The Self-Made Man: Howard Schultz
It’s kind of embarrassing, but I had no idea Starbucks has been around since the 1980s. To be fair, I didn’t grow up around Seattle, either, so there’s not much of a chance I would have heard of it until it was suddenly everywhere. You have to understand, in the grim darkness that was pre-Internet America, stuff just happened and it took moving heaven and earth to get an explanation for it. Still, I can’t help feeling a little slow.
I didn’t know much about Howard Schultz either until recently, and his story is kind of an interesting one. Well within the bounds of what TSB considers a self made entrepreneur, certainly. He may not have been an innovator, but he has passion and drive and a curious mind, and that turned out to be enough to make him a success. Unless we’re talking about when he owned the SuperSonics, because holy crap what a disaster that was.
Anyway, Schultz has an interesting story. He grew up in federally subsidized housing in Brooklyn (back when it sucked to live there because of crime and not because of hipsters), and went to Northern Michigan University on a football scholarship. He ended up putting his B.A. in communications to work at Xerox, and then at Hammarplast, a Swedish kitchenware manufacturer.
Schultz noticed that Hammarplast sold a lot of coffeemakers to a business in Seattle, and his curiosity was piqued enough for him to fly out there and see what was happening. The company was Starbucks, then owned by Jerry Baldwin, and was a local outfit that sold high-quality coffee beans and related equipment. Schultz was impressed by their operation, though, and became their director of marketing in 1982.
Soon afterward, Schultz went on a buying trip to Milan, and noticed that coffee shops were as much about community interaction as they were about coffee. Also, there were 200,000 of them in Italy, which is a number that Schultz was keen to replicate in America. When Baldwin was unwilling to expand his business beyond what he already had (and really, it’s hard to blame the guy), Schultz started his own coffee house chain, Il Giornale, which did well enough for Schultz to buy Starbucks outright for $3.8 million. He decided to keep the Starbucks name, which was a good move. I mean, Starbucks was douchebaggy enough in the 1990s; it would have been even worse with a foreign name to encourage consumer smugness that much more.
Under Schultz’s leadership, Starbucks was opening a new store every workday and expanding both nationally and internationally. Schultz also took the then-unprecedented step of not treating his retail employees like human garbage; employees working at least 20 hours a week got health coverage and an employee stock-option plan, and Starbucks also resisted a franchising model of brand expansion. When asked about his business model, Schultz usually credits it to his father, who worked a lot of crappy jobs to support his family and didn’t have much to show for it when he died.
Schultz isn’t afraid to try new things, either. Starbucks has experimented with hosting live music, selling beer and wine in addition to coffee, taking on a number of socially responsible business practices, and even disguising a few stores as local coffee shops in the face of their brand ubiquity becoming toxic. That last one didn’t go over too well, but other ideas like free wi-fi and not using pre-ground beans have worked out for them. Schultz’s refusal to let his company stagnate is a good quality overall, and it’s a symptom of the restlessness that powers every entrepreneur.
I’ll close with this clip of Howard Schultz talking leadership at the London Business Forum, Not sure when this took place, but if it was after his remark about the UK’s economy going down the toilet, I bet it was a tough room at first.
About Dave Kiefaber Dave Kiefaber is a Baltimore-based writer who regularly contributes to Adfreak and the Gettysburg Times. His personal website is at www.beeohdee.blogspot.com.