Starbucks CEO Howard Schultz: How to Be Strategic Thinkers | Inc.

Summary

The speaker reflects on unconventional strategies that revitalized a company, such as temporarily closing all stores for retraining, which was costly but essential for quality enhancement. Despite facing skepticism and criticism, these bold moves, including the launch of a successful instant coffee product, demonstrated the company's commitment to innovation and the entrepreneurial spirit. The narrative underscores the importance of vision, courage, and the collective strength of a trusted team in driving transformation.

Takeaways

• 💼 The speaker made bold, unorthodox decisions when returning to the company, including halting monthly reporting and closing every store for retraining.
• 📉 Closing the stores was a costly move, costing millions of dollars, and attracted heavy criticism from competitors and the market.
• 🔄 The closure of stores symbolized an admission of the company's mistakes and commitment to restoring quality, which became a turning point.
• 📝 The book is filled with bold moves, and the speaker emphasizes that every bold decision is often met with internal resistance and skepticism.
• 🔍 Great entrepreneurs need the curiosity to anticipate future challenges and the courage to make tough decisions.
• 🤝 Decisions in the company are now more consensus-driven due to the trust in a skilled team, but the speaker still reserves the final decision-making authority.
• ☕ Launching VIA, Starbucks' instant coffee, was seen as risky due to the brand’s high-quality image, but the company saw an untapped opportunity in the $24 billion instant coffee market.
• 📰 The media and Wall Street were initially skeptical and critical of Starbucks’ decision to enter the instant coffee market.
• 🚀 VIA became a major success, generating an estimated $250 million and proving the company's innovative ability.
• 🎯 Beyond financial success, the VIA launch reignited the entrepreneurial spirit within the company and reinforced its courage to take risks and innovate.

Q & A

What unorthodox action did the speaker take upon returning to the company?

Upon returning, the speaker closed every store for retraining, which was an unprecedented move.

What was the initial reaction to the retraining closure of all stores?

The retraining closure was met with tremendous criticism, and the competition saw it as an opportunity to attack the company.

What was the underlying purpose of closing all the stores for retraining?

The purpose was to acknowledge the dilution of quality over the years and to demonstrate a commitment to improving it.

How did the speaker describe the impact of the retraining on the company?

The retraining was a galvanizing moment that signaled a major turning point for the company, demonstrating a commitment to quality.

What is the speaker's view on the role of curiosity in entrepreneurship?

The speaker believes that great entrepreneurs must have the curiosity to anticipate what others do not see and the courage to execute their strategies.

How does the speaker approach decision-making in the company?

The speaker believes in making decisions based on consensus, especially with a world-class team, but retains the right to make the final decision and takes responsibility for it.

What was the context of the product launch mentioned in the script?

The product launch was for an instant coffee product, which was a significant departure for Starbucks, given their high-quality specialty coffee image.

What was the media and Wall Street's reaction to Starbucks entering the instant coffee category?

The media and Wall Street were highly critical, with headlines that were negative and seemed to want to destroy the company's reputation.

How did the speaker justify entering the instant coffee market despite the risks?

The speaker felt they saw an opportunity that others did not and believed in the potential success once they replicated the taste of Starbucks coffee in an instant form.

What was the outcome of the instant coffee product launch?

The instant coffee product, called V, was a runaway hit, generating approximately $250 million in revenue and had not yet been introduced globally.

How did the launch of the instant coffee product impact the company's culture?

The launch rekindled the entrepreneurial spirit within the company and reminded the organization about the courage to take the road less traveled, making the employees proud.

Outlines

00:00

🔄 Unorthodox Decisions and Transformative Actions

The speaker discusses some unconventional steps taken upon returning to the company, such as halting monthly reports and closing every store for retraining. This move, initially criticized and seen as risky, turned out to be a pivotal moment in regaining customer and employee trust. Despite the costs and backlash, it demonstrated a commitment to quality and marked a significant turning point for the organization. The narrative emphasizes that bold moves often face resistance, yet they play a crucial role in transformation and success.

💡 The Challenge of Convictions and Strategy Execution

The speaker highlights the importance of being a visionary and having the courage to make bold decisions despite opposition. They reflect on past decisions, acknowledging that not all choices were successful. However, by surrounding themselves with a skilled team, they’ve shifted towards more consensus-driven decision-making. The speaker asserts that while leadership requires owning the final decision, it also means taking responsibility when things go wrong. This section underscores the balance between individual vision and collaborative execution.

