Howard Schultz turned a small local company into a rapidly growing global business. Starbucks experienced astronomical expansion during the '90s, going public in 1992 and growing at a rate of 25 to 30 percent a year. During the new corporation's first year, expansion amounted to 15 additional stores; by 1992 there were nearly 150 Starbucks locations. Starbucks became the first privately-owned company to offer employees stock options. Howard Schultz was honoured with several awards among which is Botwinick Prize in Business Ethics, Columbia Business School, 2000.
“If I came to you in 1987 and I said to you, 'Even though coffee consumption in America is down, I wanna build a company that was gonna sell coffee not in a porcelain cup, but in a paper cup, with Italian-saying words that no one could pronounce, for $3 a cup of coffee,' would you invest?” asks Howard Schultz. Most of us would answer “No”. He heard the same answer many times trying to find investments for building the Starbucks empire.
“We're in the business of human connection and humanity, creating communities in a third place between home and work,” said Schultz. And that approach created a market that didn't exist and a company that now doubles its sales every three years.
Once Howard Schultz visited coffee bean store Starbucks in Seattle in 1981 he fell in love in this business and people that were working there. He was delighted with the care the Starbucks owners put into choosing and roasting the beans. He was making a successful career in big corporation, but he left everything and followed his dream. It took Schultz a year to convince the Starbucks owners to hire him. When they finally made him director of marketing and operations in 1982, Schultz went to Italy where he took note of the coffee bars that existed on practically every block. He learned that they not only served excellent espresso, they also served as meeting places or public squares; they were a big part of Italy's societal glue, and there were 200,000 of them in the country. But back in Seattle, the Starbucks owners resisted Schultz's plans to serve coffee in the stores, saying they did not want to get into the restaurant business. Frustrated, Schultz quit and started his own coffee-bar business called Il Giornale.
His first investors were Starbucks’s owners that gave him $150 000. But to realize his dream he needed $400 000 for start-up and $1.25 million for opening next 8 espresso-bars. During one year he talked to 242 potential investors and 217 of them said “no”. They didn’t believe that his project could have commercial success. It was the hardest time for him but he didn’t stop. Schultz remembers: “In 1986 with my wife pregnant with our first child, her father asked to come over and see me and he went for a walk and this is in the early stages of the kernel of the idea and I was not drawing a salary and we were really struggling, and we were trying to raise money and having a hard time. And we were going for a walk and he said let's sit down. We sat down on a park bench and he said to me with my daughter seven-eight months pregnant and she working and you not bringing in a salary I want to ask you to do something and that is to give up this dream and hobby and get a job. And I remember I started to cry because I was so embarrassed. But I couldn't do it”. And after all his passion and faith helped him to find private investors that believed in his idea and gave him enough money. Il Giornale was successful, and a year later Schultz bought Starbucks for $3.8 million.
Howard Schultz wanted to build “a company with the soul”, a company that his father never got a chance to work for, in which people were respected. He applied a series of practices that were unprecedented in retail. He insisted that all employees working at least 20 hours a week get comprehensive health coverage - including coverage for unmarried spouses. And now Starbucks spends more on health care than it does on coffee. Then he introduced an employee stock-option plan. These moves boosted loyalty and led to extremely low worker turnover. And when you pay $4 for coffee, you're funding Schultz's social agenda — the health care, stock options for employees and more. He even pays farmers higher than market rate for beans.
“We're now the ‘Third Place’” says Schultz. “The physical environment has become as important as anything we do, including the coffee. The environment and the experience is the brand.” Entertainment is also an important part of Starbucks business. The coffee retailer now sells Starbucks branded CDs and owns entertainment company Hear Music. In 2006, the company entered the movie market as one of the producers behind the film, "Akeelah and the Bee."
Howard Schultz is visiting about 25 stores a week and he is looking for people doing things right. That's an important point. Not looking for people doing things wrong. He is sure that it is necessary to win back customers' loyalty every day and that success is based on their continued trust in company’s people and environment over long periods of time. “I think one of the underlying values of Starbucks for the last 20-25 years has been that everything we do relates to the fact that we're — the only reason we are in business is because of the quality of people that we're able to attract and retain, coupled with the quality of coffee that we can buy and roast. If we don't do those two things well, we are finished. We have no secret sauce, we have no patent, we have no technology, those are the only two pieces of the puzzle that can differentiate Starbucks” says Schultz.
Starbucks experienced astronomical expansion during the '90s, going public in 1992 and growing at a rate of 25 percent to 30 percent a year. During the new corporation's first year, expansion amounted to 15 additional stores; by 1992 there were nearly 150 Starbucks locations. A markedly growing mail-order business paved the way for the Starbucks brand in many other areas outside of the Pacific Northwest, such that the only advertising the company needed was word of mouth. Now the company has stores in 37 countries. “I think there were many moments when people said, not to me directly, but I remember hearing things that, 'Don't aim too high.' Not my parents, but people. 'You're from Brooklyn, you're from the projects. Don't aim too high.' “said Schultz. “I can’t give you any secret recipe for success, any foolproof plan for making it in the world of business. But my own experience suggests that it is possible to start from nothing and achieve even beyond your dreams.”
Howard Schultz (born July 19, 1953, in Brooklyn, New York) finished Northern Michigan University, BS in 1975. He started his career in 1976 in Xerox Corporation. In 1979–1982 he worked as a manager of U.S. operations in Hammarplast.
Background Links
Amazon.com: http://www.amazon.com/Pour-Your-Heart-into-Starbucks/dp/0786883561 Here you can buy (read about) Schultz autobiographical book Pour Your Heart into It : How Starbucks Built a Company One Cup at a Time.
Marketplace: http://marketplace.publicradio.org/segments/corneroffice/corner_schultz_transcript.html Howard Schultz’s interview featuring interesting details about Starbucks’s values and corporate culture.
CBS News: http://www.cbsnews.com/stories/2006/04/21/60minutes/main1532246.shtml A 60 minutes interview in which Howard Schultz shares his thoughts about human relationships in his business, relationships with customers and employees. Here you can find some interesting biographical details.
Business 2.0: http://money.cnn.com/popups/2006/biz2/howtosucceed/5.html This is Schultz’s brief speech on how to succeed in 2007: dare to be a social entrepreneur.
Fast Company: http://www.fastcompany.com/magazine/84/starbucks_schultz.html An interview about Starbucks’s music retail. Schultz speaks about customer experience and how the partnership with Hear Music could remake the music industry.
Fast Company: http://www.fastcompany.com/magazine/84/starbucks_1.html Here you can find an article about Starbucks’s efforts to transform the record industry and turn the company into the world's biggest brand.
Answers.com: http://www.answers.com/topic/howard-schultz Howard Schultz’s biography.
