Howard retired from Starbucks after 21 years, where he led both the domestic business, as President of North America, and was the founding President of Starbucks International. He participated in the growth of the company from 28 stores to over 15,000. He has written two books: The Magic Cup and It’s Not About the Coffee.
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Time Stamped Show Notes
(click the time stamp to jump directly to that point in the episode.)
- [00:31] – Welcoming Howard to the show.
- [01:07] – Howard has six grandchildren and an incredible wife.
- [01:26] – He is the son of two immigrants.
- [01:35] – He grew up in an entrepreneurial family.
- [01:43] – He grew Starbucks to an international brand.
- [02:13] – How did your experience with entrepreneurship in your family business prepare you for Starbucks?
- [03:25] – Was there a point in your Starbucks career when you implemented these strategies? – That was the foundation for Starbucks.
- [04:31]– How did you increase sales at Starbucks? – People have to understand your greater purpose.
- [05:45] – A time when you were surprised about a certain success that you had – The Frappuccino
- [07:02] – A surprising time when something didn’t sell – Developing hot chocolate.
- [08:25] — Worst Moment as a Leader at Starbucks – 3AM in the morning.
- [10:16] – What’s one thing that you took away from that experience? – Safety is first.
- 11:53 – Entrepreneurial AH-HA Moment: He had been with the company for just a short time, and he had gotten letters from customers.
- [12:23] – They said Starbucks was arrogant about their coffee and was disrespectful.
- [12:43] – He realized he was not in the coffee business. He was in the people business.
- [12:57] – He invited those customers to a conference with his team, and it started a huge shift for Starbucks that drove the company to success.
- [15:28] – Biggest strength? – “I know myself.” I am in tune with my values.
- [18:10] – Why are you so fired up about the importance of values in a company? – They form the core of your company.
- [19:33] – Why did you write The Magic Cup? The story is valuable for anyone at any phase of life.
- 20:31 – Expound upon the Virtues that you talk about in The Magic Cup – Trust is the most important.
- 23:05 – firstname.lastname@example.org and his website
- [23:14] – “If someone reaches out to you, you have a responsibility to reach back.”
- [23:37] – “Give more than you get—it will serve you well.”
- [24:18] – Leave an honest review for Howard’s book.
Howard: I'm ready, man. I'm here.
Howard: I've had two Triple Tall Americanos and I'm ready to go.
John: A little hint, Fire Nation, about what's to come. Howard retired from Starbucks after 21 years, where he led both the domestic business as President of North America, and was the founding President of Starbucks International. He participated in the growth of the company from 28 stores to over 15,000. He’s written two books: The Magic Cup and It's Not About the Coffee. So Howard, take a minute and fill in some gaps from that intro and give us a little glimpse into your personal life.
Howard: Well, my personal life, I've got six grandchildren, ages from 15 down to 8. And I've got a partner in life that couldn’t be more incredible, way smarter than I am. I've had a wonderful life. I grew up as a son of two immigrants. My father was a small time entrepreneur, a small mom and pop grocery store that he opened in 1924. And so I grew up in an entrepreneurial family, all small mom and pop kind of businesses, from jewelry stores to tailors, to bagel makers.
John: I love this story. And Fire Nation, you can just see how it resonates the importance of those that you surround yourself with, the influences that you have in your lives. And then of course, you know, if you're going down that road of having kids or you have kids, I mean, the influence that you can have on their lives. It’s really exciting stuff. And Howard, a lot of people know you because of your role for growing Starbucks form just a small company to an international brand and this household name.
But way before Starbucks you had a chance to learn about entrepreneurship from working in your family business, so can you talk a little bit more about how that experience prepared you to grow a company like Starbucks?
Howard: Well, let me give you probably the single most important example. I was about nine years old, and my dad was a couple years away from retiring. And I was working in his store, you know, working at nine, helping as best as I could, probably more in the way. But he asked me to go get a couple of baskets of strawberries back from where the fruit was in the back of the store. And I went back and got a couple baskets of strawberries. And he took those baskets of strawberries, and I watched him put them in the bag of the customer.
