Howard Schultz: The Coffee King
I wanted to be in charge of my own destiny,” says Howard Schultz. “It may be a weakness in me: I’m always wondering what I’ll do next. Enough is never enough.” Schultz used this weakness to his advantage, taking the U.S. by storm with his vision of a coffee shop the likes of which the country had never seen before. Today, as a so-called ‘third home’, Starbucks has revolutionized not only the coffee industry but also society at large.
Howard Schultz was born on July 19, 1953, in Brooklyn, New York as the oldest of three children. He grew up in Bayview Project, a government-subsidized housing unit. His family had little money and both parents worked long hours to try and support the family. Growing up, Schultz spent most of his time playing sports, taking a particular liking to football, baseball and basketball. He found that he quickly excelled in each of these in high school and used it to his advantage, receiving a football scholarship to Northern Michigan University.
Schultz was determined to escape poverty and become the first member of his family to graduate from college. In 1975, he realized his dream and earned his bachelor’s degree in business and marketing. But, while Schultz’s academic career was soaring, his family life was taking a turn for the worse. His father was starting to suffer from the never-ending stream of low-paying, dead-end jobs he was forced to work. “I watched my dad’s self-esteem fracture,” Schultz would later recall.
Nevertheless, Schultz was determined to make more of his own life. After graduating, Schultz moved back to New York and got a job working for Xerox Corporation. He then switched to working as a salesman for Hammerplast, a Swedish housewares company. When he noticed that he was selling many coffee percolators to a little Seattle-based company, Schultz few out to see why.
In 1981, Schultz met with Gerry Baldwin, one of the owners of Starbucks, and he immediately fell in love with the company and the concept. In less than one year, Schultz had left Hammerplast and had become Director of Retail Sales for Starbucks. But, Schultz’s vision for the company soon took a different turn from its original owners.
When Schultz frst joined Starbucks, it had 12 retail outlets and was dedicated to selling coffee beans and coffee-related products. In 1983, Schultz went on vacation to Milan, Italy, and became infatuated with the idea of coffee bars, places where gourmet coffee was served not in beans, but by the cup, and where people could come to meet and relax. “I believed the relationship I saw between people and coffee in Italy was transferable to America in a big way,” he said.
“Great companies recognize who they are and who they are not,” said Schultz. “But they must have the courage to examine transformational opportunities”. The owners of Starbucks disagreed with Schultz’s vision. They had little desire to expand their company in the way Schultz was proposing. But, confident in his idea and the untapped possibilities, Schultz left Starbucks and started out on his own.
“It wasn’t until I discovered Starbucks that I realized what it means when your work truly captures your heart and your imagination,” said Schultz.
After being rebuffed by the owners of Starbucks for his idea of taking the company in new directions, Schultz decided to leave and start a company of his own. He approached numerous investors for financial backing until he finally found support for his project. Several Starbucks partners were even willing to invest in him. In 1984, Schultz opened I1 Giornale coffee bar in Seattle.
Il Giornale was Schultz’s takeoff of the Italian espresso bar concept he had fallen in love with in Milan. It was a small, friendly café, which soon became a popular gathering place for the Seattle sophisticates. As its popularity took off and Schultz planned for the expansion of his chain, he heard a rumor that one of the Starbucks partners wanted out of their business. He immediately seized the opportunity and put together a group of investors to make an offer, one of whom was Bill Gates, Sr.
In 1987, Schultz bought out all the partners of Starbucks for $3.8 million and merged Il Giornale and Starbucks to form the Starbucks Corporation. From that point on, there was no looking back for the company. Once Schultz took the helm of the company, he set about making his dream a reality. He created a relaxed and comfortable atmosphere, where customers could not only enjoy a basic cup of coffee but could enjoy an entire experience. He also instituted one of the most thorough training programs and compensation packages for all his Starbucks employees.
Schultz continued its steady expansion, immediately opening their first outlet outside of Washington State. After five years, the company went public and growth continued throughout North America. It then began expanding overseas, opening outlets in Japan. By 1992, there were 165 Starbucks locations; just two years later, there were 425. Sales increased from $100 million in 1993 to $465 million in 1995. New stores continue to open up around the world; 1,500 new stores were planned for 2006.
Starbucks is the number one specialty coffee retailer in the U.S. Schultz succeeded in creating a nationally recognized brand and creating a loyal culture of premium coffee drinkers. He popularized the café latte, the frappuccino and other specialty drinks. In 2004, Starbucks was ranked number eight on Fortune magazine’s list of “America’s Most Admired Companies.” Today, there are over 10,000 Starbucks stores in over 30 countries.
Following from his love of sports, Schultz was also the owner of the NBA’s Seattle Supersonics until recently, when he sold the team to investors from Oklahoma City for US$350 million. He also owned the WNBA’s Seattle Storm and is a partner in Jamba Juice, a chain of smoothie restaurants with over 500 locations throughout the U.S.
