In late 2007, Starbucks was not doing well, and the future looked bleak. To address the emerging problems, former CEO Howard Schultz, who had stepped aside almost eight years earlier to become chairman of the board, did something unexpected: he returned as CEO to oversee day-to-day operations.
Schultz came back to Starbucks with a passion and a plan, and over the next two years, Starbucks returned to sustainable, profitable growth.
Here’s what Schultz had to say in looking back to early 2008:
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.
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.
In the early years at Starbucks, 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.
Great organizations foster a productive tension between continuity and change. On the one hand, they adhere to the principles that produce success in the first place, yet on the other hand, they continually evolve, modifying their approach with creative improvements and intelligent adaptation.
When organizations fail to distinguish between current practices and the enduring principles of their success, and mistakenly fossilize around their practices, they’ve set themselves up for decline.
By confusing what and why, Starbucks found itself at a dangerous crossroads. Which direction would they go?
In Leading the Starbucks Way, organizational consultant Joseph Michelli uses two years of research with dozens of leaders in the Starbucks organization to develop five actionable principles that forge emotional connections that drive innovation, grow new business product lines, and foster employee and customer loyalty. These principles are “brief and clear, and put the customers, products, and experiences at the purposeful center of Starbucks.”
Leadership Principle #5: Cherish and Challenge Your Legacy
“Cherish and challenge your legacy” is all about encouraging you to define the legacy you wish to leave and evaluate your leadership performance, in part, based on your progress toward that legacy. – Joseph Michelli, Leading the Starbucks Way
A key element in the success of the Starbucks transformation results from an alignment between leaders who are charged with driving change and those who are responsible for ensuring consistent operations.
Our challenge has been to produce innovations that improve operations, drive growth, enhance the partner and customer experience, and increase profitability. That’s a tall order, but it often occurs in the most subtle ways. – Craig Russell, Starbucks senior vice president, Global Coffee
Ultimate success in driving innovation hinges on the alignment of those who foster change and those who maintain stability.
- What are the strengths of your organization that have been most instrumental to the success you have achieved?
- How might those success drivers inadvertently become traps that could constrain future growth?
- How aligned are the “operators” and the “innovators” in your organization? Would you say that both groups share an “operational innovation” mindset?
Any organization, small or large, consumer or otherwise, that is going to embrace the status quo as an operating principle is just going to be dead…The need for constant innovation and pushing forward has never been greater than it is today. – Howard Schultz, CEO, Starbucks
Leaders must honor the past but not be trapped in it.
Part 8 of a series in the 2013 GsD Fall Term
Leading the Starbucks Way: Information, Insights, and Analysis Needed to Create a High-Performance Guest-Oriented Organization