And I also noticed that he hadn’t rung those two baskets of strawberries up on his cash register. And so after the customer left I said, “Dad, you forgot to ring those baskets of strawberries up.” And he looked at me and he said, “Son, not everything we do in life do we get paid for. And I happen to know that those people love strawberries. And I also happen to know that they're having a hard time right now and they can't afford it.
And they're not only our customers, but they're our friends and neighbors and it's my way of saying thank you.” And that was my father teaching me probably the single most valuable lesson in life, you got to give before you get.
John: Wow. Now, I'm kind of putting you on the spot here, was there a scenario at any point during your Starbucks career where like you kind of implemented some of these strategies in some way shape or form?
Howard: Absolutely, all the time. That was the foundation of Starbucks. We gave everybody healthcare benefits in the company, all the part time workers. It had never been done before in our kind of industry. Everybody got equity in the company, whether you were part time or not. And we just operated the company like we were all in it together. There were no company cars, no company airplanes at the time. Now there is one, but I wouldn’t buy one if I was there. I still would be fighting it.
You know, we thought that we were all in it together. And so did I earn more than a barista, yeah, but I got exactly the same healthcare benefits that they got. And they got stock options and I got stock options.
John: I love that. So my listeners Howard, on EO Fire here, they are entrepreneurs, small business owners. They are sidepreneurs looking to make their kind of impact in this world. And everybody is looking to increase their revenue, so they can maybe serve more greatly with more freedom, so can you talk about some of the mindset and strategies that you used to increase sales as you developed new products at Starbucks?
Howard: Number one is that your people have to be signed on to your greater purpose. You know, we're not selling things, we sell ideas. I don’t care whether you're selling a cup of coffee; it's still an idea, right? It’s still an emotion that causes people to buy. I used to tell our people that we're not in the business of filling bellies; we're in the business of filling souls. Because you don’t need to come to Starbucks to get a cup of coffee, you could go a lot of different places. So that meant that we had to serve people in a way that they couldn’t be served anywhere else.
Take care of your people and make sure your people are signed on to your greater purpose in life. And that those people are able to express what you're doing to the people that they're serving. And everybody is in the service business. If you're selling insurance, you're in the service business. It doesn’t make any difference what you do; we're all about serving other people. And when we get that right our business grows.
John: So I love stories Howard, and so doesn’t my listeners, so can you kind of maybe tell us a story of a time where you were surprised with the success of a certain offering that you had?
Howard: So frappuccino came from a district manager in Southern California. And she kept calling me and telling me to come down and visit her, and so I finally did. And she took me on a tour of my store, our stores, and then on some competitor’s stores. And at one of our competitor’s stores she bought me this drink. You know, there was no support for us, as a matter of fact they had marketing at the time that said we're not in that kind of business, we're in the coffee business. And so I said – I pushed back a little bit, but I decided I couldn’t win this argument at the time.
And so I had to tell this young woman that we couldn’t get it going. Well, about three weeks later she called me up and she said, “Can you come visit again? I want you to come see what we want to do.” And so I went down and visited her on my next trip down to Southern California. And she served me three sample cups with this drink made in it. And so finally she just pushed so hard I said, “Okay, let’s try it, but let’s not tell anybody.” So she figured out the recipe. She figured out how to do the job. And low and behold she created a 44 billion dollar business out of nothing, out of just a little idea.
And it all was because we listened to her, finally. And you never know where ideas are gonna come from. That’s why I always say the person who sweeps the floor should choose the broom, because they're the one that knows – they know most about what they're doing.
John: So let’s flip this now, what's something that showed promise, but just didn't sell? Like, what was something that surprised you because it flopped?