☕️ Revolutionizing the Instant Coffee Market

The speaker introduces the case of launching an instant coffee product, describing it as a high-risk, high-reward strategy. Entering a $24 billion global market dominated by a single player and lacking innovation for over 50 years, the new product faced skepticism and negative media reactions. However, the company believed in their ability to replicate the taste of Starbucks coffee in instant form. With successful technology and product development, the launch exceeded expectations, generating $250 million in revenue so far. The success served as a reminder of the company’s entrepreneurial spirit and reinforced its position as an industry leader.

🔥 Embracing the Entrepreneurial Spirit and Defying Odds

The speaker emphasizes how the instant coffee launch was not just a product introduction but a symbol of the company’s willingness to take on challenges. By going against the grain, the project invigorated employees and boosted morale, proving that innovation and risk-taking are part of the company’s DNA. The speaker argues that no other coffee company could have accomplished this due to the unique combination of passion, strategic positioning, and commitment demonstrated during the launch. This success story reaffirms the company’s ability to achieve greatness by staying true to its entrepreneurial roots.

Keywords

💡Unorthodox

Unorthodox refers to methods or ideas that are not traditional or conventional. In the context of the video, the speaker describes taking unorthodox actions upon returning to a company, such as stopping monthly reporting and closing all stores for retraining. These actions were not typical business strategies but were taken to address quality dilution and signal a commitment to change.

💡Retraining

Retraining involves teaching new skills or updating existing ones to employees. The video mentions closing every store for retraining as a bold move to improve quality, which was costly but served as a public demonstration of commitment to excellence. It was a galvanizing moment that showed employees and the market the company's dedication to quality.

💡PR Bonanza

A PR Bonanza is a situation that generates a lot of positive publicity. The speaker mentions that closing all stores for retraining was unexpectedly a PR Bonanza, meaning it led to a lot of favorable media coverage. This was not the primary goal but was a beneficial side effect of the decision.

💡Galvanizing

Galvanizing means to stimulate or provoke into action. The video script uses this term to describe how the decision to close stores for retraining energized and unified the company's workforce and the market's perception of the company's commitment to quality.

💡Entrepreneurial Spirit

Entrepreneurial Spirit refers to the mindset of someone who starts and runs their own business, often characterized by innovation, risk-taking, and ambition. The video discusses the importance of maintaining an entrepreneurial spirit, especially when launching a new product like instant coffee, which was seen as a bold and unconventional move for Starbucks.

💡Consensus

Consensus means general agreement among a group. The speaker talks about making decisions more skewed towards consensus when working with a world-class team, indicating a shift from individual decision-making to a more collaborative approach, leveraging the diverse insights and skills of the team members.

💡Credibility

Credibility refers to the quality of being trusted or believed in. In the video, the speaker discusses the credibility that leaders must earn from their teams and Wall Street, suggesting that trust and a history of making sound decisions are crucial for leadership.

💡Innovation

Innovation is the process of introducing new ideas, methods, or products. The video highlights the lack of innovation in the instant coffee category for over 50 years and how Starbucks' decision to enter this market with a high-quality product represented a significant innovation.

💡Execution

Execution refers to the successful implementation of a plan or strategy. The speaker emphasizes the importance of having the courage of one's convictions to execute strategies, even when faced with opposition or skepticism, as illustrated by the decision to launch an instant coffee product.

💡Catastrophic

Catastrophic describes an event causing great and often sudden damage or suffering. In the context of the video, the speaker admits to making catastrophic decisions in the past, which were wrong and had severe consequences, highlighting the risks associated with bold moves and the importance of learning from mistakes.

💡Instant Coffee

Instant coffee is a type of coffee that can be prepared by adding hot water. The video discusses Starbucks' entry into the instant coffee market, which was a $24 billion category with no innovation for over 50 years. The decision to create an instant coffee that replicates the taste of Starbucks' regular coffee was a significant move that defied industry norms and expectations.

Highlights

The company closed every store for retraining, costing millions of dollars.

The retraining was an admission of guilt regarding a dilution of quality over the years.

The decision to close stores was met with criticism and competitive attacks.

The retraining was a galvanizing moment to demonstrate a commitment to quality.

