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Co-founders Gordon Bowker, Zev Siegl and Gerald Baldwin in the early
day
Only the silly entrepreneur takes that kind of praise from family or
friends.
It was the advice and mentorship of Netherlands-born Alfred Peet, who
founded Peets Coffee & Tea, which proved to be most valuable.
Peet and I hit it off, he says, recalling a visit to the Holocaust survivors
coffee shop in Berkeley, California. He agreed to mentor us and was like
an uncle. His philosophy, which became ours, was no compromise about
coffee.
Im pretty sure that there wouldnt be a single Starbucks store if it wasnt
for him.
Siegl urges ambitious entrepreneurs to get a mentor theyre free.
Starbucks went from a retail shop to a global coffeehouse chain because
its founders grew slowly, he says.
Have money in the bank before you start, adds Siegl, who says the
founders cut costs by building shelves in his parents basement and
launched Starbucks with the equivalent of $100,000 today or $20,000
in 1970.
We raised a lot from our own coffers and our families loaned us some
money. None of us were wealthy but [our families] wanted to help us.
Siegl says his mother Eleanor and father Henry, respectively descended
from Polish-Russian Jews and Hungarian Jews, influenced him in very
different ways.
Howard Schultz
Chairman & CEO of Starbucks Corp.
Founded: 1971
"I always wanted to do something to make a difference."-Howard Schultz
Everyone knows Starbucks, the ubiquitous retail chain that, in the 1990s, turned
coffee drinking into a national pastime. But few know Howard Schultz, the selfeffacing chairman, CEO and mastermind behind Starbucks' astonishing growth. By
bringing Italy's "coffeehouse culture" to the United States and packaging it for mass
consumption, this maverick marketer transformed a little-known four-store chain in
the leading retailer of specialty coffee in North America.
Born in 1953, Schultz was raised in the rough and tumble Bay View housing project
in Brooklyn, New York. His mother worked as a receptionist and his father held a
variety of jobs, none of which paid much or offered such basic benefits as medical
coverage for him and his family. When Schultz was 7, his father lost his job as a
diaper-service delivery driver after breaking his ankle. At the time, sick pay or even
legally mandated disability assistance were luxuries to those in low-paying jobs, and
in the ensuing months, the family was literally too poor to put food on the table. It
was a memory that Schultz would carry with him into adulthood.
Determined to build a better life for himself, Schultz channeled his energy into high
school sports and earned an athletic scholarship to Northern Michigan University.
After graduating with a bachelor's degree in business in 1975, Schultz immediately
began working in the sales and marketing division of Xerox Corp. Schultz excelled at
Xerox, so much so that he attracted the attention of the Swedish housewares
company Perstorp AB, which recruited him at the age of 26 to be vice president and
general manager of their American subsidiary, Hammerplast USA.
While at Hammerplast, Schultz noticed that a small Seattle company named
Starbucks (after the first mate in Hermann Melville's classic Moby Dick) was buying
an unusually high number of Hammerplast's espresso machines. Intrigued, he flew
to Seattle to investigate and found four Starbucks outlets. Originally founded in 1971
as a single store near Seattle's famed Pike Street Market, Starbucks sold freshly
roasted gourmet coffee beans as well as teas, spices and various coffee-making
accessories.
But the most radical change Schultz made was to improve the way his company
dealt with its employees. Convinced that friendly, efficient service would boost sales,
he instituted a training program designed to groom knowledgeable employees who
would enjoy working behind a counter, an occupation considered by many to be
menial labor. "Service is a lost art in America.it's not viewed as a professional job to
work behind a counter," Schultz says. "We don't believe that. We want to provide our
people with dignity and self-esteem, so we offer tangible benefits." Among the
benefits Schultz offers is complete health-care coverage to both full- and part-time
employees, as well as stock options, practices that are virtually unheard of in
corporate America. As a result of Schultz's vision, Starbucks experienced
unprecedented growth throughout the 1990s, blossoming from 425 stores in 1994 to
more than 2,200 stores in 1998. And the company is on target to break the $2 billion
in the year 2000.