Howard: We always thought that hot chocolate fit with Starbucks. You know, we sell hot coffee and hot chocolate always goes. We worked hard to develop this chocolate drink. And we did all the research. We did everything you could possibly do on it. We put it out there and within in one week it was dead. We totally misjudged the customer and we had to pull it out. But we always operated under the philosophy that as long as you don’t do anything illegal, immoral, or unethical, and you don't poison anybody, that was a big thing at Starbucks, then you might as well try it.
The second one that absolutely failed, we had done a joint venture with Pepsi. And Pepsi did all this research. And we put it out there, the most beautiful bottle you can imagine. As a matter of fact, I have this bottle sitting on my desk right now. It's a plastic container and, you know, that thing got out there, and after spending millions of dollars it was an abject failure. But you know what it caused? It spawned another product called bottled frappuccino, which became a huge international business. So you just don’t know in life.
John: Howard, you're a pretty upbeat guy. You seem very optimistic. And you are an entrepreneur. I mean, you’ve had the ups, you’ve had the downs, you had a 21 year career at Starbucks, you definitely encountered some setbacks and challenges. Can you actually take us to what you consider your worst moment as a leader of Starbucks, and really tell us that story?
Howard: The single worst moment as a leader of Starbucks it was 3:00 in the morning West Coast time and I got a call from our regional vice president in Washington D.C. and, you know, I'm not used to getting calls at 3:00 in the morning, so I knew something was up and that it had to be serious. So he got on the phone and he said a disaster has happened. So it's going through my mind quickly as, you know, something’s burned down. I had no idea. And he told me this story of three of our young people had died in a bungled holdup in Washington D.C. in a Georgetown store.
No way was I prepared for that. I never thought in my wildest imagination that three young people would die because of selling a cup of coffee, just didn't enter my mind. And immediately I got a hold of Howard Shultz and he happened to be in New York, and he got to Washington D.C. right away. And the police lines – you know, the liens were up and they were starting their investigation. And it was a terrible experience to lose three young people, a 24 year old store manager, an 18 year old barista, and a 15 year old barista that it was his first job ever.
And his parents were so proud that he got a job at Starbucks, and here he had died because of this bungled holdup. And it was – I don’t think I've ever been sadder or more emotionally drained than during that time. We closed that store and we dedicated all the profits of that store, and we still do, to getting rid of violence in Washington D.C. And it’s one of the things that can happen when you're running a business because you're part of a greater community, and so we had to deal with it.
John: So what is something that you can say that you took away from that experience that maybe just helped you going forward in the future with any number of ventures that you had with Starbucks?
Howard: You know, one of the things is that safety is first. Have somebody at the front door, and have one person go in the bathroom and check. Never allow – in our business, never allow one person to close a store down. And always have somebody check the whole building before, and have somebody by the front door before you lock the door. And so it was those kinds of things that really made us really aware that safety was so important and our people’s lives were a hell of a lot more important than costing us a few extra bucks.
You know, you got to be conscious of all those things because we have to look out for our people’s wellbeing. It's not just what they do for us; it's what we do for them. And when you say you care you have to mean it. You know, people – you hear all the time CEOs say people are our most important asset. And I think that is totally wrong. People are not assets. Assets you own, people you don’t. You know, assets are trucks, they're computers, and when you turn them on they pretty much always give you what you expect. People are human beings.
We never give each other exactly what we expect. It's usually either more or less. And that’s the way it is in life. We have responsibility for our people and we have to take that responsibility seriously.
John: So Howard in your first book you talked about how Starbucks was in the people business serving coffee, not the coffee business serving people, so that was an ah-ha moment that you had. And you’ve had a lot of those as you’ve developed people and sales strategies, so can you take us to one of what you consider your greatest ah-ha moments, and tell us that story?
Howard: I was with the company for a very short time, and we’d get customer comments in writing all the time. And I had come back from a trip and there were probably a couple hundred on my desk and I started reading through. And there were three that just struck me. And it basically said, you know, you guys are awful arrogant about your coffee. You think that you know more than your customers know. And, you know, we can all go – we can go different places to get good coffee. We want to be treated respectfully.
