Onward (15 page)

We considered other brands that had also evolved, some radically, but had still preserved their stature, some even after taking a hit. Brands such as Apple, Gucci, Mini Cooper. Even New York City. Then, with guidance from SYPartners, we looked for parallels that could inform Starbucks’ own challenges and touched on several themes.

 

• Icons make sense of the tension of the times, offering hope and even mending a culture in turmoil, much as The Beatles did for my generation in the 1960s.
  In what ways could Starbucks help bridge the political divides, environmental
  concerns, and economic uncertainties that were sweeping the country, particularly during a tumultuous election year in the United States and a recession that seemed inevitable?
  
 

 

• Icons assert a “cultural authority,” helping to frame the way people view the times they live in.
  How was the concept of “community” changing, online and offline, and how did we want to react to it—or drive it?
  
 

 

• Icons don't confuse history with heritage, and always protect and project their values.
  How could Starbucks continue to grow through the lens of ethical behavior, global responsibility, and human connection?
  
 

 

• Icons disrupt themselves before others disrupt them.
  With competitors and critics breathing down our necks as never before, how could we tell our story, reassert our coffee authority, and perhaps change the industry—again?
  
 

 

• Enduring icons are willing to sacrifice near-term popularity for longer-term relevance.
  For Starbucks, that would mean making tough choices and experimenting with new concepts at the risk of ridicule.
  
 

These were profound questions that could not be answered that day, but at least they were being planted in our brains. I suggested something to the group as ideas began to percolate. “The only filters to our thinking should be: Will it make our people proud? Will this make the customer experience better? And will this enhance Starbucks in the minds and hearts of our customers?”

Those questions, I figured, provided focus, but left lots of room for creativity.

In those early days after I returned, as we talked long-term strategy, we also focused on tactics. Real actions that would yield visible results, and fast. The company had already announced that it would slow US store openings, close some stores, and accelerate growth in other countries. But we also needed to innovate and dramatically improve
the in-store experience. A number of projects were already in the pipeline and, if pushed to completion and positioned right, held a great deal of potential.

In my head I knew that no silver bullet would transform Starbucks overnight, but in my heart I was on the lookout for a big idea—What would be the next Frappuccino, the most successful new product in Starbucks’ history?—that would solve our problems. In truth, I was also impatient, a weakness I needed to curb.

Yet there was another reason to insist on immediate, tangible improvements to the business. The annual Starbucks shareholders’ meeting loomed. On March 19, less than two months away, more than 6,000 investors and partners would pack Marion Oliver McCaw Hall, Seattle's grand arts auditorium nestled near the towering Space Needle, and the nearby pavilions we use for overflow. For the first time in our 15 years as a public company, many people in attendance would not be happy with Starbucks’ performance. Nor should they have been.

Rather than apologize for the past, I viewed the 2008 annual meeting as a chance to move us forward. It would be a seminal event, an unparalleled moment with tremendous potential to reassure shareholders and partners that Starbucks was committed to—and, more importantly, already embarking on—real change. As ceo I would host the two-hour presentation, and secretly I was a bit worried about what the reaction would be when I stepped onstage to face thousands of people whose investments had lost almost half of their value in the past 14 months. Would they welcome me back? Would they boo? Anything was possible.

My instinct was to take as much control of the situation as possible by infusing the meeting with honesty and optimism. To do so, I would need to deliver more than a compelling speech and a business plan. I would need proof of our progress.

At the same time that I was working with others to imagine the company's future, I was also meeting with people in our operations, financial, partner resources, supply chain, and real estate departments to address our mistakes of the past. In those meetings, I more fully realized not only that I'd have to significantly change the makeup of our leadership team, but also that there were myriad questions that needed to be answered. What were the stores’ trending unit economics, our term for the financial performance of
individual stores? Exactly how many stores were underperforming, why, and where? How many stores could we open, and in which markets, without risking further cannibalization? How far was our supply chain operation being stretched? Where were we spending more money than necessary to achieve the same or better results? Did we have the right people with the right skills in place for everything that needed attention?

Perhaps the most important step in improving the faltering US business was to reengage our partners, especially those on the front lines: our baristas and store managers. They are the true ambassadors of our brand, the real merchants of romance and theater, and as such the primary catalysts for delighting customers. Starbucks desperately needed baristas and managers to be genuinely friendly, enthusiastic, and willing to go the extra mile millions of times a week.

