on the environmental and community programs I've been working on. I don't want to get away from that.
You don't have to. The Starbucks and Crisis Mode Howard, you have to identify the problems you can fix, and how you can fix them. Howard starts to picture his own version of a transformation agenda and he quickly falls in love with the idea of it.
What would my agenda be? How can we instantly create a sense of teamwork? I mean, like instantly. We're all working towards the same thing. From the executives to the bristas. How do I communicate that?
I don't know what you have to. Everyone has to know the stakes, but they also have to know you have a plan to fix things. I mean, if you lead them, they'll follow.
Howard picks up his pace and smiles. He's made a decision. Over the course of his wine holiday, Howard met with Michael Dell several more times. They talked through some specifics of Howard's transformation agenda and bigger picture issues like the Flailing American Economy. By the time Howard returned to Seattle, he was ready to re-assume the role of Starbucks CEO.
Back in Seattle, Howard met privately with Jim Donald, members of the board, and Starbucks leadership to discuss his plans to take over as CEO and to tell Jim his time at Starbucks was over. Jim was upset, but he didn't put up a fight, and the board quickly moved to reinstate Howard as CEO. As Jim departed Starbucks, Howard reassured him that he didn't blame Jim for Starbucks failures. Howard said he'd make sure everyone in the company knew that. And while Howard never publicly blamed Jim, he knew the problems were vast, and he also knew that Starbucks needed a fresh start, in a moment that was quickly becoming more daunting.
At the beginning of 2008, America and the rest of the world were headed into what would become known as the Great Recession. The retail and service industries would be hit especially hard, as consumers had far less money to spend. But Howard still believed he could turn Starbucks around. In order to accomplish that, Howard set out to fine tune his transformation agenda.
Before announcing his return as CEO, Howard worked tirelessly to break down what he thought were the most important goals for Starbucks moving forward. Howard crafted a long list of transformation pillars, as Michael Dell had called them. But he identified three that Starbucks had to focus on in order to survive. Number one, be the undisputed coffee authority. Two, engage and inspire our partners. And three, ignite emotional attachment with our customers. Along with the three pillars, Howard wanted to revisit the concept of company growth.
It was clear to Howard that Jim Donald had pushed growth for growth's sake, and that Starbucks had faltered because of it. Howard would push his new take on company growth throughout his career. When you look at growth as a strategy, it becomes somewhat seductive, addictive, but growth should not be and is not a strategy, it's a tactic.
With his transformation agenda solidified and his views on company growth clear, Howard was ready to once again lead day-to-day operations of Starbucks. On January 7th, 2008, Starbucks made a public announcement that Howard Schultz was back as CEO. The news sparked plenty of chatter on Wall Street, and in business trades, just as Howard knew it would.
But on the same day, another company made an announcement, one that took Howard by surprise. Fast food giant McDonald's, who had long marketed their quality, affordable coffee, made it public that they were expanding their beverage menu to include lattes, espresso, and other specialty coffee drinks.
The move was a direct attack on Starbucks and everyone in the industry knew it. The Wall Street Journal ran an article with the headline, McDonald's takes on a weekend's Starbucks. McDonald's leadership had watched over the last two years as customers deserted Starbucks. Now, with American and global economies heading into a recession, the fast food chain wanted to make it clear that nobody needed to pay top dollar for coffee beverages when they could just come to McDonald's and get the same items for far less. Panic ensued inside Starbucks' headquarters, but Howard remained calm.
He knew McDonald's posed a serious threat and that they would inspire other low-cost coffee providers like Dunkin' Donuts to follow suit. But the news from McDonald's simply reinforced what Howard already believed. Starbucks was an experience. The experience is what customers came for. It was what set Starbucks apart from the competition. So Howard knew he had to act fast and get people to fall in love with a Starbucks experience all over again.
Facing a threat from a huge competitor and a failing global economy, Howard Schultz would spend his first days back as Starbucks CEO, trying to put out fires while boosting company morale and laying out plans for transformation. From the outside, it would appear to be a nearly impossible task. And Starbucks would continue to struggle, while Wall Street questioned whether the coffee company would ever be able to bounce back.
In the face of this crisis, Howard Schultz would take drastic measures that would shock company leadership and business insiders alike in order to save Starbucks, Howard, we shut it down.
From Wundery, this is episode one of Howard Schultz saving Starbucks for business movers.
这是由Wundery制作的第一期《霍华德·舒尔茨拯救星巴克》企业家节目。
On the next episode, in the face declining sales, amounting criticism, Howard's decision to shut down all of Starbucks American stores leaves many wondering can Starbucks survive?
Hey, prime members, you can listen to business movers add free on Amazon Music, download the Amazon Music app today, or you can listen add free with Wundery Plus and Apple podcasts.
If you'd like to learn more about Starbucks, we recommend Onward by Howard Schultz with Joanne Gordon, Howard Schultz, a biography of the Starbucks billionaire by James Perry. From the ground up, a journey to reimagine the promise of America by Howard Schultz, and it's not about coffee, lessons on putting people first from a life at Starbucks by Howard B. Hart and Janet Coltsstein.
A quick note about our dramatizations. In most cases, we can't know everything that happened, but all our reenactments are based on historical research.
Business Movers is hosted, edited and executed produced by me, Lindsey Graham for Airship, audio editing by Molly Bach, sound design by Derek Barrett's, music by Lindsey Graham.