Big Case Study - Starbucks: A Story of Change

Starbucks: A Story of Change

During those four decades, Starbucks had grown from a single location in Seattle, Washington, to a multi billion-dollar enterprise that operated more than 17,000 retail stores in fifty countries. Originally selling only coffee beans and ground coffee, it had added to its offerings prepared coffee, Italian-style espresso beverages, cold blended drinks, food items, premium teas, and beverage-related accessories and equipment. Outside of its retail stores, consumers could purchase Starbucks-branded beans, instant coffee, tea, and ready-to-drink beverages in tens of thousands of grocery and mass merchandise stores around the world. As he reviewed the company’s many successes, Schultz remembered the words he had spoken to Starbucks’ partners just days before as they celebrated their best holiday season ever: “We have won in many ways, but I feel it’s so important to remind us all of how fleeting success and winning can be.”

Cửa hàng Starbucks đầu tiên ở Seatle

1.      Magic

I was just a young boy, no more than 10 years old, when my aunt took me to Radio City Music Hall in New York City. After the show, we walked to an Automat, a style of self-serve restaurant that I'd never seen anything like. I was immediately enthralled.

Rows of little windows stretched from wall to wall, and behind each window was a different food. A turkey sandwich. A bowl of Jell-O. And my choice that day, a slice of apple pie. My aunt put some coins into a machine and then lifted the window, which was hinged at the top, and removed my pie. Almost immediately a new piece of pie appeared, replacing the one we had bought. My aunt convinced me that a magician was working behind the scenes; back then, I had no idea there was a kitchen full of cooks and servers behind the vast wall of food, making and constantly refilling each item for new customers.

That experience crystallized for me what it meant to be a merchant. Since then, I have always looked for the magic.

It's not unusual for me, no matter where I am in the world, to hop in a cab or go walking to visit other retailers. I do not know how many times I have done this in my life. Hundreds. I love to experience different stores—sole proprietors’ and large chains’—and to see firsthand how they present their products and communicate with customers. I am a sponge, always soaking up store design, layout, and salespeople's behaviors, and over the years I've been intrigued by many types of stores that have nothing to do with coffee.

In New York City, I once entered a soap store and was struck when the clerk invited me to wash my hands in a beautiful porcelain sink by the entrance. All customers were encouraged to wash their hands, and there was something about that simple act that elevated the shopping experience before it even began. In just seconds, I was seduced! The store had successfully transferred respect for the product to customers. Who wouldn't want to leave with something so special?

In Paris, one of my favorite places to visit is Colette, a spectacular three-floor specialty store that is owned and operated by a mother-daughter team. Colette delights customers with its whimsical collection of high-end, hard-to-find items from all over the world. Books. Sneakers. Toys. There is even a bar that serves 100 different bottled waters! The owners are curators, and shopping Colette is an adventure in discovery.

The merchant's success depends on his or her ability to tell a story. What people see or hear or smell or do when they enter a space guides their feelings, enticing them to celebrate whatever the seller has to offer. Intuitively, I have always understood this. So when, in 2006 and 2007, I walked into more and more Starbucks stores and sensed that we were no longer celebrating coffee, my heart sank. Our customers deserve better.

In the months after the memo was leaked, inside our company there were more open discussions about what was going wrong. To my relief, there was even general agreement that we were compromising too much in order to accommodate our ever-increasing size.

That spring of 2007, at an all-day brainstorming meeting with a cross section of leaders and partners at Seattle's Edgewater Hotel, I was pleased to hear others voice their own concerns and pose tough questions. Is the stock price and valuation a limiting factor to where we want to go? How do we improve how our store partners interact with customers? How blinded do we get when we are doing well financially? Are we willing to give up certain thinking for an uncertain future? How do we make good business decisions while still being aspirational? How do we participate in the conversation about Starbucks? How do we grow without losing our core? How do we stay small while growing big? What is the soul of Starbucks?

It was freeing to admit, collectively, that we had trapped ourselves in a vicious cycle, one that celebrated the velocity of sales instead of what we were selling. We were opening as many as six stores each day, and every quarter our people were under intense pressure from Wall Street—and from within the company—to exceed past performance by showing increased comparative store sales, or comps, which are the year-to-year differences in revenue generated by a retailer's existing stores.

Our answer had been to build more stores as fast as we could.

Our strategy was to do more of what had worked in the past.

But we were not pushing ourselves to do things better or differently. We were not innovating in lasting ways. We were venturing into unrelated businesses like entertainment. And we were pushing products that deviated too far from the core coffee experience. As one Starbucks partner expressed, it was as if we were running a race but no longer knew what we were running for.

During the Edgewater brainstorming session, as we sat in a circle and pondered our future, some of my colleagues said they recognized that Starbucks was at an inflection point or, as Jim put it, a “critical juncture.” I believed our predicament was much more serious. Starbucks was on the verge of a defining test that we would fail if we did not look in the mirror, acknowledge our blemishes, and undertake transformative, even disruptive, change.

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By summer 2007, it was no longer enough for me to talk about my frustrations with our executives in Seattle. I had to go out on my own and speak to our store, district, and regional managers directly, as well as talk with baristas. I considered the fact that it might have bothered Jim that I was talking to other partners about what I perceived was wrong with Starbucks, but still I took it upon myself to have these direct conversations about the deteriorating store experience.

For me, the most acute example of this, the most symbolic representation of how Starbucks was deviating from its heritage and losing its magic, was the breakfast sandwich.

 Starbucks first began serving sandwiches in 2003. Over the years we had experimented with many types, from bagel sandwiches to, in 2006, warm combinations of sausage, turkey bacon, and ham and egg on English muffins. We called the latter warm or breakfast sandwiches, and most of them included cheese. I understood why sandwiches made financial sense. For years customers had come into our stores with competitors’ food products, or only bought our coffee and then went elsewhere, or were buying lower-quality coffee where they purchased their breakfasts. The sandwiches met a need. As a result, they drove sales, drove profit, and drove comps.

But I had resisted the idea of serving hot food from day one. While I encouraged innovation, I never envisioned people coming into Starbucks for a sandwich. Many customers, however, embraced the warm breakfast sandwich, grateful for a tasty, more substantial food offering. In fact, they gained quite a loyal following. The more popular they became, the more our baristas had to heat them in our warming ovens. And when they did, the sandwiches’ cheese would inevitably drip and then sizzle in the ovens, releasing a pungent smell. Whatever rich, hearty coffee aroma remained in the store was overwhelmed by singed Monterey Jack, mozzarella, and, most offensively, cheddar. The smell further chipped away at our narrative. Where was the magic in burnt cheese?

 People who have known me for years will tell you that few things had ever piqued my ire as much as that smell. As far as I was concerned, nothing could be further from the romance of the Italian espresso bar.

I could not stand it.