Unfortunately, I continued to learn via e-mails from people in the field and through my own observations that many of our retail partners were unmotivated and uninformed about our coffee and the company. Our turnover rates in stores were too high, and a new generation of baristas had not been effectively trained or inspired by Starbucks’ mission. It was not their fault. New hires were often handed a thick, three-ring binder of rules, techniques, and coffee information and simply told to “read it.” Employee reviews and pay raises could be inconsistent, and the scheduling of shifts was also inefficient, sometimes burdening one employee with the work of several. For some, being a barista was just a job.

Part of the problem was that we did not have the proper incentives or the right in-store technology to help store managers operate like owners, taking more control over their stores’ destiny. Because we were opening new stores so fast, a barista could easily have a new manager every few months. Much too much inconsistency. In addition, our compensation and benefit plans, while generous compared to almost any other retailer, no longer rang revolutionary. Reinventing compensation and benefits for a 21
^st
-century retail organization, and for a younger generation, was crucial. Unfortunately it would take time, likely more than a year, to put in place meaningful new programs.

In the near term, however, we had to do something to inspire and improve performance.

I made two quick decisions.

First, we would retrain 135,000 baristas in espresso beverage preparation, from pouring a perfect shot to properly steaming milk. And we would do it before the annual meeting. I had long maintained that our training was inadequate, and giving baristas more tools and knowledge to do their jobs well would improve the experience for them as well as customers. I asked a team to figure out how the company could take on such a large task in a matter of weeks, and they came back to me with the radical idea of closing all of our US stores on one day. Espresso Excellence Training was set in motion, and on January 11 we issued a press release announcing that, on February 26, we would close stores for a “historic in-store education and training event.” Rather than trying to hide our deficiencies and teach people in private, we publicly celebrated espresso, loudly asserting our coffee authority.

Second, I committed to hosting a 2008 leadership conference for our 8,000 US store managers and almost 2,000 more partners. Starbucks had a history of holding these mass meetings every few years in a different city as a way to inspire and reward our managers. But the company had not held one for several years. I did not know where we would hold the 2008 conference or how I would justify to Wall Street the millions of dollars it would undoubtedly cost, but I intuitively knew that such a massive gathering, if executed right, would infuse the people who managed our stores with the emotional capital they so desperately needed to reconnect with the company.

The first day of the brainstorming summit neared its end, but instead of sending us home or back to the office, we were split into smaller groups and sent out into various corners of the city to visit some of Seattle's most compelling homegrown retailers. Our assignment was to observe and report back on what we saw, heard, tasted, smelled, and felt. The merchant in me was hungry to explore.

In the Fremont neighborhood, Theo Chocolate is a cozy store connected to the company's only factory in a flat brick building. The smell of warm chocolate wafts through nearby streets, while factory tours and free candy bar tastings let customers experience confections like Coconut Curry and Vanilla Salted Caramel. Plus, Theo's status as the only organic, Fairtrade certified, bean-to-bar chocolate factory is inspiring to customers and a source of pride for the staff we met.

We also crowded into Top Pot Doughnuts, where a two-story, floor-to-ceiling wood bookcase, coupled with the shop's slogan, “hand-forged doughnuts,” elevated sugary cake to a level beyond fast food.

And in Pike Place Market I ventured inside Beecher's Handmade Cheese, where founder Kurt Beecher Dammeier makes natural cheese on the premises. I love cheese, and chatted easily with an enthusiastic woman behind the counter. “How did you get to be such an expert on cheese?” I asked, and was floored when she told me that she had known nothing about the subject before she was hired—just six months earlier!

Leaving the cheese shop, which is located just yards away from the very first Starbucks, I couldn't help but think about our baristas. About how knowledge can breed passion. And about how our company had to do a much better job of sharing our coffee knowledge and communicating our mission. Pride in purpose would help give our partners a sense of ownership. These were not new insights, for me or for most of my colleagues, but revisiting them helped us—or at least it helped me—see our priorities more clearly. My eyes were wide open.

My thoughts wandered back to the iconic nature of The Beatles, as a band and as a brand. What courage they had had, staying true to their musical talents while maintaining relevance in the world. One reason I believed that the Starbucks brand would be resilient was because our founding values still resonated, perhaps now more than ever as anxiety and distrust seeped into the popular zeitgeist, and not just in the United States. In addition to our values, Starbucks’ core product would also continue to be relevant. Coffee will never lose its romance. It will always bring people together and be part of conversations in every language, even as the conversations change. Coffee will forever connect.

Our ongoing challenge is to creatively nurture coffee's essence, keeping it personal despite our size. I do not want Starbucks to be defined solely by its thousands of stores or millions of customers. More than our scale, the brand can and should be defined by the quality of its coffee as well as its values. Community. Connection. Respect. Dignity. Humor. Humanity. Accountability.