In front of a full house in the Vista Ballroom yesterday, Howard Schultz, Starbucks chairman, president and chief executive officer, stood humbly recounting the path of one the greatest foodservice companies of our time. It wasn’t an always happy story, but it was the truth.
Schultz took the audience on a journey that started with only 11 stores and has grown to 19,000 stores in 62 countries. He recounted the “magical carpet ride” years of the 1990s. “Everything we touched turned to gold,” said Schultz. As the saying goes, all good things must come to an end; the company started to lose focus, and chasing comp store sales and stock prices became more important than the customer experience. In 2008, when Schultz started the now five year journey through “The Transformation,” he stood in front of his company an apologized. “I had let 20,000 people in the green apron down,” Schultz said. He knew that to turn the company around required the transparency with the people that mattered most—is employees, or “partners,” as is the Starbucks way.
“The most important person in our company has always been the store manager,” he said. As a company that has spent more on training than marketing, Schultz wanted to get all the store managers in one place. “They told me this would cost 3.2 million dollars, and then they really thought that I was crazy,” Schultz said. He also made a radical decision to be completely transparent with his partners. “I had to explain not only what we were going to do, but why we were going to do it. We can’t ask something of our people without them understanding the situation with 100% transparency.” His ask for his partners, “What does is truly mean to be great? And what does it mean to be truly accountable for that greatness?”
The Transformation was launched in New Orleans. A mission that sought to redefine the Starbucks experience–one customer, one partner, and one experience at a time–the team first saw what really mattered in the world by getting out into the community to help those affected by Hurricane Katrina. “We had to make it personal,” says Schultz.
He talked how overlooking mediocrity led to that acceptance of that behavior being imprinted in training for the entire team. He spoke on how titles, and how all partners, had to accountable and respectful. “The world does not revolve around Starbucks coffee,” stated Schultz, “It’s discretionary! Our brand was built around the Starbucks experience and its people and we had gravitated towards mediocrity.” Standards were unrecognizable so Schultz decided to close every store for retraining. “Can you imagine the embarrassment?” he said. “But it was truth with a capital ‘T’.”
He knew that the Transformation was more than those meetings. It was about installing a belief and a mentality that things could change. That the Starbuck experience that the company was built upon and eventually fractured could be rebuilt, and customers were longing for it to come back.
Now five years after the Transformation, Starbucks is now at a record high 48 billion dollar stock price, but Schultz isn’t jumping back on the magic carpet. “Innovation is not a line extension. Innovation is disruptive. Despite how successful you are, you cannot embrace the status quo.”