One day I walked into a Seattle Starbucks and immediately felt frustrated because burnt cheese had, once again, enveloped the store. I spoke to the manager about it. But she did not understand my concern because, she told me, the store had already far exceeded its sales goals for sandwiches for that week. I left the store depressed. What would be next? Hash browns?

The breakfast sandwich became my quintessential example of how we were losing our way. “Get the sandwiches out!” I pointedly told Michelle Gass, then our head of global products, even as we continued to introduce them into hundreds of new stores. An hour later, Jim told Michelle that Starbucks needed the sandwiches and would not take them out. Research and anecdotal evidence had told him that customers liked them, bringing into our stores more people who now included our sandwiches in their morning coffee rituals.

Not surprisingly, Michelle and others felt uncomfortably pulled between two leaders. Both Jim and I had good intentions and similar goals, but differing opinions about how to achieve them. Removing the sandwiches would have cost the company sales and customer loyalty. I was willing to trade some short-term pain for longer-term gain. Jim and others were not.

My adamant stance was admittedly dispiriting for partners in our food department who had worked for years to create the new food offerings. Months of planning, research, and testing had gone into the sandwiches’ development, including hundreds of hours trying to minimize the smells of sausage, bacon, and, of course, burnt cheese. At one point, an “aroma task force” was pulled together as the team wrestled to eliminate the offending smells.

They experimented with different ovens.

They retrained baristas to clean the ovens more often.

They replaced the parchment paper that held the sandwiches.

Cook times were narrowed to prevent dripping cheese.

Manufacturers were asked to rework their ovens’ vents to keep aromas from entering the air, and our own operations people tried to improve the stores’ heating, ventilation, and air-conditioning systems to pull odors from the air.

Nothing seemed to work.

Internal disagreement about the sandwiches’ benefit to Starbucks as a business—versus their detriment to Starbucks as a brand—continued to heighten tensions within the company's most senior ranks. The debate was as divisive as the memo. Maybe even more so. The question at hand was whether the company should follow customer data or my intuitive sense. At the time, I was not interested in finding a compromise.

Adding to my frustration was the reality that the sandwiches were not alone in detracting from our stores’ essence. There was also the loss of coffee aroma, the resteaming of milk, the too-tall espresso machines. The list was getting longer. Such negative incrementalization, like one thread after another pulling at our seams, could be the company's undoing.

I saw it. I felt it. I could not ignore it.

---

A founder's perspective is unique.

Entrepreneurs are builders, and the lens through which I view Starbucks and the marketplace is somewhat different from what it would be if I were a professionally schooled manager.

Such a lens, however, has its strengths and weaknesses.

On the plus side, founders know every brick in the foundation. We know what inspired the company and what was required to create it. That knowledge, that history, brings with it a high level of passion to do whatever it takes to succeed, as well as an intuition about what is right and what is wrong.

But sometimes we are too close to a situation. Entrepreneurs can be blinded by emotion, by our love of what we have built, unable to see it fresh and with the eyes of a more objective outsider.

Whether I was right or wrong about the sandwiches was less telling than my obsession with removing them, which was a manifestation of my mounting frustration. Twenty years after purchasing Starbucks, I felt like a former captain who could sense his ship slowly sinking. In a knee-jerk attempt to keep us afloat, I pushed to eradicate the sandwiches from our menu. But my efforts were only a gasping attempt to plug one hole when, in reality, there were so many other holes bringing us down.

By the fall of 2007, six months after I wrote the memo, I did not think anything substantial had changed inside the company or in our stores. Day by day my disappointment edged toward anger, and at times fear, that Starbucks was losing its chance to get back the magic. That's when I began to seriously consider if the time had come for me to return as CEO.

Không gian bên trong một quán Starbucks

2.      Loyalty

 I still remember what it was like when we started building the company. Every day we were fighting for survival, doing whatever we had to do. We rolled up our sleeves and left our egos at the door. Every small gesture mattered, and so much of what Starbucks achieved was because of partners and the culture they fostered.

We believed that celebrating coffee and creating connections mattered. And we believed we were capable of doing it, and that it was worth doing, on a grand scale. Confidence propelled us, and we went after audacious goals with enthusiasm. We did not take our success for granted.

Until some of us did.

 If not checked, success has a way of covering up small failures, and when many of us at Starbucks became swept up in the company's success, it had unintended effects. We ignored, or maybe we just failed to notice, shortcomings.

We were so intent upon building more stores fast to meet each quarter's projected sales growth that, too often, we picked bad locations or didn't adequately train newly hired baristas. Sometimes we transferred a good store manager to oversee a new store, but filled the old post by promoting a barista before he or she was properly trained. This was the kind of operational rigor we let slip and then didn't attend to the subtle but negative cumulative effects, such as declining beverage quality, because every metric we were looking at said everything was fine. For years we were able to open new locations while sales continued to increase at the stores we already had.

As the years passed, enthusiasm morphed into a sense of entitlement, at least from my perspective. Confidence became arrogance and, at some point, confusion as some of our people stepped back and began to scratch their heads, wondering what Starbucks stood for. Music? Movies? Comps? And while our people worked hard to meet our goals, it was not always with the joy or innovation or pride that had once defined us.

I can recall popping in on meetings in mid-2007, sitting in the back of the room, a fly on the wall, and being struck by the lack of decisiveness and creativity around the table. It was incredibly tough for me not to jump in; I did not want to undermine Jim, but it also saddened me because I knew we were better than that. Back in the early days, just before our initial public stock offering in 1992, Orin, Howard Behar—a former leader at Starbucks who had been instrumental in helping to build the company—and I liked to say that a partner's job at Starbucks was to “deliver on the unexpected” for customers. Now, many partners’ energies seemed to be focused on trying to deliver the expected, mostly for Wall Street.

This is why, I think, so many companies fail. Not because of challenges in the marketplace, but because of challenges on the inside.

That September in Boston, seven months after the memo leaked, I shared with the board what I was hearing from partners as well as what I continued to observe. In a private executive session the board and I openly discussed the concerns we had about what was going on in the business. For the first time I indicated that, if things got worse, if things continued to deteriorate, I would be willing to come back as chief executive officer. I also confided in Orin. When I told Orin what I was considering, he reassured me that returning as ceo was the right decision. I knew that if he thought otherwise, he would have said so.

It had never been my intention to return as ceo. But I have always said that people are responsible for what they see and hear. I could not be a bystander as Starbucks slipped toward mediocrity, especially since I had played a role in and bore some of the responsibility for our troubles.

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Fiscal 2007 was not a terrible year for the company. But our internal problems, the toughening economic environment, and the rise of new competitors all hinted at a rougher time ahead—for our bottom line and our brand.

