Onward (7 page)

Every organization has a memory, a history of achievements, mistakes, even unintended consequences that contribute to an ongoing dialogue as people mold an event's meaning for themselves. The tapestry of interpretations informs, and often directs, the organization's future. That February, my memo became part of Starbucks’ collective memory.

Some partners strongly disagreed with my opinions. After all, the
company was soaring. In 1992, when Starbucks went public, our market capitalization had been $250 million. Now it was approximately $24 billion. People who invested with us in 1992 had experienced an almost 5,000 percent increase in the value of that investment. Every week, Starbucks’ stores had 45 million visitors. We were the most frequented retailer in the world! Why complain? some murmured behind closed doors.

Other partners, even those who shared my concerns, could not help but feel confused or insulted because they had worked so hard to make the company better and meet our growth goals—the very growth goals that I had championed. Weren't we just doing our jobs? They wanted to know. Then there were partners who saw the memo as nothing new, just another one of Howard's impassioned commentaries.

But there was also a great deal of talk among partners that I was “right,” that a dirty family secret had finally been aired. A secret that could no longer be ignored. Topics that had been taboo, such as our myopic push for efficient, rapid growth at the expense of the Starbucks Experience, were suddenly open for discussion. It was as if a collective sigh of relief rippled through the corridors.

As people at our Seattle support center—our name for Starbucks’ headquarters—and in our stores interpreted my words, I had to reconcile my own emotions. I worried that Jim may have felt personally attacked, as if I had publicly reviewed his job performance. Assigning fault was never my intent, publicly or privately. I was as culpable as anyone for the direction we were headed in.

Plus, I had tremendous affection for Jim. Despite our differences, I wanted him to win and succeed, and after the leak I apologized to him for any embarrassment the memo may have caused him. Unfortunately, maybe inevitably, the leaked memo further complicated our relationship, widening the rift between us. In the months that followed, more partners e-mailed me and approached me in confidence to share their own concerns about the company. Others purposely avoided me, discounting me as little more than a cranky former chief executive who had lost touch with the business.

Neither of these situations was good for Starbucks.

Outside the company, the memo continued to take on a life of its own.

It had first appeared on what was, in early 2007, a little-known blog called Starbucks Gossip. One of many third-party websites that focused on Starbucks, it posted news releases, articles, and mostly anonymous opinion pieces about the company.

The day after the memo was posted, the mainstream media picked it up like a whirlwind.
The Wall Street Journal. The New York Times
. The Associated Press. Bloomberg, Reuters, the
Financial Times.
Online financial news sites and independent blogs. Articles quoted the memo and parsed my words, usually under dour headlines that implied, or stated outright, that trouble was brewing at Starbucks. Online, readers posted comments one after the other. Many of them stung.

Stunned as I was that the memo had been leaked, I was also astonished by the depth of conversation it unleashed, as well as the speed. It seemed that everyone—customers, partners, analysts, reporters, industry insiders, and business “experts”—had an opinion about the memo, its motive, what it meant for the future of the company as well as what it said about me as a leader.

Reactions swung to extremes. Some praised the memo as an entrepreneur's bold move to try to save his company. Others used my criticisms to support their own critiques. Yes, they agreed, Starbucks had expanded too far outside its coffee roots and was diluting the experience. Financial analysts acknowledged that our rapid expansion was necessary for growth, or they interpreted the memo as a strategic signal to Wall Street that we intended to slow our growth, which was not true at the time. Anonymous posts chastised me for not realizing that my words would get out; others insisted the leaked memo was a public relations stunt.

Amid the circus of speculation, we captured the company's quandary in an interview with
The New York Times
: “The question is always, How do you keep things in balance?”

That sentiment was, after all, the memo's point. Balance had always been Starbucks’ challenge. Fiscal responsibility and benevolence. Shareholder value and social conscience. Profit and humanity. Local flavor on a global scale. Now our challenge was to restore proper balance between our desire for growth and the need to preserve our heritage.

Although the rush of news coverage, opinions, and false rumors was very frustrating, in retrospect it served two very important, and unexpected, purposes.

First, the avalanche of press and punditry pushed me to accept another reality: Nothing that Starbucks or I do can be presumed confidential. The Internet simply exacerbates that fact. Going forward, the company and I would have to be much more cognizant of what we said and where. While I would continue to strive to speak transparently, I would do it through a much tighter lens.

I also became more attuned to the true power of the virtual world.

