Starbucks co-founder Zev Siegl, now a small business adviser, shares

untold Starbucks stories

He co-founded one of the biggest names in retail, but American Zev Siegl
has the manner of an enthusiastic schoolteacher.
Thats because he initially taught history at a school in Seattle before
launching Starbucks with Gerald Baldwin and Gordon Bowker in 1971. It is
now the largest global coffeehouse company with over 20,000 outlets.
Speaking at JW3 last week, in a fundraising bid for One Family UK, which
supports Israeli victims of terrorism, Siegl shared the untold story behind
the multi-billion pound business.
We were just three young guys, he says. We were not businessmen. I
was a schoolteacher, Jerry had a minor position at the Boeing Company
and Gordon was a journalist.
We wanted a little more excitement in our lives, more authority. We
wanted to express ourselves. Making a ton of money wasnt on the table.
But we were in a position that many young entrepreneurs are. We had
nothing to lose. That can make you want to take a risk.
Siegl, 58, says the trio, who have remained close friends since meeting at
San Francisco University, once came together for a cheap lunch to
brainstorm business plans and lament our situation. That lunch ended
like most lunches ended in 1970 with a terrible cup of coffee.
It really tasted like something you would put in your car, he laughs,
recalling the light-bulb moment that propelled them into business.
We thought, maybe theres a demand for coffee in Seattle. Thats the
seed from which Starbucks grew.
We really had only one thing going for us, and that was that we were
alert to possible demand.
People didnt walk around carrying coffee with logos like they do now.
This was before the birth of the modern coffee business. There wasnt
much going in terms of gourmet coffee in the US.
We were determined to make our company great. In the six-month startup period we didnt sleep much.
[But] its safe to say that it was a good idea to get into business.

Siegl, now a small business adviser, pauses his PowerPoint presentation

and turns to the audience. Theres a message to be learnt, he tells
entrepreneurs scribbling down notes. That is the value of research and
marketing.
Fortunately, we chose not to plunge in. We did research at the public
library and spoke to business people.
You have to think beyond your family and friends, who love you dearly
and went to your bar or batmitzvah. Theyre not going to say whats he
thinking? Theyll keep encouraging you to plunge ahead.

Co-founders Gordon Bowker, Zev Siegl and Gerald Baldwin in the early
day
Only the silly entrepreneur takes that kind of praise from family or
friends.
It was the advice and mentorship of Netherlands-born Alfred Peet, who
founded Peets Coffee & Tea, which proved to be most valuable.
Peet and I hit it off, he says, recalling a visit to the Holocaust survivors
coffee shop in Berkeley, California. He agreed to mentor us and was like
an uncle. His philosophy, which became ours, was no compromise about
coffee.
Im pretty sure that there wouldnt be a single Starbucks store if it wasnt
for him.
Siegl urges ambitious entrepreneurs to get a mentor theyre free.
Starbucks went from a retail shop to a global coffeehouse chain because
its founders grew slowly, he says.
Have money in the bank before you start, adds Siegl, who says the
founders cut costs by building shelves in his parents basement and
launched Starbucks with the equivalent of $100,000 today or $20,000
in 1970.
We raised a lot from our own coffers and our families loaned us some
money. None of us were wealthy but [our families] wanted to help us.
Siegl says his mother Eleanor and father Henry, respectively descended
from Polish-Russian Jews and Hungarian Jews, influenced him in very
different ways.

My father was a violinist and poor manager of money, says Siegl.

He didnt influence me in [business] but certainly enriched my life.
My mother founded The Little School in Seattle. All board meetings for
the school were held at our dining table, so I would hear management
issues and what was going on. That was a big influence for me.
But after 10 years as vice-president of Starbucks, Siegl made the decision
to leave the company. In 1987, it was sold to Howard Schultz, the current
chairman and chief executive of the company.
Not only did I exit I sold my stock, he says. Every entrepreneur has a
comfort level. My comfort level is the start-up level.
I love making companies where there wasnt a company or changing
something radically that wasnt there. Thats what I enjoy.
Perhaps thats why Siegl has been widely dubbed Mr Start-Up.
I was comfortable selling Im an early stage guy.
When things get complicated, I have to exit, he adds.
My idea of complication is hundreds of employees and middle
management Im not very effective there.
Siegl went on to defend Starbucks position in the controversial UK tax
avoidance row.
Its a publicly traded company. Sometimes their drive for profit to satisfy
millions of stockholders might get in the way of their right decisions, he
says, whilst also highlighting Starbucks corporate social responsibility
initiatives.

