Thursday, March 10, 2011

Just follow Starbucks CEO Howard Schultz's 5 easy steps.

I didn't expect to like Howard Schultz so much. First of all, I had cracked his book, which is titled Onward: How Starbucks Fought for Its Life without Losing Its Soul, with a bit of an attitude. Maybe I just have a problem with relentlessly positive people. Maybe I have a chip on my shoulder about business dudes who tackle the job without a certain degree of cynicism. Maybe I just don't like CEOs. I've seen my share: For the most part, they're a lot like babies. They cry when they're hungry. They demand to be spoon-fed very soft stuff. They have tantrums that scare everybody. They have funny hair a lot of the time. They think the whole world revolves around them, because it does. And in the end? Everybody loves them. Even the mean ones. Often, though, it's the CEO who ruins a perfectly good organization with his egotism, narcissism, and disregard for other people. So I guess there's that, too.

Except for one thing. Every now and then a CEO with vision comes along and turns a disparate, bored, mediocre group of people into a fighting team. Business becomes something different from the daily grind, something rare and stirring and worth dragging yourself out of bed in the morning and scraping your face for. Great CEOs are rare, and this fact makes it all the more important to study the good ones closely, to look at what separates the real deal from the posers.

Okay, so where are you right now? Perhaps in a cafe someplace, sipping a cup of really strong coffee, the stuff you really like�not that swill from down at the diner. Or maybe you're between cups, but thinking about having one. What's it going to be? A big, brawny cup with a depth charge of espresso? A half-caf latte with extra foam? Choose your poison. It's not that hard to find, and unlike a lot of things that you come to with great expectations, it always does what it's supposed to do. You can even score it at the supermarket now. And that's because Howard Schultz had a vision. And he was just goofy, relentless, naive, and determined enough to pursue it�and, in so doing, make a billion dollars for himself.

So let's look at Schultz, because if you're in business, if you're thinking about how you'd like to change the world and make your first billion, his story is really not a bad place to start.

I met him in a Starbucks in SoHo. He was drinking coffee, and so was I. He was dressed in a dark suit and tie, ready for a board meeting, and he had that mix of intensity and relaxation sported by powerful people with limited time. Cool, you know, and focused. Laser eyes. Leaned in when he talked. Not too heavy on that, though. Certain sense of balance. Yeah, that was it. Balance. Like a high-quality brewed cup.

We discussed his life, his book, and, of course, coffee. Let me assure you: The guy thinks about coffee pretty much all the time.

I'd finished his book and ended up liking it, primarily because while Schultz does unload a full dollop of business philosophy (which can make me impatient), he also dishes the real stuff with some gusto�lots of inside baseball, texts of memos, and so on. In his saga you can ascertain the outlines of how a regular guy from Brooklyn can become a captain of industry. Here's my interpretation of Schultz's personal business plan�which you, too, can use to make your own fortune.


Billionaire CEO Rule #1

See what's not there

Schultz was born in 1953 in the most populous borough of the greatest city in the world, enjoyed a poor but dignified lower-middleclass upbringing, and went into business. This turned out to be the coffee business. Unhappy with the in-your-face world of New York, he gravitated to perhaps the most European city in the United States, Seattle, where in 1982 he joined a little enterprise named after the first mate in Moby-Dick. The firm sold a beverage people liked, did it well, but had yet to change the world in any way. One day, in pursuit of his duties, Schultz traveled to Milan, where they take food almost as seriously as sex, and often don't care about much else.

On that trip, while other men might have been thinking about the beautiful Italian models floating through the streets, Schultz was thinking about coffee. He noticed people sitting around in little cafes doing nothing but immersing themselves in what he now refers to as "coffee experiences." This is Vision. You and I see a bunch of rather indolent Europeans wasting time sipping on tiny cups of battery acid. Schultz, on the other hand, experiences one of those life-changing epiphanies that transform society as we know it. He describes in Onward the flight of the Milanese barista�coffee dude�as he spun the sensuous cocoon of sights, smells, and tastes: "Moving gracefully and with precision, he seemed to be doing a delicate dance as he ground coffee beans, steamed milk...and chatted with customers standing side by side at the coffee bar. Everyone in the tiny shop seemed to know each other, and I sensed that I was witnessing a daily ritual."

This is a key insight. Coffee is a daily ritual for people, and a powerful one, as much here as in Milan. Have you ever noticed how people refer to the beverage as "my coffee"? As in, "I can't function until I have my coffee." That possessive pronoun says a lot. We own our coffee. It's not business, it's personal. This is the emotional raw material from which habits, dreams, and great amounts of money are made. Schultz saw that, and did not waver from then on.