And I started to think about that. And I started to look at what we were doing. And it was early days, and it’s like very, every entrepreneur thinks that their service or their product is the cat’s meow. And that’s what everybody thought at Starbucks. They thought that they were in the coffee business serving people. And that’s when I came away with that idea: no, we're in the people business serving coffee. And what matters most is that we care about the people. So I invited those three customers to come to the support center in Seattle.
And I got the whole leadership team, maybe 100 people, and I got everybody together plus all our store managers. And I had those three customers tell us about what they were feeling. And then we got to ask them questions and have a conversation. And that began a systemic change at Starbucks, in this little company called Starbucks, to realizing that we really were in the people business, and that’s really what drove the company.
John: Fire Nation if you think Howard has been dropping value bombs so far, just wait until after we get back from the word from our sponsors. So Howard we're back, and you talk a lot about strengths, and you talk about weaknesses, let’s maybe focus on something that allowed you to achieve success at Starbucks as an individual, like you personally? Because Fire Nation, like we're listening to you right now and we're like: wow, like Howard did so much over the 21 years. What's something that you kind of look at as one of your biggest strengths?
Howard: Biggest strength is that I know myself, not that I'll ever completely know myself, and that I'm in tune with what my values are. I have a document; as a matter of fact I'm looking at it right now because I see it every day. I carry it with me wherever I go. And it's Howard in 50 Words or Less. And it starts with my core values. It starts with my eight core values. What I try to manage my life by. So the first core value is honesty. Well, everybody would say, probably if I asked everybody, and everybody in the audience would say I'm honest, but each of us might have a different way of acting or making decisions on that word honesty.
And so I had to define what honesty meant for me. You know, we all tell little white lies once in awhile, you know, that’s just part of life. And you have to decide what honesty means to you, and how it's gonna inform the decisions that you make in life. The second thing I have is my mission statement. It goes like this: to live my life every day nurturing and inspiring the human spirit of myself and others. And that’s how I live my life. I've realized that I have to take care of myself physically and spiritually in order for me to really serve other people effectively.
And so that mission drives my life every day. And then I have how I do within my six P’s: with purpose, passion, persistence, patience, performance, and the most implementation one serving people. And then I live my life according to a plan. I have – you know, I'm 72 years old and I still have a five year plan, that’s pretty optimistic. And I have a one, three, five year goals and I still do it. I live my life now, I'm not managing a career, you know.
I'm doing the work that I was put on this earth to do, which is to help people become better human beings starting with myself. And so that is what's driven me. And I've had this plan, and I've had this Howard In 50 Words or Less, and it's changed over time, but I've had it for almost 40 years and that has made a huge difference in my life.
John: Howard, in both of your books, both The Magic Cup and It's Not About the Coffee, you talk a lot about the importance of building a company and leading from a place of values first. So why are you so passionate, or as I would say why are you so fired up about the importance of using values to become a better entrepreneur and leader?
Howard: Because they form the core of who you are and what you're about. If your people don’t know what you stand for, and you don't act on those words, then what holds it together? You know, businesses are not held together because of their products or the services they provide, businesses are held together because they have a purpose that’s greater than the organization. They have a purpose that’s greater than any individual. And those purposes, that purpose is about values and about how we serve other human beings. And we have to do that with passion.
If you’ve got these values, you know, mine are honesty, fairness, respect for self and others, responsibility, integrity, trust in self and others, caring and love, that purpose deserves passion. When you are passionate about your values, and you live those values, you act on them. It doesn’t mean we do it all – we're not perfect. No human being is perfect. We make mistakes and we screw up on those core values that we have, but when we try to act on them all the time, the people that we're serving, those customers know that. And they want to be part of our team in essence. They want o buy from people that they know that really care.
John: So Howard, I really want to end it strong by focusing on your book The Magic Cup. Let’s kind of maybe take a step back and have you share why you wrote this book, and who specifically would gain value from reading it?