Howard Schultz
Chairman & CEO of Starbucks Corp.
Founded: 1971
"I always wanted to do something to make a difference."-Howard Schultz

Everyone knows Starbucks, the ubiquitous retail chain that, in the 1990s, turned
coffee drinking into a national pastime. But few know Howard Schultz, the selfeffacing chairman, CEO and mastermind behind Starbucks' astonishing growth. By
bringing Italy's "coffeehouse culture" to the United States and packaging it for mass
consumption, this maverick marketer transformed a little-known four-store chain in
the leading retailer of specialty coffee in North America.
Born in 1953, Schultz was raised in the rough and tumble Bay View housing project
in Brooklyn, New York. His mother worked as a receptionist and his father held a
variety of jobs, none of which paid much or offered such basic benefits as medical
coverage for him and his family. When Schultz was 7, his father lost his job as a
diaper-service delivery driver after breaking his ankle. At the time, sick pay or even
legally mandated disability assistance were luxuries to those in low-paying jobs, and
in the ensuing months, the family was literally too poor to put food on the table. It
was a memory that Schultz would carry with him into adulthood.
Determined to build a better life for himself, Schultz channeled his energy into high
school sports and earned an athletic scholarship to Northern Michigan University.
After graduating with a bachelor's degree in business in 1975, Schultz immediately
began working in the sales and marketing division of Xerox Corp. Schultz excelled at
Xerox, so much so that he attracted the attention of the Swedish housewares
company Perstorp AB, which recruited him at the age of 26 to be vice president and
general manager of their American subsidiary, Hammerplast USA.
While at Hammerplast, Schultz noticed that a small Seattle company named
Starbucks (after the first mate in Hermann Melville's classic Moby Dick) was buying
an unusually high number of Hammerplast's espresso machines. Intrigued, he flew
to Seattle to investigate and found four Starbucks outlets. Originally founded in 1971
as a single store near Seattle's famed Pike Street Market, Starbucks sold freshly
roasted gourmet coffee beans as well as teas, spices and various coffee-making
accessories.

Impressed by Schultz's energy and marketing skills, Starbucks owners Gerald

Baldwin and Gordon Bowker-who possessed very little business knowledge-asked
Schultz to become part of their operation. Enticed by their offer, which included part
ownership, Schultz joined Starbucks as head of its marketing and retail operations in
1982.
A year later, during a vacation in Italy, Schultz had what he has described as an
"epiphany." While sitting at one of Milan's many espresso bars, he realized that the
coffee shop played an integral role in the social life of most Italians. It was a focal
point for the neighborhood, where friends met, mingled and lingered at all hours of
the day. "Seeing this, I thought to myself, 'Why not open a coffee bar in Seattle?' "
Schultz recalls in an interview in The New York Times.
Returning to Seattle, Schultz shared his epiphany with his fellow Starbucks owners.
Although coffee was brewed in the shops, it was done so only at the request of
customers and dispensed as free samples, and Baldwin and Bowker were unwilling
to move beyond the stores' core product offerings.
Convinced he had hit upon something big, Schultz left Starbucks in 1986 to open his
own espresso bar called Il Giornale (The Daily). The venture was a hit. Schultz
wanted to open more shops, but didn't have the funding he needed to expand. In a
quirky twist of fate, a year later he learned that Baldwin and Bowker wished to sell
their outlets, so after rounding up investors from the Seattle area, Schultz purchased
the original Starbucks chain for $3.8 million and merged the stores with his own.
Once in charge, Schultz set out to completely overhaul Starbucks according to his
vision. In addition to the $1-per-cup "basic" brew, he expanded Starbucks' offerings
to include more exotic coffee beverages such as espresso, cappuccino, caf latte,
iced coffee and caf mocha. He also sought to create a more appealing
atmosphere for his customers-the proverbial "clean, well-lighted place" where they
could relax and enjoy their coffee in comfort.