On November 15, Starbucks reported annual earnings for the 12-month period that had ended September 30. Starbucks had $9.4 billion in revenue, up 21 percent, and almost $700 million in net earnings, also an increase from the previous year. We hit the earnings per share target that we had laid out for the Street, and for the 16th straight year we had 5 percent or better comps. Under any scenario that would have been fantastic, especially in the tenuous economic environment. But Starbucks had such a long history of high performance that the bits of increasingly disappointing news we delivered that quarter—slowing store traffic, the cannibalization of old stores’ customers by nearby new stores, and a contracting profit margin—worried Wall Street and drew more scrutiny.

The day we announced earnings, a Wall Street Journal headline rang out: “At Starbucks, Too Many, Too Quick?” “The growth in Starbucks same-store sales revenue and number of transactions in the U.S. has slowed,” it read. The “‘underlying fear is that Starbucks is finally seeing the signs of saturation in the US,’ says John Glass, an analyst. . . . Some analysts say the chain has fallen behind on creating enticing new beverages and its breakfast sandwiches have created little excitement.”

Meanwhile, every morning, just as I'd done almost every day for 20 years, I would wake up and, after making my coffee, go to my computer to look at the company's daily same-store sales data, the year-over-year changes in sales at stores open for at least 12 months. For most of my career, revenues, transactions, and comps had been nothing less than validations of Starbucks’ health and momentum. But as November 2007 rolled on, I continued to shake my head at the screen, disappointed, as the comps dropped to levels we had not seen in years.

Eventually the board felt, and I agreed, that a change was really needed. Something had been lost at Starbucks, an ability to effectively execute at all levels: in our support center, at regional offices, and in the stores. The patient needed more than a face-lift. But the patient did not need a new heart. Starbucks was not that far gone. Our coffee beans’ quality had not been compromised. In fact—and this was a frustrating irony—we were sourcing, buying, and roasting the highest-quality coffee in our history. In addition, the heart of our culture—its purpose and mission, our values—was still beating, albeit faintly.

But there were problems. The question was, how were we going to fix them?

Being a ceo during a turnaround situation was not something I had experience doing. My entire career had been about building something that had not existed, and, more often than not, having the wind at the company's back as we executed against our original vision. Now Starbucks needed another vision, and I had to come back with one. I had to come back leading. From day one, my return as ceo would have to resonate with our partners and shareholders as more than just a point of inflection. Starbucks had lost its point of view, and I needed to declare one, as well as a clear perspective about how we were going to change.

But whom could I talk to? Until we formally announced the change in leadership to the company and shareholders after the holiday season, it had to remain confidential. At the same time, I had to plan. I needed people I could confide in. I needed objectivity and tactical guidance to ensure we did more than just announce that I was back as ceo, but rather that I was back with confidence and vision.

Myron “Mike” Ullman was—and still is—Starbucks’ lead director and the chairman and chief executive officer of JCPenney. Mike is not only one of the most respected retail executives in America, having also led R.H. Macy and Company and luxury goods manufacturer LVMH Moët Hennessy–Louis Vuitton, but also one of the kindest people I have ever met. This rare combination of qualities serves Starbucks well. During this period, Mike proved a supportive confidant and counsel for whom I was grateful. He knew I could not speak to people inside Starbucks about the upcoming transition, and he strongly recommended I work with an outside resource, a firm in New York City that he had worked with for many years.

In Manhattan I walked alone into a Midtown office building on Madison Avenue and took the elevator to the 19th floor, where Kekst and Company's offices were located. I sat in a conference room across from a tall, thin man with glasses whom I had never met. His name was Jim Fingeroth. When it comes to surrounding myself with people who can add value to the company, I look for experience and skill as well as people with like-minded values. I've always had a sixth sense about those who will be a good character fit, and as I began to explain the culture and values of Starbucks to Jim, I could see that this was someone who was going to understand and embrace them, as opposed to fighting them as someone else might. If Jim could not help me make changes in a manner compatible with the company's culture, and do so with a degree of sensitivity and humanity, then we would fracture our partners’ trust.

I immediately felt comfortable with Jim. He was personable and smart, yet understated. As a principal of Kekst and Company, he had been with the firm for most of its almost 40 years, guiding large public companies and financial firms through crises, mergers, and abrupt shifts in leadership. Jim and his colleagues were often brought in by outside advisors, and they worked quietly with a board of directors or senior management, usually behind the scenes. During our conversation, he did not reveal any clients’ confidences. I noted his discretion. There was a reason I had never heard of the firm. Being under-the-radar is part of its value.

Jim also had worked with and studied entrepreneurs, and he understood that the odds were against me. It is very unusual for a founder to be able to manage his or her company through all phases of its evolution, especially in a turnaround situation. He told me he had winced when he read about my leaked memo back in February 2007, and had been following the company's trials in the months since. I appreciated his honesty. At one point in the conversation, Jim introduced me to two of his colleagues, Molly Morse and Jeremy Fielding. I felt that Jim and his team were the right people to help me. Plus, he had been so strongly recommended by Mike that any trepidation I had about confiding in an outsider disappeared. I opened up, and we discussed in some detail the past few years, my mounting frustration, as well as my fears. Jim listened intently and asked important questions.

I had a lot of questions for them, too. What did I need to do in the weeks ahead to hit the ground running come January? How and when should we announce the change in leadership to our senior leaders? How should we announce it publicly and talk about it with shareholders? I knew there would be mixed reactions to my return. Some people would celebrate it, while others would question whether I was the right person for the job. I asked Jim how we could minimize the inevitable disruption and angst, but at the same time let people know that things at Starbucks were going to change. And what was the best way to communicate the many changes I was already thinking about?

One of my biggest concerns was how and when to inform Jim Donald. I dreaded the prospect of telling Jim. He is a good person, and I did not question his love for Starbucks. Upending his life was one of the most unsettling things I would have to do. In the coming weeks, Jim Fingeroth, Molly, and Jeremy would help me tackle these and other issues.

When I returned to Seattle, I shipped the Kekst and Company team a box full of background information about Starbucks. They immersed themselves in our history, watching DVDs of past speeches, reading transcripts of annual meetings, reviewing past memos, annual reports, and press releases. They also read my first book.

When they flew to Seattle for the first of several visits, I took them to Pike Place Market and to the original Starbucks store that had opened in 1971, 16 years before I bought the company and combined it with Il Giornale. As I walked in the door, I explained once again how it had captured my imagination more than 20 years earlier. We also visited several competitors, including some of Seattle's finest independent coffeehouses. Then I quietly brought Jim and his team to our support center so they could get a first-hand feel for the culture. The nine-story brick building just south of downtown Seattle was a former warehouse for Sears, Roebuck and Co's catalog division, and we had designed it to feel inviting and to inspire collaboration and community, much like a coffeehouse. Our kitchens have espresso machines. The walls are lined with art inspired by countries where our coffee is grown. Costa Rica. Guatemala. Kenya. As we walked to my office, through the playful maze of slanted hallways and exposed staircases, we passed coffee trees that grow year-round under skylights, a cupping room that hosts daily coffee tastings, and partners holding impromptu meetings on couches and chairs clustered throughout the building's open spaces. Again, much like a café.