With annual sales topping $1.7 billion in 1999, Starbucks Corp. reigned as the
nation's No. 1 specialty coffee retailer. Quite an impressive achievement for a bluecollar kid from the projects. But despite Starbucks' phenomenal success, what
Howard Schultz seems most proud of is not how much he has earned, but the kind
of company he has created. "My dad was a blue-collar worker," Schultz explains in
an Inc. magazine interview. "He didn't have health insurance or benefits, and I saw
firsthand the debilitating effect that had on him and on our family. I decided if I was
ever in the position to make a contribution to others in that way, I would. My greatest
success has been that I got to build the kind of company my father never got to work
for."
The Benefit Of Benefits
Howard Schultz credits Starbucks Corp.'s benefits policy as one of the keys to his
company's dramatic growth. By extending health benefits to all employees, Schultz
has created a more dedicated work force and promoted an extremely high level of
customer service. He has also achieved a turnover rate that is less than half the
Entrepreneur:
Howard Schultz
Company:
Starbucks Corporation
Founders:
Howard Schultz
Year Started:
1987
Description of Business:
The Starbucks Corporation sells coffee drinks from over 3,300 stores
around the world. The company has entered into agreements with
bookstores, airlines and hotels. It also markets its coffee through an
online catalogue.
Enter Howard Schultz. In 1981, Schultz was a vice president at Hammarplast -- a Swedish maker of
stylish kitchen equipment and housewares. Schulz noticed a small business in Washington state was
ordering a large number of a special type of coffee maker. Driven by curiosity, Schultz ventured to the
Pacific Northwest from New York City to learn more about Starbucks. He saw the store, and
immediately realized the attraction to the coffee bean culture. He eagerly wanted to be a part of that
world. Schultz met with Baldwin, Siegel and Bowker and tried to break his way into the Starbucks
family. He had a plan to take Starbucks across the country. The founders didnt share Schultzs bigger
picture approach to roasting coffee, but his persistence paid off. In September 1982, Schultz was
hired to head Starbucks marketing and oversee the four Seattle stores.
Schultz later left Starbucks to open a string of specialty coffee stores in Seattle modeled after the
typical Italian espresso bar. Schultz quickly raised $400,000 in seed capital and by the end of 1986 he
had $1.25 million in equity (including backing by his former Starbucks partners). While Schultzs
stores took off, only a year later in 1987, Schultz bought the original Starbucks franchise. Between
1987 and 1992, Starbucks, under Schultz, opened 150 new stores. In 1990, Starbucks turned a profit,
and the company continues to open new stores today.
Outstanding Contributions:
Entrepreneurs make unique contributions to the American economy: Using innovations to grow their
businesses, they provide concrete benefits to the national bottom line. These benefits provide an
interesting framework in which to view these companies.
Entrepreneurs create innovations that improve our quality of life: Starbucks serves ten million
customers a week. The average coffee-loving customer will visit a Starbucks 18 times a month. Rapid
expansion has marked Starbucks history, but it has remained committed to the value of individuality.
Each store has a different lay out with a dcor that matches the personality of the neighborhood.
Entrepreneurs create new jobs: With over 3,300 stores around the world, Starbucks employs more
than 40,000 people. The Starbucks Corporations policy of opening restaurants in office buildings,
hotels and outdoor kiosks has invigorated other businesses in surrounding areas.
Entrepreneurs improve our position in global economic competition: Starbucks has rapidly shot
beyond the city lines of Seattle and beyond the borders of the United States. More than a dozen
countries are home to a Starbucks store. There are over a hundred Starbucks stores in Japan and the
United Kingdom alone.