But the most radical change Schultz made was to improve the way his company
dealt with its employees. Convinced that friendly, efficient service would boost sales,
he instituted a training program designed to groom knowledgeable employees who
would enjoy working behind a counter, an occupation considered by many to be
menial labor. "Service is a lost art in America.it's not viewed as a professional job to
work behind a counter," Schultz says. "We don't believe that. We want to provide our
people with dignity and self-esteem, so we offer tangible benefits." Among the
benefits Schultz offers is complete health-care coverage to both full- and part-time
employees, as well as stock options, practices that are virtually unheard of in
corporate America. As a result of Schultz's vision, Starbucks experienced
unprecedented growth throughout the 1990s, blossoming from 425 stores in 1994 to
more than 2,200 stores in 1998. And the company is on target to break the $2 billion
in the year 2000.

With annual sales topping $1.7 billion in 1999, Starbucks Corp. reigned as the
nation's No. 1 specialty coffee retailer. Quite an impressive achievement for a bluecollar kid from the projects. But despite Starbucks' phenomenal success, what
Howard Schultz seems most proud of is not how much he has earned, but the kind
of company he has created. "My dad was a blue-collar worker," Schultz explains in
an Inc. magazine interview. "He didn't have health insurance or benefits, and I saw
firsthand the debilitating effect that had on him and on our family. I decided if I was
ever in the position to make a contribution to others in that way, I would. My greatest
success has been that I got to build the kind of company my father never got to work
for."
The Benefit Of Benefits
Howard Schultz credits Starbucks Corp.'s benefits policy as one of the keys to his
company's dramatic growth. By extending health benefits to all employees, Schultz
has created a more dedicated work force and promoted an extremely high level of
customer service. He has also achieved a turnover rate that is less than half the

average of other fast-food businesses, saving the company countless thousands in

training costs and enhancing its ability to attract and retain good employees.
Another benefit that makes Starbucks stand out from its competitors is its stockoption plan. Dubbed "bean stock," unlike most plans, which are only available to top
executives, Starbucks gives stock options to everyone in the company. "My aim was
to give our employees a vested interest in the company," Schultz says. "And that, I
think, has made all the difference."

Cartoons And Coffee

One of the true "good guys" of the business world, Howard Schultz's philanthropic
endeavors have extended beyond just helping his employees have better lives. One
of his major philanthropic concerns has been helping to improve literacy in America.
To this end, in 1998, Starbucks formed an unprecedented partnership with Pulitzer
Prize-winning cartoonist Garry Trudeau to create products to benefit local literacy
programs across America. The collection marked the first time that a series of
licensed Doonesbury products had been sold in retail stores. The series featured
such Doonesbury characters as Duke, Mike, Kim and Zonker on T-shirts, tumblers,
ceramic mugs, coffee gift cards and limited-edition lithographs.

Entrepreneur:

Howard Schultz

Company:

Starbucks Corporation

Founders:

Howard Schultz

Year Started:

1987

Description of Business:

The Starbucks Corporation sells coffee drinks from over 3,300 stores
around the world. The company has entered into agreements with
bookstores, airlines and hotels. It also markets its coffee through an
online catalogue.

Biography of Howard Schultz: BS 1975 Northern Michigan University

How the Business Started: Starbucks Coffee, Tea and Spice, as it was first known, roasted its first
coffee in 1971. The small coffeehouse in Seattle was the vision of three men -- Jerry Baldwin, Zev
Siegel, and Gordon Bowker -- who shared a common passion for fine coffee and tea. Their
determination to provide the best quality coffee helped their business to succeed. With success came
growth. A decade later Starbucks opened its fourth store in Seattle.

