On Tuesday evening, members of the Entrepreneurs' Organization's LA chapter gathered to honor Starbucks CEO Howard Schultz with the Entrepreneur of the Year Award at Hollywood's Roosevelt Hotel. In town to promote his new book, "Onward: How Starbucks Fought for Its Life Without Losing Its Soul," Schultz sat down for a Q&A with HuffPost’s Willow Bay.
The Entrepreneur’s Organization describes itself as a "global network of more than 7,500 business owners in 38 countries," with over 300 members in the Los Angeles chapter. Membership is by invitation only and members must make over 1 million dollars in profit per year. Amir Tehrani, EOLA’s Learning Chair, told HuffPost/LA that events like Tuesday’s Q&A with Howard Schultz are designed to provide members with an opportunity not only to network but to learn from some of the world's most influential and successful entrepreneurs.
Willow Bay: The title of your book is called "Onward." I know it’s a word that’s layered in history and meaning for you. What does the word “onward” mean to you today?
Howard Schultz: The word actually goes back to the past. I actually wrote an original kind of manifesto in 1986 and I can’t tell you with specificity why I closed the memo with the word “onward,” other than it’s a word about the future and a word about progress. And from that point on every written piece of material I’ve written for the company is closed with that word, and in many ways it’s a linkage to the past but its also about the future of the company. I think the last year and a half we’ve really tried to create a vision and aspiration for the future. I think "onward" connotes the words "progress" and "future," and most importantly for me, preserves the relationship we have with the customers and our people with regards to the values of the company.
WB: Why did you come back on as CEO of Starbucks in 2008?
HS: I use a word to describe my relationship with this company, and it’s a word generally not used in business, and it’s "love." I love this company. I love what it represents, and I feel a deep level of responsibility to 200,000 families. There isn’t anything I will not do to preserve and enhance the culture and values of Starbucks. And when I speak in front of my people as I did two hours ago [in a company meeting], one of the things I say is when you are part of a company you have to have a voice, and what that means to me is you can’t be a bystander, and no matter where you are in the company—a twenty hour part-time barista or a manager of the state of California—If you see something that is inconsistent with the values of the company and you don’t speak up, you become a part of the problem. In a sense, I was the bystander for a while and I just couldn’t allow myself to drift through a sea of mediocrity. I had to do something and I was faced with a difficult challenge because I wasn’t the CEO, but I was torn between not having responsibility and at the same time watching something I love so much go awry.
WB: Whose advice, whether it's positive or constructively critical, do you seek, do you follow, do you embrace?
HS: Well first of all I was willing and actively pursuing anyone who could give me advice during the [2008 financial] crisis, and I think very few people actually had answers. The issue of managing through a crisis is you have to be decisive even if you don’t have perfect information. But I got great advice from Michael Dell, and he was very helpful. He shared with me something when I came back [in 2008 as Starbucks’ CEO] that he loosely described as a "transformational agenda." When I saw that, I realized that I would have sixty days to prepare myself before coming back, so I had a data plan already in place. The transformational agenda is essentially one single piece of paper that [helped]--whether you were a part-time barista or president of a division--you understand exactly what the company was going to try and do and you also knew, relatively speaking your role and responsibility and you could see yourself in it. Jim Sinegal, the founder of Costco, gave me fantastic advice because we were going down the wrong track. We brought him in to look at our plan and he said "you know, I don’t want to be rude but this is exactly the wrong thing to do." This was my idea, and he was right. His advice was the cost of losing your core customers and trying to get them back post-recession would be much greater than trying to find new customers, so we completely shifted and focused specifically on recognizing and rewarding our core customers. That was fantastic advice. And that evolved into the Starbucks Rewards program, which is a big, big idea today. Twenty-two, twenty-three percent of all transactions happen on that Starbucks card. Just in the last 90 days we launched mobile payment at Starbucks, and we became the number one company in all of America in terms of mobile payment frequency of dollars spent.
WB: Starbucks is one of the biggest brands on Facebook and Twitter. You’ve also told Charlie Rose that you have a unique ability to communicate with your customers in that space. Can you share what you know about social media with us?
HS: In its early stages, I think companies believed [social media] is an opportunity to sell more stuff, and that’s a dangerous road. And I think one of the reasons we’ve been more successful on Facebook specifically is we don’t use or view that as a channel for commerce. We use that channel as an opportunity to share what it is we do, how we do it, why we do it. These channels are a viable opportunity to lower cost of traditional communication, but these are also a reservoir of trust. Every time you try to sell something [on social media], which we do from time to time, you are taking a withdrawal out of that reservoir. I think we’ve succeeded because we view social media as an opportunity to make a deposit to the equity of the brand, rather than a withdrawal. This is a channel to build authenticity and communicate effectively, but you have to be honest with your intent ... It’s a new day and the rules of engagement have changed, and we can’t hold onto the past. That’s the bottom line.
WB: You’ve started companies, you’ve been a manager of a massive global brand, and you’ve been a turnaround specialist. Did you need a different skill set for each one of those three different roles?
HS: I never took classic business classes in college, so I don’t have the background that any of the people running large companies have. So what do I have? I feel like sometimes I can smell something or have an intuitive sense. At my best I’m a merchant. I think turning around a company during a crisis—there’s no blueprint, there are no rules. I think so much of it is intuition and being decisive and trying to find your footing ... I don’t have any secret sauce and I’m no smarter than anyone else. I will say I have surrounded myself with unbelievable talent that has made my job easier.
WB: You wrote “I have come to think of myself as at my best as a leader when Starbucks is being challenged or fighting for survival. I am comfortable and enjoy a rugged, steep ascent.” Times are not as challenging right now [as they were in 2008], so where does that leave you right now as a leader?
HS: The challenge I have right now is not allowing human behavior and the human condition to relax. The stock price is two and a half dollars away from the all-time high at Starbucks. And everyone looks at that and says "well, everything’s fantastic." Bullshit. No, this is a fragile issue, and I think the challenge we all have as leaders is maintaining that intensity. And that is a challenge, but also I’m incredibly excited about what it is in the future and what’s behind the curtain. I also think it’s my job to think about the future and about succession. I think succession from Starbucks in the future has to come from within. Also, I think I have a responsibility to my wife. She has sacrificed a tremendous amount over the last two and a half years to allow me to do this, and I made certain promises to her.
WB: Any that you’d like to share?
HS: Uh, no.
Audience Member Marty Metro, EO LA Sponsorship Chair and CEO of Used Cardboard Boxes: How does an entrepreneur starting out find balance between following your dream to success and risking everything, especially with a family?
HS: That is the most critical question because you’re trying to balance your own dream and aspiration with the responsibility you have to your family. In the beginning I didn’t have a salary for almost a year and a half. My wife was eight months pregnant with our first child. She’s from Ohio. Her father came to Seattle to talk to me, and he literally said to me, "my daughter’s eight months pregnant, she’s still working, you’ve got to stop." We had two stores open but we kept losing money, and I went back into the house and I told my wife and she said "No. We’ve got to see this through.” If she would have blinked on any level, I think it would’ve been over. So I think you have to have a partner that’s willing to see this through with you. What I want to say is the following: Sometimes the difference between seeing your dreams through is not following strong enough or long enough, and the worst thing that can happen is you get to an age where you get bitter because you gave up too early or you keep looking back. And what I tell young people is don’t let anyone, even your parents, tell you your dreams can’t come true. If I took you to where I grew up, you couldn’t believe that I could get here. And I got here because, and I know this sounds kind of trite, because the American Dream is still alive and well.
Photos by Leroy Hamilton