Entrepreneurs reinvest their newly created wealth in the community: Howard Schultz has insisted that
Starbucks adopt an environmental mission statement. This pledge commits Starbucks to only buying
coffee that has been grown organically. The company also takes an interest in the farming
communities that harvest the coffee beans. Starbucks has built schools, health clinics, and safe coffee
processing facilities. Locally, Starbucks has worked with stars like Magic Johnson to bring Starbucks
stores to poor African American neighborhoods across the country. The Starbucks Foundation
sponsors literacy programs, Earth Day clean-ups, and regional AIDS walks.
Howard Schultz earned a BS from Northern Michigan University in 1975. His company, the Starbucks
Corporation, sells coffee drinks from over 3,300 stores around the world. The company has entered
into agreements with bookstores, airlines and hotels. It also markets its coffee through an online
catalogue. Provided by: National Commission on Entrepreneurship. Article on howard, schultz by
National Commission on Entrepreneurship
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Read more: Stories of Entrepreneurs: Howard Schultz
Howard Schultz was born on 19th July 1953 in Brooklyn, New York to a lower middle class
family. He studied at the Canarsie High School graduating in 1971. Schultz was very good at
sports and was awarded an athletic scholarship to the Northern Michigan University where he
studied communications. After graduating from university in 1975 he got a job at Xerox
Corporation where he spent four years. His next job was at a Swedish drip coffee maker
manufacturer named Hammarplast. Schultz had to visit a coffee bean shop called Starbucks
Coffee Company based in Seattle for Hammarplast. He was very inspired by their dedication
and recognized its potential business opportunity. A year later he joined them as Director of
Marketing. During his visit to Milan, Italy, Schultz was further encouraged as he saw dozens
of coffee shop lined on almost every street. They were not just places to buy coffee; they
served the purpose of a meeting place and a place to relax. He returned with the idea of
adding traditional espresso beverages to the menu. The concept was very well received by the
public however the owners of Starbucks did not agree to take the caf idea company wide.
Schultz was very frustrated at the refusal because he wanted much more. So in 1985, he
opened his own coffee shop which he called il Giornale. After two years Schultz purchased
Starbucks for $3.8 million. He renamed his own shop Starbucks and started aggressive
expansion all over the country. Howard Schultz did not want to sell its franchises and decided
to keep the possession of every domestic outlet. Schultz was a very generous employer. He
initiated some practices that really helped increase the loyalty of his employees. He said that
although the main goal of the company was to serve a great cup of coffee, he wanted to
build a company with a soul. He wanted his employees to work 20 hours a week and get
complete health coverage and a stock-option plan. Starbuck underwent heavy expansion in
the 1990s and in 1992 went public. Schultz was also the owner of Seattle Supersonics.
Howard Schultz has been given several awards for his superb achievements. He was given
the Israel 50th Anniversary Tribute Award in 1998 for playing a significant role in the
promotion of a close alliance between the U.S and Israel. He was awarded with the National
Leadership Award for his philanthropic efforts to combat AIDS in 1999. In 2004, he received
the International Distinguished Entrepreneur Award from the University of Manitoba for his
remarkable success and admirable conduct of Starbucks. He got the FIRST Responsible
Capitalism Award in 2007. Schultz was named Businessperson of the Year in 2011 by
Fortune magazine for his creativities in the job market.
between his desire to create locations where people wanted to linger and enjoy his
premium beverages, and the providing of wi-fi to customers. Instantly he expanded his
market to college students and business people, who often found themselves away from
their home, but still needing to get work done with their wi-fi enabled computing devices.
return to those ideals and has brought them back to the strength and dominance that
they had initially.
much tail wind. You're planting new seeds. But it's also scary, because there's no
safety net. I really enjoyed that experience. At an early age, my mother gave me this
feeling that anything is possible, and I believe that. If you look at where I came from
and where we are today, my story is like a Hollywood movie. I was able to achieve
the American dream. It's not that it was easier or harder the first time I ran the
company, but I would say that the feeling that goes with building something
especially when you get some successit's a wonderful carpet ride.