The company made bold moves to increase qualitative measures.

Entrepreneurs need curiosity to anticipate what others do not see.

Courage of convictions is essential for executing strategies in the face of opposition.

The speaker admits to making wrong decisions that had catastrophic outcomes.

Decision-making now leans towards consensus due to trust in a world-class team.

The final decision and responsibility rest with the speaker.

The launch of Starbucks' instant coffee was initially met with skepticism.

The instant coffee category, a $24 billion market, had seen no innovation for over 50 years.

Starbucks' entry into instant coffee was seen as a potential risk to its high-quality image.

The company successfully replicated the taste of Starbucks coffee in an instant form.

The instant coffee product is expected to generate $250 million in revenue.

The product launch was an opportunity to rekindle the entrepreneurial spirit within the company.

Starbucks' success in instant coffee was due to its unique positioning and passion for the market.

The company's people took pride in doing something against the grain that succeeded.

Transcripts

[Music]

when I came back you know I did a couple

of things that not that they were

unprecedented but they were unorthodox

one was we'd stopped reporting monthly

comps but in the first three months of

me returning I did something that

probably had never been done before and

that is we closed every store for

retraining right and and that turned out

to be a a PR Bonanza but it wasn't

designed for that what it was was an

admission of guilt we had to stand up to

our people and our customers and say you

know what over the years there's been a

dilution of quality and to continue like

this is a mistake so we literally closed

every store the cost was millions of

dollars I came under tremendous

criticism and the competition really

smelt blood and they went after us but

it was again one of those galvanizing

moments of demonstrating to our people

and the marketplace that this was not

going to stand anymore that in fact we

were going to significantly increase the

qualitative measures and that turned out

to be another major turning point for

the company but even even those types of

bold moves and the book is filled with

bold move after bold move after bold

move and almost every single time

there's a group assembled who doesn't

think you should do it and who um

questions you and challenges you so for

those of us who who run Enterprises of

any size should we ever expect that our

the group of people who work with us

should sort of give us that credibility

or are we only ever as good to Wall

Street to the people who work with us as

our last right call well I think um let

me try and answer it this way um I think

great

entrepreneurs must have the Curiosity to

to kind of metaphorically see around the

corner what's coming what can I

anticipate that other people don't see

um and then you must have the courage of

your convictions to execute the strategy

every decision is different and certain

people have different insight and

different skills and in the book I write

about some things that I decided on my

own that were wrong and that were you

know catastrophic in some ways I don't

always have the right decision now when

we brought in a new team this is a

worldclass group of people who have

skills and insight well beyond me the

decisions we're making today are more

skewed towards consensus than they were

in the past because of the trust of the

team however I will make the final

decision and you reserve that right and

I and also I will take the

responsibility if that decision is wrong

well that's just happened with uh at

least the way you describe it with via

the so you have a a team working for

well very very long time but as the

product launch comes near yes via the

instant coffee product um and you've got

these a lot of great people working on

it maybe these very same people you're

describing but at some point at some

point it ends up again back in your

living room with a couple of old

Consultants that you had worked with in

the past where you say let's get this

right well I think this is a great case

study uh the instant coffee category is

a $24 billion doll category globally has

not had any Innovation for over 50 years

and is dominated by one

company uh but for for a company like

Starbucks who's imag is based on high

quality specialy coffee to go into the

instant coffee category one could assume

would be a death sentence and uh when we

announced we were doing this the media

and Wall Street just basically wanted to

destroy me and the headlines were

terrible but again I felt we saw

something that other people didn't see

but the litmus test for this is we had

to replicate the taste of Starbucks

coffee in an instant form once we

cracked the code techn with with

technology I knew right away that this

would be a success V has been a runaway

hit for the company probably do $250

million as we sit today and we haven't

really begun to introduce it globally

where 81% of the market is so this is

this is a major hit for the company and

it also did something and I think this

is important you know not everything

should be measured on its own Merit this

again was a opportunity to rekindle and

remind the organization about the

entrepreneurial Spirit and the courage

of the company to take The Road Less

Traveled and our people were so proud of

the fact that we were about to do

something that was against the grain

that was going to succeed and I don't

believe there's any coffee company that

could have done this other than us not

because we're better than anyone else

but because of the way in which it was

positioned and obviously the the passion

we had to bring this to Market in a very

unique way

[Music]