Enter Howard Schultz. In 1981, Schultz was a vice president at Hammarplast -- a Swedish maker of
stylish kitchen equipment and housewares. Schulz noticed a small business in Washington state was
ordering a large number of a special type of coffee maker. Driven by curiosity, Schultz ventured to the
Pacific Northwest from New York City to learn more about Starbucks. He saw the store, and
immediately realized the attraction to the coffee bean culture. He eagerly wanted to be a part of that
world. Schultz met with Baldwin, Siegel and Bowker and tried to break his way into the Starbucks
family. He had a plan to take Starbucks across the country. The founders didnt share Schultzs bigger
picture approach to roasting coffee, but his persistence paid off. In September 1982, Schultz was
hired to head Starbucks marketing and oversee the four Seattle stores.
Schultz later left Starbucks to open a string of specialty coffee stores in Seattle modeled after the
typical Italian espresso bar. Schultz quickly raised $400,000 in seed capital and by the end of 1986 he
had $1.25 million in equity (including backing by his former Starbucks partners). While Schultzs
stores took off, only a year later in 1987, Schultz bought the original Starbucks franchise. Between
1987 and 1992, Starbucks, under Schultz, opened 150 new stores. In 1990, Starbucks turned a profit,
and the company continues to open new stores today.
Outstanding Contributions:
Entrepreneurs make unique contributions to the American economy: Using innovations to grow their
businesses, they provide concrete benefits to the national bottom line. These benefits provide an
interesting framework in which to view these companies.
Entrepreneurs create innovations that improve our quality of life: Starbucks serves ten million
customers a week. The average coffee-loving customer will visit a Starbucks 18 times a month. Rapid
expansion has marked Starbucks history, but it has remained committed to the value of individuality.
Each store has a different lay out with a dcor that matches the personality of the neighborhood.
Entrepreneurs create new jobs: With over 3,300 stores around the world, Starbucks employs more
than 40,000 people. The Starbucks Corporations policy of opening restaurants in office buildings,
hotels and outdoor kiosks has invigorated other businesses in surrounding areas.
Entrepreneurs improve our position in global economic competition: Starbucks has rapidly shot
beyond the city lines of Seattle and beyond the borders of the United States. More than a dozen
countries are home to a Starbucks store. There are over a hundred Starbucks stores in Japan and the
United Kingdom alone.
Entrepreneurs reinvest their newly created wealth in the community: Howard Schultz has insisted that
Starbucks adopt an environmental mission statement. This pledge commits Starbucks to only buying
coffee that has been grown organically. The company also takes an interest in the farming
communities that harvest the coffee beans. Starbucks has built schools, health clinics, and safe coffee
processing facilities. Locally, Starbucks has worked with stars like Magic Johnson to bring Starbucks
stores to poor African American neighborhoods across the country. The Starbucks Foundation
sponsors literacy programs, Earth Day clean-ups, and regional AIDS walks.
Howard Schultz earned a BS from Northern Michigan University in 1975. His company, the Starbucks
Corporation, sells coffee drinks from over 3,300 stores around the world. The company has entered
into agreements with bookstores, airlines and hotels. It also markets its coffee through an online
catalogue. Provided by: National Commission on Entrepreneurship. Article on howard, schultz by
National Commission on Entrepreneurship
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Read more: Stories of Entrepreneurs: Howard Schultz

Howard Schultz was born on 19th July 1953 in Brooklyn, New York to a lower middle class
family. He studied at the Canarsie High School graduating in 1971. Schultz was very good at
sports and was awarded an athletic scholarship to the Northern Michigan University where he
studied communications. After graduating from university in 1975 he got a job at Xerox
Corporation where he spent four years. His next job was at a Swedish drip coffee maker
manufacturer named Hammarplast. Schultz had to visit a coffee bean shop called Starbucks
Coffee Company based in Seattle for Hammarplast. He was very inspired by their dedication
and recognized its potential business opportunity. A year later he joined them as Director of
Marketing. During his visit to Milan, Italy, Schultz was further encouraged as he saw dozens
of coffee shop lined on almost every street. They were not just places to buy coffee; they
served the purpose of a meeting place and a place to relax. He returned with the idea of
adding traditional espresso beverages to the menu. The concept was very well received by the
public however the owners of Starbucks did not agree to take the caf idea company wide.
Schultz was very frustrated at the refusal because he wanted much more. So in 1985, he
opened his own coffee shop which he called il Giornale. After two years Schultz purchased
Starbucks for $3.8 million. He renamed his own shop Starbucks and started aggressive
expansion all over the country. Howard Schultz did not want to sell its franchises and decided
to keep the possession of every domestic outlet. Schultz was a very generous employer. He
initiated some practices that really helped increase the loyalty of his employees. He said that
although the main goal of the company was to serve a great cup of coffee, he wanted to
build a company with a soul. He wanted his employees to work 20 hours a week and get
complete health coverage and a stock-option plan. Starbuck underwent heavy expansion in
the 1990s and in 1992 went public. Schultz was also the owner of Seattle Supersonics.
Howard Schultz has been given several awards for his superb achievements. He was given
the Israel 50th Anniversary Tribute Award in 1998 for playing a significant role in the
promotion of a close alliance between the U.S and Israel. He was awarded with the National
Leadership Award for his philanthropic efforts to combat AIDS in 1999. In 2004, he received
the International Distinguished Entrepreneur Award from the University of Manitoba for his
remarkable success and admirable conduct of Starbucks. He got the FIRST Responsible
Capitalism Award in 2007. Schultz was named Businessperson of the Year in 2011 by
Fortune magazine for his creativities in the job market.