It's different when you're trying to turn something around, especially something that
you built, at a time when so many constituentsthe media, Wall Street, competitors,
ex-employeesare all saying that Starbucks's best days are behind it, and that
Schultz is never going to be able to bring it back. It's not that they underestimated
me, but they underestimated the power of our culture and values and the resiliency
of the brand and our people.
In many ways, it's much more rewarding to be here today, having made it through the
past few years, than it was building the company. It was difficult, because during the
financial crisis, there were no navigational tools. No one had experienced anything
like this. You couldn't really talk to anyone or read something. You had to make big
decisions based on things you believed in your heart were the right things to do.
What did you learn about this new environment?
There's been a real sea change in consumer behavior. And those companies that are
consumer based must appeal to the consumer in a different way today than they did
two or three years ago. And it's not all based on value. Cutting prices or putting
things on sale is not sustainable business strategy. The other side of it is that you
can't cut enough costs to save your way to prosperity.
I think the question is, What is your relevancy to the new life of this consumer, who is
more discriminating about what they're going to spend money on? The customer
today is very well informed. In addition to price and convenience, there's something
else they are influenced by, and that's what the company stands for: how it treats its
employees and its customers. We've found that consumers are willing to walk
another block and potentially spend a little bit more for companies whose values they
truly trust.
How do you maintain quality as a company grows and grows?
There are 17,000 Starbucks stores in 54 countries, serving 60 million people a week.
We employ 200,000 people. So I can make the caseand I have for yearsthat the
When you consider Apple and Dell and other businesses, there
seems to be a trend that when a company is struggling, the
solution is to bring back the founder. Why do you think that is?
I think founders come back perhaps because they no longer recognize the company
they built. In my case, if an outsider would have come in, I suspect the easiest and
most predictable thing he or she would have done is cut things to the bone. That
would have destroyed the company. I had the benefit of knowing what buttons and
levers to push and pull. I also knew that just going back in time and embracing the
status quo of the past would not produce success. That's what people thought I
would do. I had to restore the company's heritage but, at the same time, push for
reinvention.
What were some new strategies?
We recognized that social digital media was not only changing consumer behavior
but, if done properly, could significantly lower our cost of customer acquisition and
could be a creative way to engage emotionally with our customers. We've invested
heavily in that.
We also started a website, mystarbucksidea.com. We said, "Tell us what will bring
you back to Starbucks; tell us what will engage you with our company." Not
surprisingly, the No. 1 suggestion was that we create a loyalty program. More than a
million people are now carrying the Starbucks gold card and getting significant
rewards.
You write in the book that you were also on a mission to find the
next Frappuccino. You thought you had found it.
Yes, the Sorbetto. It didn't work. There were many lessons that the company and I
learned. And I think one of the most humbling lessons was that the problems we
were dealing with were not created by one decision or the financial crisis alone.
There were multiple problems that led to the issues we were facing. I learned there
wasn't going to be one silver bullet that was going to save us. There had to be a
comprehensive transformation, from the bottom up. Even if Sorbetto had worked, it
wouldn't have solved all of our problems.
One idea that did transform the company was Via, our instant coffee. Via not only
reinvented the coffee category, but it reminded our people of the entrepreneurial
DNA of the company. It was 20 years in the making, primarily because we could not
replicate the taste of Starbucks coffee in an instant. Here's another example where
the world thought we were crazyand that I was desperate. And in the end, Via in its
first year did over $180 million in sales.
You had people inside the company who fought this, too.
Yes, people came to my office and said, "In all due respect, I think you're crazy. It's a
bad idea." But sometimes, you've got to believe what you believe. I'm not always
right, but in this case, we were right. I think great companies have the curiosity to see
around the corner about what's possible and the courage to execute. All small and
large companies have to push for reinvention and self-renewal. Consumers are
rethinking what they're buying and how they're buying it. Business plans decades in
the making have to be rethought and reexamined, because they will not be relevant
in the future