Published on: Monday, May 07, 2012
Managing Vision and Culture: The Makings of a Global Brand
Howard Schultz, the former kid from Canarsie, is now mostly known as the king of coffee, but last year, he set his sights beyond Starbucks with social initiatives for cutting the debt, creating jobs and healthcare accessibility.
In just four years, Schultz took Starbucks out of a downward spiral and revitalized the brand, re-centering the focus on the core mission. In 2007, Schultz felt the Starbucks experience and the "theater" of the coffee shop were being diluted. The company was feeling the gravity from the impending financial crash, cutting 6,700 jobs and closing 800 stores worldwide.
Also in 2007, an internal memo was leaked that Schultz, then company chairman, sent to the CEO and management team, and within 24 hours, his life changed. In the memo, Schultz essentially pulled the rug out from under the company's "15-year magic carpet ride."
"I kinda smelled that growth, success was somehow covering up mistakes, and we had lost focus on our core reason for being," Schultz recalled at the 2011 World Business Forum, where ExecuNet exclusively reported. "For 40 years our mission and our business model had been to achieve the fragile balance between profitability and a social conscience. But as a result of our PE and the success of the company, we began to measure and reward the wrong things, and a virus, a disease, somehow infiltrated the company."
A year later, Schultz returned to Starbucks to restore the health of the business profitability but also to rekindle the core and guiding principles of the company. "It is important to exceed the expectations of your people first and then your customers," said Schultz.
"When we were about to lose 20 billion dollars in a year," the Starbucks CEO continued, "we weren't going to allow external forces to define who we are." He said the company did some unorthodox things, which others thought were courageous, but Schultz said they were just being transparent.
Among the risks the coffee company took:
- Closed every store in America and retrained 130,000 employees to make the best cup of coffee in world
- Took 10,000 store managers to New Orleans for extensive community service helping the victims of Hurricane Katrina
The CEO of Starbucks offered three key insights on consumer behavior and the paramount changes in how people respond to products and make purchasing decisions:
- Consumer confidence is down worldwide. People are spending less money and scrutinizing what they spend it on. Companies must create value propositions that are authentic, genuine and real. There must be an entry point for customers to believe and understand the value. "You as a merchant, and you as a leader, are putting your feet in the shoes of customers; understand with great sensitivity the pressure that they are under."
- We live in a hyper-connected world now, thanks to Twitter, Facebook, LinkedIn. Social and digital media are overtaking our way of grasping, receiving and taking in communication. Traditional marketing and PR is subordinate to social and digital media. The rules of engagement have changed dramatically. The mistake companies are making is they think these channels are there to sell stuff; they are there to build a level of emotional engagement and trust — not commerce.
- Customer choice is not only based on price or convenience; there is an importance placed on the values of your company and its authenticity. "Those companies that are doing the right thing — and not sending out a press release — that are active in the community really helping people are going to attract and retain great people and build an enduring relationship with the customer. Those companies that reject a social responsibility as a main reason for doing business, in my view, are not going to succeed."
Schultz then focused in on his recent mission: the national economy, which he called an "emergency situation." He didn't place the blame on the 9.1 percent unemployment rate, the lack of access to credit for small businesses, or the 42 of 50 states in budget deficit. "It is the unbelievable dysfunctionality in Washington," he said. "Is this the best we can get? Don't we deserve more?"
Our political process is fractured Schultz said, and Washington's leaders are unable to solve the country's problems. "We are on a collision course with time, and America is in trouble because we've allowed the vocal minority on both extremes to capture the voices of America and allow these leaders to lead us down a path we know is wrong! We need the vocal majority of America to speak up, and we need business leaders to recognize we can't wait for Washington to invest in the economy."
He asked whether the Marshall Plan would exist today in the US? He replied with a resounding "No" because it would require 61 votes to pass, and we wouldn't be able to make that happen! We've allowed the vocal minority to control leaders, and that has brought us down the wrong paths.
Schultz offered that Starbucks' efforts in Harlem and South Central Los Angeles were important because all the profits would be going back to these two communities. Additionally, Starbucks would help to create micro-funding for small businesses.
Social services are going to be cut US-wide in the very near future. Schultz implored citizens that if you hear or see something that isn't right, you must stand up. "We are better than us, we deserve more than us. Please do not be a bystander."