I hold most small meetings in my office around a large rectangular coffee table, and when Jim Fingeroth sat down on the couch he voiced a specific request. Could I identify an internal Starbucks partner with whom he could coordinate? Someone I trusted, who knew our leaders as well as Starbucks’ operations, but whose role would not be compromised by the knowledge of what was to come.

I sat back in my chair. There were many people whom I trusted and deeply respected. Two stood out as the most appropriate ones to confide in at the time.

---

One day I asked Chet Kuchinad to join me for a cup of coffee.

Chet was our number-two leader in partner resources at the time, and we had traveled together a great deal internationally. We often jogged together in the early morning hours through the streets of whatever city we were visiting. Back in Seattle, we would run at lunchtime, from our offices to Pike Place Market and back.

Chet had regular access to the board, and he was familiar with our senior leaders, our operations, and our day-to-day performance. I had always been impressed by his business acumen. He also did not shy away from speaking his mind with respect and conviction. He had a habit of telling me any number of things that I did not necessarily want to hear. At first I had been taken aback, but I came to value it.

During one of our runs, at a time when Starbucks’ stock was doing well, Chet said half-jokingly, “Howard, you are making people too rich.” Many Starbucks partners had seen their net worth grow as our stock rose and split several times over the years. “People are starting to think it will never end.” There was truth in his statement. With time, I came to see the arrogance that the wealth of the company, and its track record for success, had created.

Whenever I spoke with Chet, I knew I was getting an honest perspective. That trait, coupled with his sensibility for Starbucks’ culture, led me to seek his help.

I put down my mug and leaned forward. “I am coming back as ceo,” I told Chet. “I could use your help, but I understand if it puts you in a delicate situation.” Chet worked with and respected Jim Donald, and he understood the tension that had come to exist between the two of us. I did not give Chet much more detail. “Take the weekend to think about it.”

On Sunday he called me on my cell phone. “Howard, I'm in.”

The next day, we met in my office where, over another cup of coffee, I brought him up to speed and put him in touch with Jim Fingeroth.

The other person I wanted to bring on board was Wanda. A lot of the work Jim Fingeroth, Chet, and I had to do in the coming weeks involved crafting press statements and internal communications that would be released the day of the announcement. I thought Wanda would be the ideal candidate to assist. She was no longer a Starbucks partner, but she understood Starbucks’ culture and my voice. After more than a decade of working together, I trusted her implicitly.

Wanda and I hadn't seen each other since February, when we had discussed the leaked memo, and in December I asked if she would meet me for breakfast at Lola, a restaurant in downtown Seattle. We hugged hello and settled into a booth inside the narrow, bustling restaurant. Over coffee and eggs, I asked Wanda how her family was doing and what projects she was working on. I updated her on the kids and Sheri. Then I casually changed the subject.

 “Would you be interested in doing some work for Starbucks?” I asked, careful not to reveal the magnitude or nature of the project. “We might need some help at the end of the year with an announcement.” I was not surprised, but I was pleased when Wanda smiled widely and, without hesitating, said she was available and would be more than happy to help.

I left Lola with a heightened sense of optimism. The team was coming together.

Starbucks ở TpHCM

3.      Believe

 At the end of December 2007, I joined my family for our traditional trip to Hawaii. Family has always been the most important thing in my life, and this was the only time of year when the four of us took time out from our busy lives to reconnect. But considering what I had planned for the New Year, it was hardly a vacation for me.

Every day I was on the phone with Chet in Seattle and Jim Fingeroth in New York, not only mapping out the logistics of the transition, but also planning for what would come in the following days, weeks, and months. There were no obvious answers, and together we thought through what a new management structure might look like and how a variety of people's roles had to change. One of the decisions I made was to eventually eliminate the newly created position of chief operating officer and, instead, to have Starbucks’ most senior leaders report directly to the ceo. I wanted a clear line of sight into every aspect of our operations, from supply chain to store design to everything in-between. Reshuffling, as well as eliminating, some of Starbucks’ leaders would be inevitable.

Given that I had spent the past two years observing and talking about what was wrong with Starbucks, it was invigorating to plan for how to make it right. Ideas and priorities had been percolating in my mind for so long. We needed to reignite our connection with customers. Replace the bureaucracy with a more efficient organizational structure. Slow our US growth to a more sustainable pace while ramping up internationally, focusing on countries like China. We would also have to close some stores, although I did not know how many.

My struggle, however, was with how to appropriately frame my priorities for our people in a manner that would instill confidence and elicit support while communicating that we could no longer do business as usual.

Fortuitously, I spent time in Hawaii with Michael Dell, founder of the PC company Dell, who was spending his holidays nearby. Michael and I had been friends for many years, and only 11 months earlier he'd returned to Dell as chief executive, replacing someone he'd selected to run the company two years prior. Our parallel circumstances were a bit uncanny, and although our respective businesses—coffee and computers—could not have been more different, Michael, as a returning founder, had a unique perspective and insight about what I could expect.

It was during one of our daily three-hour bike rides along the Kona coast that I first confided in him. “I think I have to come back as ceo.”

Michael did not seem surprised, and together we talked through a host of logistical and strategic issues now in front of me: managing the Street, maintaining morale, the teetering economy and the drop in consumer confidence, as well as the trepidation that came with reassuming responsibility for day-to-day operations. We rode to Michael's house, where he walked me through the chronology of what he had done at Dell one year earlier and graciously shared the very documents that had aided his own transition.

One tool stood out as particularly applicable to Starbucks. Michael called it the Transformation Agenda. Neither of these words was part of my or Starbucks’ vernacular at the time. But they resonated with me. “Transformation” spoke to the scale of change that Starbucks had to undertake, but with a positive connotation. The word “Agenda” provided an actionable framework. This was key. I was intent on demonstrating, right out of the gate, a sense of immediacy and precision in decision making.

Yet just as the future of Starbucks was beginning to crystallize in my mind, its present circumstances were causing me great angst.

Every morning in Hawaii, I checked the company's daily sales reports.

It was extremely difficult for me to fathom what I was seeing. Starbucks was reporting negative daily comps—meaning our sales were down compared to the same day a year earlier—in the double digits. Our comparable store sales had been negative before, but never had I seen performance this poor, and so consistently. Sales were in free fall! Every day, around the country, fewer and fewer people were coming into our stores. And those who did were spending less money than in the past. Starbucks was hardly alone. That holiday season in the United States, consumer spending reached its weakest level in four years. Still, I felt helpless. I was on the phone with our people in Seattle asking for comps from every region of the country. The numbers were so bad I felt paralyzed. I simply did not know what to do with myself. I couldn't eat breakfast. I couldn't enjoy my family. I could barely move. It was as if everything I feared was coming true.

