The Starbucks Story (7 page)

Though Il Giornale started as a single store, it was always intended as a chain. The first outlet became Howard Schultz’s testing ground. There he learned how to raise money and to nurture people; to lay the foundations of a brand by establishing a culture and values; to take care of all the retail details; and to see that the fundamental beliefs he formulated drove every decision and set every objective for the business.
Everything matters
. That phrase later became part of Starbucks’ philosophy, but it was forged in the gleaming metal and hissing steam of Il Giornale.

Not that Howard sat down and drafted out his values. He simply allowed them to emerge from what was now a powerful combination of himself and Dave Olsen. He later expressed it like this: “If every business has a memory, then Dave Olsen is right at the heart of the memory of Starbucks, where the core purpose and values come together. Just seeing him in the office centers me.”

Il Giornale was a brand in the making. It had the obvious outward trappings of a brand, a visual style of its own. Its logo embodied its emphasis on speed: the head of Mercury, the swift-footed messenger of the gods, was surrounded by a green circle bearing the company name. Staff dressed in white shirts and bow ties, and recordings of Italian opera were played throughout the day. On the Italian coffee bar model, there were no seats, just a counter to stand at. Customers could take down a newspaper to read from one of the rods on the wall. The menu was, at least to the eyes of Seattle customers, incredibly foreign, filled with Italian words.

The shop did well, but things had to change. Though the numbers were good, it became clear that they would be better if the bow ties went, the opera was replaced by something lighter, and a few chairs were added. After six months, the store was serving 1,000 customers a day, and a second store opened in Seattle. A third store followed soon after in Vancouver, Canada. Already Il Giornale was an international business, the signal that Howard wanted to send his investors early.

Then in March 1987, something extraordinary happened. Jerry and Gordon put Starbucks up for sale. And Howard bought it.

Just before I started writing this chapter I traveled to Porto in Portugal. I had been invited by one of the country’s leading companies to give a talk. As I was driven into Porto that evening, my first experience of Portugal, I looked out of the taxi window at the buildings and signs that lined the river Douro. It was a pretty sight. Lights glowed, reflected on the still surface of the river.

Lots of the lights were on the tops of the quayside warehouses and they announced SANDEMAN, GRAHAM’S, TAYLOR’S, COCKBURN’S, names that seemed strangely British in this Portuguese setting. But it was a good example of the way brands cluster together as friends and competitors in a neighborhood.

My fellow speaker at the Porto conference was a French marketing academic called Michel Montebello. His theory talks about the way business and brands have moved from catering for “users” to serving “customers” and now to looking after “friends.” Perhaps we were all users in the 1970s. Our expectations were set low. Gradually customer service developed until we all became aware that we were customers. We could make demands, and we did. We chose brands that did not treat us simply as users, but we had relatively shallow loyalties.

The best brands now are striving to gain “friends.” Certainly that is what Starbucks would like its customers to feel. Perhaps there is an irony in the association with the US TV programme
Friends
, which often features gatherings in a coffee shop. The advantages of “friends” to a brand are a much higher degree of brand loyalty, and a much greater propensity to forgive when things go wrong.

Since 1987, Starbucks has been one of the leading brands moving in this direction. It has simply recognized the importance of sociability to a brand. Howard Schultz might say, “Strong brands create a powerful personal connection,” but then go on to say, “We never set out to build a brand.” This is honest, but slightly disingenuous. When he first became involved with Starbucks, he might not have said or thought, “We want to build a brand.” But because he understood marketing and branding instinctively, everything he did worked towards that goal, including the concentration on the core product, the determination to sell one cup of coffee at a time to individuals. Howard understood that brand-building relies on establishing emotional links – in effect, friendship – with people. You secure this deeper relationship through consistent adherence to a product idea and an experience that goes beyond the basic simplicity of the product itself. He also understood something that certainly was not commonly accepted in the 1980s: that a brand’s people are the most important element in delivering a brand experience.

This does not mean ignoring people outside – the customers – to concentrate all attention on the people inside – employees, or partners as Starbucks came to call them. It is simply an acknowledgement that the two depend on each other. You cannot deliver a brand that customers like unless your own people embody your brand. And if there is a lack of connection, the inside and outside worlds both rebel and fail to grant the trust that is essential to the growth of any brand.

These thoughts, benefiting from hindsight, provide the backdrop to the resumption of the narrative. In 1987, Jerry Baldwin and Gordon Bowker decided they had had enough of the business development treadmill. The business they had established in 1971 at the little Pike Place shop was the one that remained closest to their hearts. It was about coffee, pure and simple. Over time much else had been added to it, and these peripheral products and services represented frustrating distractions from the core business of coffee beans. They had bought Peet’s to follow their hearts in that direction. Now Jerry wanted to concentrate on Peet’s and Gordon wanted to do other things altogether and take some cash out of the business. So a For Sale sign went up on the Seattle stores, the roasting plant and Starbucks’ name.