His Belief that Employee Satisfaction

Leads to Customer Satisfaction
In seeing the happy worker as the best way to earn a happy customer, he has shifted
thought from only marketing through billboards and commercials to really driving
customer demand from the personal connection created through the process in his
stores. If an employee seems pleasant and happy, that will increase the chance that the
customer leaves with an negative experience. That will, in turn, make it more likely they
will return.

#2 Elevate the Employees Satisfaction

Through Empowerment and Training
Howard Schultz has pushed for full participation from employees at levels of his
organization, from executives down to the employees taking orders and cash at the
registers. By calling them partners instead of employees or workers, they feel a larger
part of the company. They each undergo continuing education in both the technical skills
of making the highest quality coffee drinks, but also the customer involvement skills that
improve their ability to relate to the customers.

#3 See Partners as a Pivotal Part of

Return Customer
Due to the personal nature of the coffee buying experience, he wanted to create the
satisfied employee, which in turn leads to lower turnaround, more stable management,
and a more predictable store environment. That way the customer is more comfortable if
they know the people who are going to be behind the counter, and know that their drink
is going to be made the way they like it. It makes it possible to carry out Howard
Schultzs desire that the customers be greeted by name as often as possible, and also to
have their beverage of choice remembered by the partners as often as possible. This
customer involvement and familiarity is what he believes keeps people coming back.

#4 Making High Quality Beverages Can Be

Done Quickly
By creating a product offering that generates a multitude of choices from a relatively
small number of components is essential. Anyone that has been to a Starbucks location
during a busy time knows that the baristas behind the counter can turn out the drinks in a
very quick manner. Howard Schultzs idea is that there is an unlimited number of
combinations of beverages that can be generated from having those essential
components. Those seeming never ending combinations make it possible to keep a
relatively simple operating space, while satisfying the most customers quickly.

#5 Allow Customers to Have it Exactly

How They Like It
The highly customizable practice of ordering coffee, which was almost always
discouraged at other stores, was embraced at Starbucks. Instead of pouring a cup of
coffee and leaving all flavorings in a cart at the end of the counter, like most places,
Starbucks did it very differently. Choosing the type and amount of cream, sweetener,
flavoring, ice, was turned into a fun part of the purchasing process. Each location also
includes cozy chairs and sofas in a comfortable environment, so that the customer can
choose to take some time to enjoy their drink before getting back to their daily routine.

#6 Being a Good Corporate Citizen is

Important
Howard Schultz has always encouraged philanthropy as an essential part of corporate
leadership. One hugely successful example is the Create Jobs for USA Program. This
aims to create jobs for small employers in underserved markets in the USA. Starbucks
sells in its stores products that are made from these companies, as well as selling
wristbands that the customers can buy to help support the movement at $5 each.

#7 Keep Eyes Open For Emerging Trends

Howard Schultz and Starbucks was one of the first retailers to notice the spread of wi-fi
locations and the use of devices that feed from that technology. He saw the connect

between his desire to create locations where people wanted to linger and enjoy his
premium beverages, and the providing of wi-fi to customers. Instantly he expanded his
market to college students and business people, who often found themselves away from
their home, but still needing to get work done with their wi-fi enabled computing devices.

#8 Encourage and Support Promising New

Technologies
With the invention of mobile devices, and recently their ability to be used as forms of
payment at retail locations, Howard Schultz has once again recognized that his best
customers are fully immersed in these new technologies. Starbucks was a leader in
creating an app for mobile devices that could attach the ability to make payments from a
credit or gift card, and to link to a rewards program that gave free products to those
customers that were regular customers. This took the rewards idea that many retailers
were coming up with, and took it to the next level of involvement. He has also worked
with Square, a new mobile payment company, to work in his Starbucks locations.