As December 2007—and our first fiscal quarter of 2008—came to a close, I knew that Starbucks would not make its projected earnings. I was not only coming back as ceo, but also coming back to hold the mantle after the company's worst three-month performance in its history as a public company.

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Immediately after the New Year, I returned to Seattle and reconvened with Jim Fingeroth and the few other people who knew of my return as ceo.

There was a disciplined, almost chesslike approach to the work we did in the days leading up to the public announcement on Monday, January 7, 2008. As the cold winter rains and gray skies engulfed Seattle, we hunkered down around my dining room table, comfortably dressed in jeans and sweatshirts, and engaged in very serious discussions about what and when to communicate to a variety of audiences. These included Jim Donald; Starbucks’ most senior leaders; thousands of corporate and store partners; shareholders; the financial community; the business and consumer media; and customers who would likely come across the news online, in newspapers, or on television.

Everything had to be done with an eye toward disclosure regulations and legal formalities, as well as authenticity and sensitivity to our partners. I also wanted to personally touch as many people as possible, in person or by phone. It would be a logistical whirlwind that required precise execution. First, following my private meeting with Jim Donald, the board would have to meet and officially ratify the change in Starbucks’ leadership. Before the announcement, Nasdaq, the exchange where Starbucks’ stock trades, had to be alerted. After the announcement went out, a conference call with financial analysts had to be scheduled. For the Securities and Exchange Commission, we needed to prepare and immediately file an 8-K form documenting financial details of Jim's departure.

Although Starbucks’ annual report was about to go to the printer, we still had time to revise the letter to shareholders so it came from me, as the new ceo, and reflected Starbucks’ new vision.

I also needed to resign from my board position at DreamWorks to convey to everyone my complete commitment. I had already given up my board seat at eBay.

How our partners received the news was of utmost importance to me. Without their support, we would not succeed. Many people would be very sad to see Jim Donald leave, that I knew. To temper reactions and allay uncertainty, one-on-one meetings needed to be arranged between our top leaders and myself, and a larger gathering of partners assembled. I valued Wanda's input on our communications strategy, and a few days before January 7, I invited her to my house without explanation. Not until she entered my home and saw several unfamiliar people working around a table covered with laptops and papers did she learn about my plans to return.

Together, Wanda and I crafted an open letter to post on Starbucks’ website. I wanted it to evoke our heritage, to remind everyone of how the first Starbucks store had ignited my passion 25 years ago and how that same passion fueled me today. I still believed in our original mission, but had to acknowledge our trials and convey the speed with which we had to adopt a new operational mind-set.

Significant change was about to occur, and our people would want to know what it meant for them and their jobs. So the team drafted a question-and-answer document, doing our best to anticipate and address people's main concerns. We made it clear that no one employed by Starbucks would lose their health-care coverage or stock in the company. For me, that would never be an option. As for the security of their jobs, that was a decision I could not yet predict, a promise I could not make.

To ensure that my intentions were understood outside the United States, I also insisted on personally reaching out to our Starbucks vice presidents and joint-venture partners, who operated our stores in 46 countries. Calls to offices in different time zones had to be coordinated.

Our overall objective was to be transparent and restore confidence in the future of Starbucks, to begin to turn around the increasingly negative sentiment while simultaneously acknowledging the real challenges facing the company. Rather than looking back and casting blame, I wanted to lean forward with concrete strategies and tactics. To do so, I would introduce a plan that would become a galvanizing force inside Starbucks: our own version of the Transformation Agenda.

I was not sleeping much, and in the middle of the night I often contemplated just what I would say to our people the first time I stood in front of them as the new ceo. It had been more than seven years. I had never imagined I would be here again. So much time had passed, and I really couldn't predict partners’ reactions and what the tone in our offices would be that day. I did not prepare a formal speech, trusting that I would find the right words to strike a balance between urgency and optimism.

Even with all that was on my mind, occasionally my thoughts wandered back to my parents, especially my dad. Just as the sadness of my father's work life had propelled me to pursue my own dreams as a young man, it was also, I have no doubt, partly behind my decision to return as chief executive. So many people's livelihoods and dreams—including Starbucks’ tens of thousands of partners—depended on the company's success. I could not abandon them.

Finally, our team reviewed what seemed like dozens of documents and finalized the hour-by-hour schedule of events that would soon unfold.

The first domino would fall Sunday afternoon.

Despite the hurdles ahead, I felt ready for the job. I believed that Starbucks had an enormous potential to return to greatness, that the company had yet to be as good as it was going to be. I believed in the power of the brand, in our founding mission, and, most of all, in our people.

I really did believe.

4.      A Reservoir of Trust

In the predawn hours of Monday, January 7, 2008, I drove along Seattle's hilly, tree-lined streets to Starbucks’ very first store. Vendors along the narrow alleys of Pike Place Market were just waking up to their day as I took out my personal key and unlocked the door to the dark shop. It was so quiet.

The espresso machine was still asleep. Bags of coffee beans lined the shelves alongside rows of porcelain mugs and coffee tumblers. I ran my right hand over the original wood counter, feeling more than three decades of history beneath my fingertips. Nostalgia washed over me. In this store I'd learned how to make espresso as a young man. That was so long ago. Long before my kids and Il Giornale. Before I bought Starbucks, before the initial public stock offering, and before Japan and hundreds and then thousands of stores and legions of partners.

I stood there in the dark and made two commitments to myself.

One, I would not return to the role of ceo dwelling on our storied history. Instinctively I understood that we had to return to our roots, but if that heritage was not linked to a willingness to reinvent and innovate, then we would fail.

Second, I would not cast blame for the mistakes of the past. Not only would it be unproductive, but also, given the accelerating slide of the company's sales and its stock, there was simply no time to point fingers. As chairman I shared responsibility for the crisis that Starbucks faced at the onset of 2008, and I had lessons to learn from our errors. But the number-one priority in the next weeks and months was to instill confidence in our future. Without confidence, people could not perform.

The collective doubt that had emerged within and around Starbucks was palpable. I saw it on partners’ nervous faces and in their body language. I heard it in customer feedback. And it was embedded in our sinking stock price. Letting that doubt linger inside the company would chip away at the resolve required for the hard work ahead, stifling creativity and sapping the courage to make bold moves.

Strategies and tactics were not enough to get us out of this mess, particularly in the early days of my return. Passion, that intangible concept many businesspeople belittle, was also essential, and as I locked up the Pike Place store I considered what needed to be done, starting that day: muster a collective faith in the original Starbucks Experience—our purpose and reason for being—and then refocus the company on customers instead of breakneck growth. But that faith was not something I could demand. I had to ask for it and, ultimately, earn it, day after day.

Fortunately, both Starbucks and I had history on our side, and something I referred to as our reservoir of trust. Unlike other organizations or, say, a start-up with no past, Starbucks had a long past in which values and winning were part of the culture. The memory of how we historically tried to behave as a company and as individuals—going the extra mile for a customer or a colleague, for example—was not so far gone that it could not be tapped. Over the years, Starbucks and I had made deposits into the reservoir in the form of exceptional employee benefits and the respect with which we treated people. We'd made enough deposits that I could draw from it. But not forever.

