The Hindu Business Line : How Starbucks changed from bagging groceries

From a local business with six stores and less than 100 employees, Starbucks grew to 1,300 stores and 25,000 employees, in about a decade. And now, it has more than 13,500 stores in 40 countries employing nearly 1,50,000, as the world’s leading retailer, roaster and brand of specialty coffee.

“The story of Starbucks is not just a record of growth and success. It’s also about how a company can be built in a different way,” writes Howard Schultz in Pour Your Heart Into It ( www.crosswordbookstores.com). The book is almost a decade old, yet the biographical narrative by Schultz, the Chairman and CEO of Starbucks, is worth studying at a time when Starbuc ks has exited the Forbidden City and put off the India plan. One of the first lessons he learnt was in Italy, in 1983. “To the Italians, the coffee bar is not a diner, as coffee shops came to be in America in the 1950s and 1960s. It is an extension of the front porch, an extension of the home. Each morning they stop at their favourite coffee bar, where they’re treated with a cup of espresso that they know is custom-made… I had a revelation: Starbucks had missed the point – completely missed it.” Schultz realised that Starbucks could be a great experience, not just a great retail store. “Starbucks sold great coffee beans, but we didn’t serve coffee by the cup. We treated coffee as produce, something to be bagged and sent home with the groceries. We stayed one big step away from the heart and soul of what coffee has meant throughout the centuries.”

The candid account, co-written with Dori Jones Yang, includes many anecdotes, such as the 6:1 debt-to-equity ratio after the acquisition of Peet’s Coffee and Tea, the meeting with physician Ron Margolis for investment, and life as an under-underdog. “The hardest part was maintaining an upbeat attitude,” reminisces the author. He talks about the behind-the-scenes investment that Starbucks did – in new systems and processes for a far larger operation that it had. “In late 1991, when we had just over 100 stores, we hired Carol Eastin, a computer expert from McDonald’s, gave her a blank slate, and asked her to design a point-of-sale system that would link all our outlets and would be able to accommodate the 300 stores we planned to have within three years.”

When companies fail, or fail to grow, it’s almost always because they don’t invest in the people, the systems, and the processes they need, reasons Schultz. However, systems and processes should not stifle creativity, he insists. “If we bog down innovative ideas in bureaucratic nonsense, we will have made the same mistake hundreds of American corporations have made before us.” Also don’t let the entrepreneur get in the way of the enterprising spirit, cautions Schultz.

“Many entrepreneurs fall into a trap: They are so captivated by their own vision that when an employee comes up with an idea, especially one that doesn’t seem to fit the original vision, they are tempted to quash it.” He says: “The pundits regard idealists as either naïve or calculating. And even if someone is doing right 90 per cent of the time, the critics will inevitably focus on the other 10 per cent.” Still, aim high, he urges, because “in the ethical vacuum of this era, people long to be inspired.”

Recommended read, with an espresso at hand.

D. Murali

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