The heated online conversations about the memo were beyond Starbucks’ influence, more so than any other controversy we had experienced in the past. We were not perfect, but the good things about us, our values and the acts that distinguished us, these were getting lost in the public conversation. Our collaborative approach to working with farmers. The millions of dollars we invested in local communities. The health-care coverage and stock we extended to part-timers, at a considerable cost to the company. While we never put forth press releases about many of these initiatives—believing they were just the right things to do—we also were not getting credit for them.

It was clear: Starbucks did not have the tools to participate in the online debates on a scale that would make much difference.

Our website, with its beautifully designed pages that described our coffee and provided news and financial data, was primarily a one-way dialogue, inadequate in the digital age. Starbucks had no interactive presence online. No way to speak up quickly on our own behalf, to talk directly to customers, investors, as well as partners, or let them talk directly to us. To remind people of what we stood for. In short, we were losing control of our story, in the stores as well as in the world. I also began to reflect on new behaviors I was witnessing in our stores as well as in my own home, with my two teenage kids: the increasing number of young people on laptops and cell phones talking, texting, exchanging photos, downloading music, and watching videos, TV shows, and movies.

Personally, I was no technophobe. Just tactile. I prefer to visit stores in person rather than read spreadsheets. I like the feel of a pen between my fingers rather than a keyboard beneath my hands. And I always try to meet people face-to-face, to see their eyes instead of just hearing their voices. But other than using e-mail and reading the news, I was not as tied to a computer or a BlackBerry as so many others were. But I could not ignore what was happening around me.

The leaked memo helped me comprehend the enormous sea change
occurring in how information was flowing as well as what was being communicated. Technology was redefining the nature of relationships and how people spend their time. This fundamental societal shift was affecting the psyche of our own people and our customers. But not until the memo leaked did it affect me, and none too soon.

Only a week before I had handwritten the memo, Apple introduced its first iPhone.

Four months earlier, in November 2006, Google bought YouTube for a reported $1.2 billion in stock.

And five months earlier, a website called Facebook officially invited anyone over age 13—not just select groups—to join its social network.

The times were changing, with or without Starbucks. I knew we could no longer tell our story only in our stores.

I sensed a second challenge on the horizon. In addition to tackling mounting problems inside our company, we also had to innovate in the digital domain, to discover new ways to reach out and be relevant to consumers. I was not sure exactly where to begin, but we had to do something.

Companies pay a price when their leaders ignore things that may be fracturing their foundation. Starbucks was no different.

The memo's content was never intended to be public, but once it was I did not view writing it as a mistake. Every thought I expressed came from a place of love. My critiques were honest expressions born of my passion for Starbucks and my deep desire to push for reinvention and self-renewal, especially at a time when we were still winning and our shortcomings had yet to become liabilities. I had written hundreds of memos during my 26 years at the company, and all had shared a common thread. They were about self-examination in the pursuit of excellence, and a willingness not to embrace the status quo. This is a cornerstone of my leadership philosophy.

Starbucks is in the business of exceeding expectations. That means we have to admit it when we are not as good as we think we should be. My role, my duty, is to initiate that discussion, to challenge us, as well as myself, to be better, especially when we are knocking the cover off the ball.

Our partners trust me to do so.

Only by not speaking from my heart do I betray that trust.

I was just a young boy, no more than 10 years old, when my aunt took me to Radio City Music Hall in New York City. After the show, we walked to an Automat, a style of self-serve restaurant that I'd never seen anything like. I was immediately enthralled.

Rows of little windows stretched from wall to wall, and behind each window was a different food. A turkey sandwich. A bowl of Jell-O. And my choice that day, a slice of apple pie. My aunt put some coins into a machine and then lifted the window, which was hinged at the top, and removed my pie. Almost immediately a new piece of pie appeared, replacing the one we had bought. My aunt convinced me that a magician was working behind the scenes; back then, I had no idea there was a kitchen full of cooks and servers behind the vast wall of food, making and constantly refilling each item for new customers.

That experience crystallized for me what it meant to be a merchant. Since then, I have always looked for the magic.

It's not unusual for me, no matter where I am in the world, to hop in a cab or go walking to visit other retailers. I do not know how many times I have done this in my life. Hundreds. I love to experience different stores—sole proprietors’ and large chains’—and to see firsthand how they present their products and communicate with customers. I am a sponge, always soaking up store design, layout, and salespeople's behaviors, and over the years I've been intrigued by many types of stores that have nothing to do with coffee.