Resetting a beaten, dubious mind-set to an impassioned, confident one required, in my estimation, communication that was authentic, decisive, and concrete and came from all of Starbucks’ leaders. Not just me.

I took a deep breath and exhaled before I got back in my car and drove to work.

---

Later that day, at 12:45 p.m., behind the closed doors of our corporate boardroom, I stood at the head of a long conference table and addressed Starbucks’ chief financial officer, chief operating officer, and the senior leaders responsible for US and international store operations, our consumer packaged goods business, marketing, partner resources, supply chain, and legal affairs.

 “I am absolutely confident that we will turn the company around. It is going to be hard, and I am going to ask more of you than has ever been asked before. And you must ask yourself whether you believe in Starbucks’ mission, whether you believe we can do this. Whether you are up for it.”

My tone was serious and stern. I wasn't returning to the chief executive post intent upon being liked. In fact, I anticipated that many of my decisions would be unpopular with various constituents. “I don't need a vote of approval from you. I just need one thing from you, and that is to fix the house because the house is on fire! And let me be absolutely clear,” I said. “This performance will not stand.” I went on to say that I had no tolerance for anyone in that room who did not believe in the company and our core mission. “If you do not, then let's have a private, respectful conversation, and you can leave the company with no hard feelings.” This was not one of my more aspirational moments, but it was still an honest one.

The day before, early Sunday evening, Nancy had called members of the leadership team at home and asked them to be at my house at precisely 9 p.m. for an extremely important, confidential meeting.

 “Please do not tell anyone,” Nancy had requested, but that was all she had let on.

Most on the team were settling in for a final weekend evening with their families when the phone rang. I disliked disrupting that time, especially without explanation. But to maintain confidentiality, Nancy could not explain the urgency or say that the rest of the team was also being asked to attend. To my surprise, one individual refused to come until after being called three times.

One by one, Starbucks’ senior leaders pulled up to the front of my house, their car tires crunching on the driveway's stones as they parked. As they descended the few steps into the living room, they were taken aback to see their fellow team members. By five after nine, everyone was seated, wondering.

I got straight to the point.

 “I have something important to tell you. I am going to come back as ceo, effective tomorrow.” It was as if a pile of bricks had hit the floor. “And Jim Donald has left the company.”

The room was silent and serious. I think everyone was in shock. There was no hearty congratulating or obvious anger. Perhaps my tone made it clear that this decision was not up for discussion. It was done. Locked and loaded. The only option was to forge ahead in unison, and I handed each member of the team the press release, the next day's schedule, and an outline of his or her individual responsibilities over the next 48 hours.

They had one night to prepare what they would say to their own teams before the news went public, as well as to reflect on what Starbucks’ new course meant for them. Several leaders had been hired or promoted by Jim and almost everyone liked him, so feelings about my return were definitely mixed.

But in the boardroom the following day, the prevailing sentiment seemed to be united resolve. “We're in,” was a repeated refrain. Nonetheless, I considered the fact that climbing a mountain is not for everyone. Some people would not have the fortitude for the kind of journey I needed them to embark on, or the skill to make tough, quick decisions. Others simply would not have the faith in the brand or in me.

---

Forty-five minutes later, at 1:30 p.m., I stood in front of more than 1,000 Starbucks partners who had crowded into the large communal space that spans our eighth and ninth floors, an area connected by an open staircase and brightened by skylights. The space is typically filled with pods of partners discussing business; now it was wall-to-wall with people gathered for an all-hands meeting—at Starbucks we call them open forums—that had been announced that morning, sparking curiosity throughout the building. The forum would be broadcast to our offices and roasting plants around the world.

I had no prepared speech, just an intuitive sense of what to say.

 “Good afternoon,” I began. “I'm sorry to have you all abruptly gather here in the middle of the day and interrupt your schedules, but I have an important announcement to make.” The room was quiet except for shifting feet and the shuffling of latecomers arriving. “Yesterday, Starbucks’ board of directors had a meeting in executive session, and in that meeting it was concluded that I would be coming back as chief executive officer.” I paused and the abrupt sound of clapping filled the space, filling me with relief. “Thank you,” I said, and broke into a wide grin. “You always wonder when you make an announcement like that what the reaction could have been.” There were trickles of laughter as both the crowd and I relaxed.

My goal during the next 30 minutes was, in large part, to ensure that people understood that Starbucks’ very survival was at stake, while at the same time helping them feel safe. I had to demonstrate my own confidence in the resiliency of our brand as well as my belief in our collective ability to rise above our own missteps. But beyond rhetorical cheerleading, I also discussed the plan I'd formulated.

First, of course, I acknowledged Jim.

---

The previous day at my home, Jim Donald found out that I would be coming back as ceo. Weekend meetings at my house were quite common, but asking colleagues to come there at the last minute was not something I did regularly. Still, despite the short notice, Jim readily agreed to come by without knowing why. When the bell rang, I opened the front door and we exchanged hellos and, while walking through the front hall, inquired about each other's family vacations. He followed me down the two steps into the living room, where we sat across from each other.

This scenario had repeatedly played out in my mind.

I knew what needed to be said: The board has been closely monitoring what has been happening at the company and feels that under the circumstances, we must act to restore shareholder value. The board feels it is my obligation, as chairman and founder, to take direct responsibility for doing so, and returning as ceo is the most direct way for me to have the authority to make the needed changes and see them through. More difficult to articulate given my inevitable discomfort with the situation would be my feelings. I wanted Jim to know how much I regretted that this conversation had to happen, that I think he is an exceptional professional and a wonderful man, and that I hoped he knew how deeply appreciated and liked he was throughout Starbucks. In the end, our conversation happened so quickly that I cannot recall the exact words I spoke to Jim before he looked at me with what I perceived as disappointment and surprise, accepted several legal documents that had been prepared for him, and left my house.

Saying good-bye to people when they leave Starbucks never gets easier, even when I think it is the right choice for the company, and especially when I truly respect the individual. If I share a friendship with the person beyond work, this kind of career-altering event pretty much severs our personal bond, a cost I have reluctantly come to accept but never fully reconciled. Of course, as difficult as this process is for me, it is undoubtedly worse for those who leave.

I went to the kitchen and made a fresh cup of coffee. Soon the Starbucks leadership team would arrive to hear the news.

---

 “Let me first acknowledge and pay special tribute to Jim Donald, who will be leaving the company,” I spoke into the microphone at the open forum. “It is very difficult and emotional when you have a business partner and a close friend who you work next to for five years, especially someone so well liked and admired, and for whom you have so much respect. Unfortunately, the business and responsibility we have is bigger than any one person—whether it's Jim or myself or anyone in this room. We have a greater responsibility to the 200,000 partners and their families and shareholders. And the board felt, and I agreed, that a change was really needed.”