Howard: Well, I think that anybody would gain value, from somebody in high school that wants to learn about leadership advantage, all the way up to somebody that’s running a big corporation because it really is a story. It's a parable about a guy that takes on the challenge of being a CEO of a company. And he’s challenged. He’s challenged with the status quo. He’s challenged with all of the mistakes that have been made before. And he’s challenged with his own internal compass.
He’s challenged about trying to live up to his values, and he has to deal with his own personal fears and those challenges are hard. And it's not easy living life. It's not easy leading companies. It doesn’t make any difference whether it's a company that is doing $200,000 a year or $2 billion a year, it's all the same. It's all the same. And so The Magic Cup is about that story, about the struggles that we all face as leaders, whether you're leading a family or whether you're leading a corporation.
John: So Howard, you're a big guy when it come sot virtues. And there's actually 11 virtues within The Magic Cup. And I kind of wanted to just read through them quickly, and then I would love for you to maybe pick out one or two of these and expound upon them for my audience, again Fire Nation, who are entrepreneurs looking to grow their business in a value driven virtuous way. So there's responsibility, curiosity, cooperation, trust, truth, hope, forgiveness, focus, stewardship, courage, and connection. What are a couple of those that we can maybe expound upon that would be of value for our listeners?
Howard: Well, the first one, and I think the most important one in life, because it's what makes life work. It’s what makes our marriages work, our relationships work, and that’s the word trust. And if we don’t have trust between us we have nothing. You know, if any of your listeners are married or have a significant other, or just a friend in their lives, if you don’t have trust between each other you have nothing. And so trust is what makes organizations go, just like it makes a family go.
And if we can't trust each other, and I always operate on the idea that I give trust before I get trust. I always thought, you know, I have always heard some leaders say, “Well, people have to earn my trust.” And I say no, they don’t. The people have to not earn your trust; you have to earn their trust. And, you know, servant leadership is about giving trust. And so I think leaders have a responsibility to trust their people first until their people have proven that they're not trustworthy. And then even when that happens that you try to help them become trustworthy.
The second one is forgiveness. There are no perfect human beings. And the first person you're going to have to learn to forgive is yourself. You got to be able to look in the mirror and say I screwed up. I didn't do that in the right way. And then forgive yourself and then go ask for forgiveness from your people. You know, put it right out there. Just like sometimes you have to ask for forgiveness from your children or from your spouse, you’ve got to learn to put it out there, and that means you need to be vulnerable.
And so trust and forgiveness, I think, are two of the key elements in running any organization. We have to trust each other, and we have to learn to forgive each other.
John: Trust and forgiveness. Howard, let’s end today on fire with a parting piece of guidance from you, the best way that we can connect with you, and then we’ll say goodbye.
Howard: Okay. The best way to connect with me is email@example.com, or through my website. Here’s what I believe about life. If somebody reaches out to you, you have a responsibility to reach out back. I have operated under that philosophy my whole life. I never turn anybody down. I don’t care who they are. I will answer a question. I will call back. I will send an email back. And I believe that when you do that, you know, people will reach back to you. And so that’s what I would leave your listeners with is give more than you get, it will serve you well.
John: I love that. And Fire Nation, you are the average of the five people you spend the most time with. And you’ve been hanging out with HB and JLD today, so keep up the heat. And head over to eofire.com, type Howard in the search bar. His show notes page will pop right up with links to everything that we've been talking about. He shared his website, his email address. We’ll have everything linked up there. Of course his two books, we’ll have both linked up there as well.
And you definitely want to be reading all of them. I mean, It's Not About the Coffee is a great book, but the most recent The Magic Cup, Fire Nation, consume that content, read it. And here’s a call to action for you. If you really enjoy it and get value, which I know you will, take the time and leave an honest review. You heard Howard, he loves reviews. He takes that feedback seriously. And it's very valuable for us authors to get that rating, to get that review, so make that happen as well.
And I just want to say Howard, thank you for sharing your journey with Fire Nation today, for that we salute you brother, and we’ll catch you on the flipside.
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