From the blue-collar life in the projects to an estimated net worth of US$700 million, Schultz also continues to stay true to his roots by giving back to the communities that support him.
Howard Schultz’s Starbucks
Howard Schultz, Starbucks visionary, once said, “I believe life is a series of near misses. A lot of what we ascribe to luck is not luck at all. It’s seizing the day and accepting responsibility for your future. It’s seeing what other people don’t and pursuing that vision.”
In 2003, more people across America were working than the year before and unemployment was at a five month low. This was making the Starbucks CEO a very happy man; the company’s profits rose 23 percent in that same period. It seems that more and more people were celebrating the fact that they had jobs by splurging on a cup of Starbucks coffee.
He didn’t invent the idea behind the chain, but he had the vision to take the small operation that three men based in Seattle had started and turn it into something bigger. Today, the coffee giant that has emerged has become a national icon and has created a nation of coffee addicts. The success of the company is all the more impressive given that it spent almost nothing on advertising and marketing. Instead, the chain grew by the sheer force of word of mouth.
Today, many lessons on entrepreneurship can be drawn from the Howard Schultz Starbucks. Firstly, the entrepreneur himself advises to dig deep to find something that you are truly passionate about – and it might not be the product itself. Your passion will then inevitably be transferred to everyone you interact with – investors, customers, employees, and colleagues – and will make them more likely to want to do business with you and help you achieve your goal.
Secondly, the success of the chain demonstrates the rewards that come from having a clear vision. Schultz was able to rally a team behind his efforts, and tap into their emotions and inspire them by painting a picture of a world that was better because of the presence of Starbucks.
With the imagination and doggedness with which he pursued his goal, he was able to transform a small Seattle-based operation into the international success that has emerged today. With over 10,000 locations and hundreds of millions of loyal coffee addicts, it is difficult to imagine a world without the Starbucks.
Today, the Howard Schultz Starbucks is not just a place to go and grab a cup of coffee. It is a meeting place, a place to relax, a place to do business, a home away from home. And, the company is taking its vision even further. Having conquered the coffee industry, Howard Schultz is taking his
first steps into the movie business. It was part of a promotional deal for the popular film “Akeelah and the Bee,” aggressively promoting the film in all of its North American retail outlets and selling the accompanying DVD and soundtrack. The success of this program has encouraged the company to continue venturing into new industries. After all, Howard Schultz never was one to deal well with limits placed on him.
Reaching the Top
“I can’t give you any secret recipe for success, any foolproof plan for making it in the world of business,” says Schultz. “But my own experience suggests that it is possible to start from nothing and achieve even beyond your dreams.”
Schultz has gone from living in one of the poorest neighbourhoods in New York to being founder and chairman of a company that makes over $6 billion in sales each year. How did he do it?
He Trained for Success
Much as he trained like an athlete when he was a child, Schultz used the same attitude of endurance and perseverance to overcome the obstacles that arose throughout his career. He stayed strong, he stayed balanced and he stayed focused on the tasks at hand.
He Had Vision
With Il Giornale, Schultz had launched a successful café in Seattle. His dream of an Italian café experience in the U.S. had been realized. So why didn’t Schultz stop at that? Because he had bigger dreams for himself and his company. He knew he could be more; he knew he could achieve greater things. With a goal of “creating and building an enduring global brand,” Schultz continues to go to work each day and make it happen.
He Built a Brand
“Starbucks is rekindling America’s love affair with coffee, bringing romance and fresh favor back to the brew,” says Schultz. But, Starbucks is doing much more than that. By focusing on the total experience of the Starbucks customer, Schultz has created a powerful brand that stretches beyond the simple cup of coffee. “We believe that Starbucks can ultimately change the rules of the game,” says Schultz. Indeed, that is the power of a strong brand.
He Fostered a Sense of Teamwork
“Giving back to the community has always been a huge focus for Starbucks and each year we strive to create new ways to become more involved in the neighborhoods where we do business,” says Schultz. From the communities around his stores to the employees within them, Schultz has made people his priority. By giving his workers a stake in the company and the respect his father never got, Schultz has generated impressive loyalty and enthusiasm for good service.
He Partnered Up
Schultz was never one to get ahead of himself. Despite having visions of grandeur, he knew he wouldn’t be able to do it alone. Schultz took it upon himself to keep fostering those visions, but brought in others to help him implement the nuts and bolts of the operation. It was only with the help of those around him that Schultz was able to take his company to the top.
Schultz believes that his success can serve as a model for other entrepreneurs looking to achieve their own dreams. “It’s a great example for other young people about execution and doing things the right way,” he says. “You don’t have to have a cure for cancer, this is just a basic business.”
“It wasn’t until I discovered Starbucks that I realized what its means when your work truly captures your heart and your imagination,”
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