I'd conducted open forums throughout the world for two decades, and whether I spoke to hundreds of partners in Seattle or the staff of a single store in London, I usually had no script, just a general idea of what I wanted to say on that given day. Before I spoke, Wanda had asked me if I had talking points. I told her I didn't. I just wanted to speak honestly and share my own emotions and show that I truly understood what people were feeling. Everyone had to leave the forum believing that Starbucks would be okay, that I could lead us out of the quagmire. As I spoke, I strove to subordinate the company's problems to our collective ability to overcome them. Much more than just an announcement of new leadership, this open forum was my rallying cry:

If you're really honest with yourself, as I have tried to be with myself, along the way in building the company, there has been something we have lost. And it's no one's fault and there's no punishment or blame. We are what we are—but the question is, What are we going to do about it and how are we going to fix it?

I want to express to you that this is not an interim situation for me. And I will tell you as I told the board that I'm in this 100 percent. My passion. My commitment. This is the most important thing in my life other than my family. This is 25 years of my life, and I don't like what has happened.

It is not going to be good enough to go “back to the future,” but there is a piece of that past we need; we have to find and bring the soul of our company back, find our voice.

Soon I'm going to share with the leadership team a restructuring of the organization, and I promise you I will do everything in my power to restore the company to the greatness we have known in the past. But understand that this is not a one-person job. We have to lock arms with one another and recommit ourselves to the things that are important.

The worst thing that could happen is that you spread out with fear and trepidation. That's not the purpose of this meeting—the purpose is to be honest and open that we have serious challenges, and we need serious people to help solve them. And I commit myself to being in the front of the line leading the way.

As I spoke, a flurry of internal and external communications was being unleashed. Just as the stock markets stopped trading for the day on the East Coast, our press release hit the newswires (“Starbucks Announces Strategic Initiatives to Increase Shareholder Value; Chairman Howard Schultz Returns as CEO”) and a memo from me (“The Transformation of Starbucks”) was e-mailed companywide. Simultaneously, the voice message that I'd prerecorded landed in every partner's voice mail and a letter to customers was posted on our website.

Meanwhile, Nancy and Tim Donlan—my other assistant, who first worked for Starbucks as a barista in 1991 and, like Nancy, is an invaluable asset to the company—sent dozens of international vice presidents and the regional organizations that operated our stores in other countries an invitation to join me for a conference call. Nancy sent another letter to a collection of individuals who were not formally connected to the company, but were considered friends and family. Also, on the eighth floor, Valerie O'Neil and her team were busy scheduling one-on-one interviews with journalists, responding to media requests, and answering the questions that were flooding in from news outlets.

Overall, the news we issued that day strove to balance humility about our missteps with self-assurance about our ability to self-correct.

The open forum ended as open forums always do, with an opportunity for partners to ask questions. Nothing was vetted beforehand, partners were free to broach any issue. I surveyed the crowd, and one person raised a hand. His question was not about Jim, me, or the impending restructuring or new strategies I'd touched on. His question was about another elephant in the room. Competitors.

 That very day, The Wall Street Journal had run a front-page article about McDonald's move into the specialty coffee market and the effect it might have on Starbucks. At the time, only 800 McDonald's franchises in the United States served espresso-based beverages, and they were made by machines that automatically mixed espresso and milk. The offering would soon spread to all of its 14,000 US stores, accompanied by a sprawling, $100 million advertising campaign. McDonald's also had $1 billion in capital to reconfigure many of its stores into what it was calling McCafés.

Starbucks’ ills were not the result of competitors of the likes of McDonald's or Dunkin’ Donuts. Yet, as the economy continued to put pressure on consumer spending, McDonald's would no doubt capitalize on convenience and price. And despite what we perceived as the stark differences in the quality of our brewed coffee and espresso drinks—Starbucks sources and roasts its own beans in its own roasting plants, while McDonald's and Dunkin’ Donuts outsource those processes—we could not ignore the fast-food chains.

I answered the question. “We have never had a major threat from a national company that has the resources, muscle, and commitment that McDonald's appears to have to coffee—and we have to get ready.”

The one thing we could not and should not do was dismiss the ability of any competitor to capture our customers. It was going to be hand-to-hand combat as we tried our best to differentiate ourselves in the marketplace. “I strongly believe that if we protect, preserve, and enhance the experience to the point where we really demonstrate that the relationship we have with our customers is not based on a transaction, that we're not in the fast-food business, and then let the coffee speak for itself, we're going to win.”

We also could not allow competition to define us. We had to play offense, proactively defining ourselves by sharing the full story of Starbucks’ value proposition: Behind every cup of Starbucks is the world's highest-quality, ethically sourced coffee beans; baristas with health-care coverage and stock in the company; farmers who are treated fairly and humanely; a mission to treat all people with respect and dignity; and passionate coffee experts whose knowledge about coffee cannot be matched by any other coffee company.

“If we can't do all that,” I concluded, “then shame on us and they deserve to take our business.” I hoped that fear of a company like McDonald's could actually motivate the organization, giving us something to fight against, someone else to point to, instead of just ourselves.

A bit to my surprise, there were no other questions and so I wrapped up the forum with a heartfelt thanks and a final emotional boost. “We earned our respect and recognition because of one reason: the quality of our people. Thank you for all you've done in contributing to the success we have enjoyed. I ask that you do everything you can to support the new initiatives and help get this company back, find our voice, find our soul, and make our customers and partners proud to be associated with Starbucks.”

There was a palpable, positive buzz in the air as I headed to a 2:30 p.m. conference call with financial analysts, a group that was sure to have no shortage of questions.

 ---

Unlike the enthusiasm I was experiencing at our support center in Seattle, I anticipated a high degree of cynicism from some of the analysts and institutional shareholders who covered the company; they would come to the call with a preordained view that Starbucks’ cup was half empty given that our stock was down almost 50 percent in the past year.

As I saw it, Starbucks had three primary constituencies: partners, customers, and shareholders, in that order, which is not to say that investors are third in order of importance. But to achieve long-term value for shareholders, a company must, in my view, first create value for its employees as well as its customers. Unfortunately, Wall Street does not always see it the same way and too often treats long-term investments as short-term dilution, bringing down the company's value. Adopting this mentality was, in large part, how Starbucks had become complicit with the Street: For the past two years in particular, we—and I say “we” because no one person had led the charge—chased the pace of growth by building stores as fast as we could rather than investing in sustainable growth opportunities. The top line grew fast, but in a way that, for a variety of reasons, was impossible to sustain, especially when combined with the macrofactor of a tightening economy.

In the conversation with the financial community, I had to be careful not to perform as a salesman. I would not overpromise, but rather would be realistic about the problems at hand and that they would take time to fix. I was not coming back with a solution up my sleeve, but a road map and commitment in my heart to create long-term value.