#9 Constant Openness to New Markets

When looking for growth markets to expand into as the North American markets seemed
to be developing nicely, Howard Schultz began looking into new markets globally. He
looked at cultural factors in determining where would be most likely a favorable response
to his coffee houses. Many markets that would have been considered unlikely have been
developed profitably with his strategies. He has successfully expanded into Western
Europe, Asia, India with steady growth being realized. They are expecting to have 1,000
stores in Japan and China by the end of 2013.

#10 Returned to CEO in 2008 to Renew

Principles of Starbucks
He was able to see the business of Starbucks straying further and further from his core
values after his eight year leave from the duties of CEO. It reaffirmed the truth of his
belief that the individual coffee shops were the foundation of the company. By
concentrating more on other forms of growth, the essentials were being overlooked,
losing the feeling necessary to maintain customers. He came back in 2008 as CEO to

return to those ideals and has brought them back to the strength and dominance that
they had initially.

Howard Schultz on How to Lead a Turnaround

In his new book, onward, the Starbucks founder describes how he overcame
slumping sales and quality control issues that threatened to destroy the company he
had built.
Howard Schultz took a small Seattle coffee store and turned it into a global
business with more than $10 billion in annual sales. Yet one of his greatest
accomplishments, says the Starbucks CEO, was making it through the past few
years. In his new book, Onward: How Starbucks Fought for Its Life Without
Losing Its Soul, Schultz chronicles his return to the helm of Starbucks during one of
the most tumultuous times in the company's 40-year history.
After stepping down as CEO of Starbucks in 2000, Schultz, who remained chairman
of the company, found it increasingly difficult to sit on the sidelines. "In letting go of
the CEO post, I had essentially agreed to trust in the decisions of others, even when
my heart suggested those decisions were not wise," he writes. "Like a parent
standing back and watching his children make their own choices, the entrepreneuras-chairman role had its unique emotional challenges."
In 2007, Schultz dashed off a now-famous memo to the management team criticizing
the state of the company's stores. A year later, Schultz was back in charge and
working to restore quality control, going so far as to close all 7,100 U.S. stores for
one evening to retrain employees. But as the slumping economy drove consumers to
cut back on $4 lattes, he was forced to lay off thousands of employees and shutter
some 600 stores. Schultz, 57, spoke with Inc. senior editor Bobbie Gossage about
what it is like running Starbucks the second time around and how he got the
company back on track.
You write that taking on the challenges of a troubled company
was completely new territory for you. How was that experience
different from running the company the first time?
There's an energy and excitement when you're building a company. You have so

much tail wind. You're planting new seeds. But it's also scary, because there's no
safety net. I really enjoyed that experience. At an early age, my mother gave me this
feeling that anything is possible, and I believe that. If you look at where I came from
and where we are today, my story is like a Hollywood movie. I was able to achieve
the American dream. It's not that it was easier or harder the first time I ran the
company, but I would say that the feeling that goes with building something
especially when you get some successit's a wonderful carpet ride.
It's different when you're trying to turn something around, especially something that
you built, at a time when so many constituentsthe media, Wall Street, competitors,
ex-employeesare all saying that Starbucks's best days are behind it, and that
Schultz is never going to be able to bring it back. It's not that they underestimated
me, but they underestimated the power of our culture and values and the resiliency
of the brand and our people.
In many ways, it's much more rewarding to be here today, having made it through the
past few years, than it was building the company. It was difficult, because during the
financial crisis, there were no navigational tools. No one had experienced anything
like this. You couldn't really talk to anyone or read something. You had to make big
decisions based on things you believed in your heart were the right things to do.
What did you learn about this new environment?
There's been a real sea change in consumer behavior. And those companies that are
consumer based must appeal to the consumer in a different way today than they did
two or three years ago. And it's not all based on value. Cutting prices or putting
things on sale is not sustainable business strategy. The other side of it is that you
can't cut enough costs to save your way to prosperity.
I think the question is, What is your relevancy to the new life of this consumer, who is
more discriminating about what they're going to spend money on? The customer
today is very well informed. In addition to price and convenience, there's something
else they are influenced by, and that's what the company stands for: how it treats its
employees and its customers. We've found that consumers are willing to walk
another block and potentially spend a little bit more for companies whose values they
truly trust.
How do you maintain quality as a company grows and grows?
There are 17,000 Starbucks stores in 54 countries, serving 60 million people a week.
We employ 200,000 people. So I can make the caseand I have for yearsthat the

most important discipline at Starbucks is human resources. I mean, Howard Schultz