"At our core," he says now, "we are defined as an experiential brand." So it's not just about coffee, see? What Starbucks is selling is an experience. The place that provides that experience is "very comfortable and soft, and provides human contact." What's that worth? Last year, about $10.7 billion in revenue. In fact, Starbucks has become so deeply steeped into our culture that the company's new logo eliminates its printed name entirely�and in so doing, elevates the brand to the iconic levels enjoyed by the Apple and the Swoosh.


Billionaire CEO Rule #2

Stick to your plan

When Schultz returned to Seattle, he tried to convince his bosses at Starbucks to pursue the Vision he'd had in Milan. I'm sure they looked at him like he was a mad scientist. People in business respect guys like Schultz, but they fear them a little bit, too. Men like Schultz are not...businesslike, in some fundamental sense. They're on a mission. They cannot be dissuaded or made to talk about something other than the pursuit of the "highest-quality brewed cup," if that's what they're after.

Schultz was not deterred by these conventional men. So he left Starbucks and founded a new company based on his Idea. He called it Il Giornale. In a memo, he articulated its mission statement:

"Il Giornale will strive to be the best coffee bar company on earth," he wrote. "We are genuinely interested in educating our customers and will not compromise our ethics or integrity in the name of profit. . . . We will build into each Il Giornale coffee bar a level of quality, performance and value that will earn the respect and loyalty of our customers."

This original mission corresponds almost exactly to the current Starbucks business model. (Schultz bought Starbucks in 1987 and adopted the name for his entire Il Giornale chain.) He has not wavered. And anything that has stood in the way or sullied or confused that model has been eliminated. That's pretty amazing. Is there anything in your life that's survived in basically the same form for 25 years? Not in mine. Things change. Not at Starbucks, not at the core.


Billionaire CEO Rule #3

Find your focus

A great CEO doesn't just give orders, push people around, and then go play golf. A great CEO is focused. Schultz is all about the customer. As we look around this downtown Starbucks, Schultz sees the outcome of his obsession, and it's pretty much precisely what he wanted it to be�a community place. There's a queue of customers, a pair of very nice young employees wearing headsets, making gentle conversation, taking orders, making the customers feel as if they're already into the zone. Nobody is fidgety or cross. There's a delicious smell of coffee permeating the place, which is quiet without seeming sedate. Schultz scans the room, gathering information, making sure, interested in the smallest nuts and bolts. Big picture. Little picture. All viewed through the prism of the people who've come here to participate in the experience. "We're not in the transaction business," he says.

Billionaire CEO Rule #4

Blow some stuff up

This is the thorny nugget in Onward, about how Schultz tore his business down to the nub to build it back again after the recession. Like Steve Jobs at Apple in the '80s, Schultz left his CEO post at Starbucks in 2000, voluntarily in his case, to become chairman; he hired a responsible business type to be chief operating officer. Partly due to the economic meltdown, Starbucks didn't do well during Schultz's absence. He returned in 2008 and initiated a revolution to make sure Starbucks would be one of the success stories of the recession.

The company fought for its life without losing its soul by going back to the Vision, by returning to its core purpose one decision at a time. For example, Schultz hates the smell of toasted cheese. He believes it conflicts with the sensuous, lovely aroma of roasting coffee. Starbucks was making a ton of money on toasted sandwiches. Too bad: Out they went until some genius could figure out how to eradicate the cheesy smell.

The company had also invested in these cool coffee machines. They were very tall and shiny, but interfered with the line of sight between customers and their baristas, a visual relationship that Schultz saw as crucial to the entire coffee experience. Bye-bye, cool coffee machines.

The next step was perhaps the most painful. Schultz realized that Starbucks had expanded into too many territories to be managed well. Too many stores were performing poorly. So he closed a lot of them. That hurt. He also felt that his people were no longer brewing the perfect cup with passion and expertise. So one evening he closed every Starbucks and retrained his entire service staff. Ballsy. Kind of nuts. The coffee improved, though. And it wasn't a bad publicity move, either, because he was conveying a great message: It's all about the coffee.

Now Schultz is expanding�carefully. Starbucks has placed its products in supermarkets and, most perilously, introduced an instant-coffee brand, VIA. I had some this morning. It's good. In fact, most taste testers couldn't tell the difference between the instant and the brewed cup. Schultz probably can, though. And until he can no longer tell which is which, his people will probably keep working on it. New is good, as long as it stays close to the core.


Billionaire CEO Rule #5

Be the brand

And that's that. Like Sergey Brin and Larry Page of Google, Steve Jobs, Bill Gates, Warren Buffett, and a few others in business, industry, and the arts, Schultz is what he does. He is a walking, talking emblem of the company he has created, that serves him, and that he serves. Can you be that? If so, there's probably a really big job for you somewhere out there. If not? Well, good for you, too. I'll see you for a drink after work.

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