For about an hour, I fielded queries from financial institutions whose influence had the power to raise or lower Starbucks’ value.

 “Your [business] started to slow around the same time as other retailers’,” said Sharon Zackfia of William Blair and Company. “How do you try to disaggregate what's economic versus self-inflicted . . . and what do you think you have in your arsenal to protect the company [from the economy] going forward?” Few brands would be immune from the impending economic downturn. Consumer confidence had been declining since July, except for a slight rise in December after hitting a two-year low that November. I told Sharon—as well as everyone else on the call, which also included partners, customers, and the media—that I would not use the economy as an excuse and that we would fight the economic headwinds and rising commodity prices by reinvigorating customers’ attachment to our brand and creating highly relevant new products.

David Palmer from UBS asked if our new-product pipeline had some “triples or home runs” in it. “It seems like it's been a while since your innovation has resonated,” he said. David was right. During the past five-plus years, our new product offerings either had nothing to do with coffee or were simply line extensions rather than exciting ideas that had significant impact, such as Frappuccino and the Starbucks Card. I responded with what I believed to be true. “What we have to do [now] is bring new opportunities to the marketplace that are consistent with the heritage of the company.” I stopped short of offering details about what was on my mind. But I was thinking of something very specific.

The billion-dollar question came from Joe Buckley of Bear Stearns, who essentially asked how we planned to grow the company at the same pace it had grown at in the recent past—20 percent top-line growth as a public company for 15 years—especially since we were going to slow new store openings in the United States. I did not have a specific, tactical answer for Joe that day. I had not come back as ceo with some silver bullet that would restore the company's value. But I had come back with a navigational framework for how we were going to do it. And faith. But Wall Street doesn't buy faith.

 “It's very strange to hear about so much change and not have it financially dimensionalized at all,” countered Deutsche Bank's Marc Greenberg. “What can investors, after hearing this call, really sink their teeth into? What about margins, profits, costs, improved returns? We're numbers guys, and you're not giving us any numbers.” Because Starbucks was in the so-called quiet period of the quarter—we were restricted in what information we could say publicly—there were limitations on how much detail we could provide before we announced fiscal first-quarter earnings on January 30:

Let me try in my own way to answer this. I've been here more than 25 years. I've seen every aspect of the growth and development of the company, and I am dissatisfied, perhaps more than anyone else on this call, with where we sit today. I have as much at stake personally, as well as my own reputation. . . .

I am here to say that I'm making a commitment and a promise that we are going to do everything we can to make sure that the relationship we have with you, from a financial standpoint, is one in which you will be a proud shareholder of the company and recognize that we're making the right strategic decisions over the long term and going to take decisive action to put in place those things that have not been done before.

Had I polled the analysts that day about how they felt about Starbucks and me after the call, I would venture to say that most of them did not come away believers. In the end, my words to them didn't really matter. The financial community only cared about how we executed and performed in the months and years to come. They are numbers people and they wanted numbers, and I was intent on delivering. But it would take time.

In contrast, my words to Starbucks’ partners that day did matter because they gave them confidence, the fuel required to execute and perform.

---

Every communication Starbucks issued that day—the press release, the companywide memo and voice mail, conversations with partners, journalists, and Wall Street—included three strategic initiatives that Starbucks would immediately undertake. I had come up with them during my time in Hawaii over the holidays, when I'd had time to plan.

First, Starbucks had to improve the current state of its US retail business. This was our burning platform. The US stores provide the bulk of the revenues for the entire business, approximately 70 percent in 2007. Plus, their performance molds perception around the world. We are a global brand, and what happens in the States never stays in the States. We needed to be more cognizant of that fact and to act swiftly to deliver flawless execution and improve economics at the store level. To do that, we would immediately slow the rapid-fire pace of new store openings. We would also evaluate and then close underperforming locations. This was dramatic. Never before had Starbucks closed more than a handful of stores.

My second strategic emphasis was less tangible than the first but equally vital: We would reignite the emotional attachment with customers. Unlike other retailers that sold coffee, the equity of Starbucks’ brand was steeped in the unique experience customers have from the moment they walk into a store. The aroma. The sense of community. The familial relationships customers establish with their local baristas. And the pride they feel knowing that their purchases support our high standards and socially responsible practices. Reinvigorating the Starbucks Experience could provide the meaningful differentiation that would separate us from competitors.

Third, we would immediately begin to make long-term changes to the foundation of our business, closely reexamining our organizational structure, including our leaders, and digging into operations, revamping in ways that would significantly reduce costs and improve customer service. Everything from information technology—Starbucks’ antiquated checkout system in stores dated back to the early 1990s—to our bloated supply chain was ripe for overhaul. The only sacred cows, the two elements I'd refuse to strip from the company no matter how much others pushed me, were our employee health-care program and the quality of our coffee.

These three strategic pillars were not definitive keys to success, but rather a near-term navigational blueprint from which a more comprehensive, easy-to-understand Transformation Agenda would soon take shape. The pillars also gave meat to the announcement of my return as ceo, positioning the move as far more than just a transfer of power—it was the serious first step in the company's holistic restoration.

---

The day had flown by, and before I knew it the sky outside my office was dark with the Northwest winter's early nightfall.

I spent the final hours at work talking to journalists and partners and reading e-mails that had begun to come in. I was pleased to see congratulatory notes from shareholders and comforted by sentiments of support from friends and other CEOs. One e-mail included that iconic photo of James Dean walking in a rainy Times Square. “It's going to be lonely in the rain for a while, but you can make it,” a friend who understood this particular reality of leadership wrote. That type of encouragement meant a lot to me.

Most of all, I liked reading the e-mails from Starbucks partners. Many welcomed me back, but not blindly, and were quite pointed in acknowledging the company's problems and my responsibility to address them.

Sandi Torrente, a regional coordinator in South Florida, wrote:

I am an eight-year partner who started as a barista and this has been a tough year. I have always loved my job, but this year, not so much! I watched tenured partners leave the company and my optimism has been whittling away. I know how hard our partners in the stores work. We would not have a job if it were not for them. But it saddens me when I walk into our stores and don't receive legendary service or a greeting. It is not the fault of the baristas working behind the counter. It is the responsibility of the leadership team to keep our culture alive, growing and thriving.

It will be a long hard road back; I am proud to count myself among those willing to do whatever it takes. Thank you for providing me with an uplifting day!

That evening I drove home alone.

Passing the city's massive, hollow stadiums and rows of sleeping railcars, I felt humbled but also energized. Eager to get started. I'd had so much time before January to get my head around what needed to happen upon my return that I wasn't nervous, but instead antsy to act. Like a player who'd finally come off the bench, I was hungry to win, confident that we would, and grateful to no longer be so alone in that conviction.

[…]

Source: Schultz, H., & Gordon, J. (2012). Onward: How Starbucks fought for its life without losing its soul. Rodale books.