can't manage what I just described for you sitting in Seattle, Washington. I can't
manage every store. I'm not going to pour one shot of espresso today.
Every enterprise has a memory. And that memory is imprinted with a history and a
way of doing business. As leaders, we have to make sure that we're attracting the
right people and that the values of the company are being upheld. When you see
something that isn't right, you have to make sure that you're not a bystander. I've said
for years that the most important aspect of our company is the culture. And people
laugh at that, but that's the truth. Whether it's a small or a large company,
transformation can't take place with only one person saying, "I'm going to transform
this enterprise."
You grew up in a family without health insurance. During the
recession, though, there was pressure on you to trim health
insurance for part-time employees.
Yes. I got a call from an institutional public shareholder, whom I've known for many
years. The conversation went something like, "I'm assuming you're going to cut back
on health care." And I said, "Why would you assume that?" He said, "Well, because
you've never had more license. No one is going to hold you accountable." And I said,
almost instinctively, "There's no way that we're going to cut that benefit at Starbucks."
The fabric of the companygoing back to the early daysis linked to that benefit. I
would just not turn my back on that. I basically said to the shareholder, and not in an
arrogant way, "You have to evaluate whether or not you want to be a shareholder,
because I'm not cutting it." And I think great companies and great leaders have to be
willing to stand up for the things they believe in. And these things are really
important. We're not perfect. We make mistakes all the time. But that was sacred
ground for me.
You write in the book about moments that looked bleak for your
company. What would you say was your darkest hour?
It was the evening before we were going to announce store closures and layoffs.
That night, I had asked for a list of all the people who were going to be laid off. I
wanted to go through every name. I knew that there were lives at stake, and families.
And when I had to get up in front of the whole company the next morningthat was
the most emotional, most difficult moment in my 30 years at Starbucks. The way I
tried to describe it at the time was that these were decisions we had to make to
preserve the future. But we didn't have a choice.

When you consider Apple and Dell and other businesses, there
seems to be a trend that when a company is struggling, the
solution is to bring back the founder. Why do you think that is?
I think founders come back perhaps because they no longer recognize the company
they built. In my case, if an outsider would have come in, I suspect the easiest and
most predictable thing he or she would have done is cut things to the bone. That
would have destroyed the company. I had the benefit of knowing what buttons and
levers to push and pull. I also knew that just going back in time and embracing the
status quo of the past would not produce success. That's what people thought I
would do. I had to restore the company's heritage but, at the same time, push for
reinvention.
What were some new strategies?
We recognized that social digital media was not only changing consumer behavior
but, if done properly, could significantly lower our cost of customer acquisition and
could be a creative way to engage emotionally with our customers. We've invested
heavily in that.
We also started a website, mystarbucksidea.com. We said, "Tell us what will bring
you back to Starbucks; tell us what will engage you with our company." Not
surprisingly, the No. 1 suggestion was that we create a loyalty program. More than a
million people are now carrying the Starbucks gold card and getting significant
rewards.
You write in the book that you were also on a mission to find the
next Frappuccino. You thought you had found it.
Yes, the Sorbetto. It didn't work. There were many lessons that the company and I
learned. And I think one of the most humbling lessons was that the problems we
were dealing with were not created by one decision or the financial crisis alone.
There were multiple problems that led to the issues we were facing. I learned there
wasn't going to be one silver bullet that was going to save us. There had to be a
comprehensive transformation, from the bottom up. Even if Sorbetto had worked, it
wouldn't have solved all of our problems.
One idea that did transform the company was Via, our instant coffee. Via not only
reinvented the coffee category, but it reminded our people of the entrepreneurial
DNA of the company. It was 20 years in the making, primarily because we could not
replicate the taste of Starbucks coffee in an instant. Here's another example where

the world thought we were crazyand that I was desperate. And in the end, Via in its
first year did over $180 million in sales.
You had people inside the company who fought this, too.
Yes, people came to my office and said, "In all due respect, I think you're crazy. It's a
bad idea." But sometimes, you've got to believe what you believe. I'm not always
right, but in this case, we were right. I think great companies have the curiosity to see
around the corner about what's possible and the courage to execute. All small and
large companies have to push for reinvention and self-renewal. Consumers are
rethinking what they're buying and how they're buying it. Business plans decades in
the making have to be rethought and reexamined, because they will not be relevant
in the future