Howard Schultz, owner of the fledgling business called Il Giornale, felt it was his destiny to buy Starbucks. He knew that Jerry and Gordon would sell to him at the right price, but it would still be an audacious move. Starbucks was much bigger than Il Giornale, and as Howard knew well, it had a name and reputation that counted for more than the physical assets of the six stores. He approached all the investors in Il Giornale, and invited them to invest in his bid for Starbucks. He had to face down one of the big investors who tried to hijack the deal, but all the smaller investors remained solidly behind him. He offered them a fair deal, as they acknowledged, and in time they were well rewarded. Howard Schultz acquired Starbucks in August 1987 for $4 million.

After a 20-month gap Howard was back in Starbucks. Now it was his company to run and grow in line with his own vision. But the company had changed a lot in 20 months. When he gathered the staff together to talk to them about his plans for the business, he realized that they were extremely guarded in their welcome to him. People had been starved of information and involvement in the company for the last couple of years as the founders withdrew into their own concerns. Now they were worried about their jobs, their future roles in the business, and they wanted evidence, not ambitious words. Howard was a visionary, a dreamer – “Who wants a dream that’s near-fetched?” he asked – but these were people who had not been encouraged to dream for a long while. The “dream big” message was met with some cynicism.

All Howard Schultz had to offer, until his actions and subsequent developments could prove his sincerity, was his passion and belief. He was made uneasily aware that he now stood for the company. His personal beliefs would become the beliefs of the brand. You can choose to believe him or not, but Howard Schultz seems driven by a need to help people make their way, gain respect through work, achieve satisfaction at least and attain their dreams at best. Much of this goes back to his upbringing and his realization that his own father did not gain respect, satisfaction or dreams through his own working life. In many ways this is an archetypal story of the American dream – the boy from the Projects made good – but it is much more complex than that. At Starbucks, as opposed to, say, McDonald’s or KFC, there is an almost tangible sense that the people and the company’s “friends” are united by a common outlook on life: one to do with embracing, not resenting, the tolerant opportunities of a broader view of life, and with not much room for cynicism. This sometimes exposes Starbucks to attack from more cynical commentators who are not disposed to give a business or a brand the benefit of the doubt.

So Howard knew that he had to move quickly on a number of fronts, addressing the needs of people inside as well as outside the company. His confidence in the product was undiminished, and with Dave Olsen in charge he knew that issues of roasting, making and serving the best cups of coffee were in safe hands. This freed him to think of everything else, to think of the brand, because he now believed that the brand was in everything and everything was in the brand. He expressed it like this: “A company can grow big without losing the passion and personality that built it, but only if it’s driven not by profits but by values and by people.”

Howard set about creating the basic building blocks of the brand. This meant first defining what kind of business he wanted Starbucks to be, then showing his own people what it might mean to them and involving them in the discussion. Aware that a certain amount of trust had seeped out of employees, he made it his priority to reestablish a climate of trust and confidence, and a sense of fairness and respect. His aim was to create a business that valued and inspired people, and shared rewards as fairly as possible.

The first big decision he had to take had the effect of reassuring Starbucks’ people. It also happened to be the right business decision for the long term. The question was this: with the coming together of Il Giornale and Starbucks, what should be the name and logo on the shop fronts? Il Giornale might be Howard’s new baby, but he knew that the name Starbucks meant more in Seattle. It had been around for much longer and was easier to pronounce. There was also a feeling that it would be more honest to go with the unmistakably American “Starbucks” rather than the pretend Italian “Il Giornale.”

Deciding on a name is, of course, crucial for any brand. Names send signals of intent, personality, identity. We all know from our own experience how names shape our sense of self. Starbucks was chosen because it had equity, but also because it still retained the resonance of legend and mystery that had made it seem such a good name in the first place. Now there was an opportunity to build on the legend.

As always in these situations, the staff of Il Giornale were left wondering. Many of them had grown attached to their Italian name. But they accepted the force of the argument, and the company’s new visual identity at least gave them the feeling that something had been salvaged from the business they had been building. Both the Starbucks and Il Giornale logos featured illustrations of mythical figures. With the help of Terry Heckler, Gordon’s creative partner and the designer responsible for the original Starbucks identity, the two logos were merged. The new Starbucks siren was less like a book-plate engraving; she had a strong graphic presence that was contemporary, and she was set in a roundel with the brand name in the style and color from Il Giornale. A similar approach was taken with the look of the stores. They changed from brown to green and were opened out to be lighter and fresher. These were shops where you could enjoy a cup of coffee; they certainly were not restaurants. This philosophy has remained as the shop design has evolved over the years.

People, as we all know, pose a trickier problem. We all have our own personalities and values, so why would we want to adopt anyone else’s? Yet that, effectively, is the pact that a brand makes with its employees. A brand has values; they have to mean something if the brand is not to be completely hollow; and employees have to represent these values. In a sense, this is quite a moral challenge for any employee joining a company that really believes in its brand. Starbucks believes, above all, in respect and dignity to be shown to all employees. If you accept that pact, if you feel able to offer all your fellow employees respect and dignity, that is quite a high standard to set yourself as a person. It is certainly no invitation to join the forces of evil.