The only sign that Blizzard is not a staid software outfit but a fantasy gaming producer is a 12-foot-tall bronze statue of an Orc warrior, one of the types of characters in World of Warcraft, riding a menacing wolf at the building's entrance. I shook my head, but Stephen was smiling from ear to ear. He was in his element. After meeting with Blizzard's executives and discussing their business model and intensely passionate customer base, I was impressed. Rarely had I seen such devotion to a product! In many respects, Blizzard's customers are a lot like ours.
I flew back to Seattle and left Stephen in Irvine to further explore options. He was joined by one of Starbucks’ newest partners, Adam Brotman, who had founded the Redmond, Washington–based PlayNetwork, which provides customized music programming and systems for Starbucks stores and other retailers. Adam possesses a natural curiosity and a knack for melding business strategy, marketing, and technology, and Stephen had asked him to help Starbucks develop a new business unit, Digital Ventures.
On their flight back to Seattle, Stephen and Adam debated the pros and cons of a Starbucks-Blizzard partnership. It had undeniable potential to make Starbucks relevant to a new demographic, young adult males, and drive massive numbers of new customers into our stores, giving us an almost overnight sales boost. So very, very tempting. But by the time the plane landed, they had agreed with what Michelle and I had also concluded: World of Warcraft simply strayed too far from Starbucks’ core.
Again, this was not an easy choice given the financial and competitive pressures Starbucks was under. Any company, when faced with adversity, would be tempted to go forward with an idea that promises to quickly erase pain. But in business as in life, people have to stay true to their guiding principles. To their cores. Whatever they may be. Pursuing short-term rewards is always shortsighted. So while on one level, Stephen Gillett would have loved nothing more than to be in business with Blizzard Entertainment, he—as well as Adam, Michelle, and I—had the intuitive sense to know that World of Warcraft, while a fascinating product and phenomenal employee culture, was not the right fit for Starbucks at this time.
Exploring an imperfect idea can often lead to a better one, and Stephen's original vision led us to ask some important questions about how Starbucks might connect even more deeply with customers in the digital space, especially given the unique power and incomparable reach of our in-store wireless networks. Starbucks had the largest footprint of company-owned stores with Wi-Fi in the world, and millions of customers already logged on every day.
Hovering above every third place is a virtual fourth place, and the time had come for Starbucks to use it much more deliberately as a way to offer new value to our customers.
Innovation, as I had often said, is not only about rethinking products, but also rethinking the nature of relationships. When it came to our customers, connecting with them in a store and online did not have to be mutually exclusive experiences. Figuring out exactly how the retail and virtual worlds might coexist would be a matter of connecting the dots, and just as I had with Chris Bruzzo, I had given Stephen license to be disruptive, which was exactly what he and Adam tried to be after returning from Irvine.
For the next few months, Adam hit the road, meeting with people at all kinds of companies to listen and learn about their products and business models while exploring possible relationships. Almost every company, he quickly realized, wanted to strike a deal with Starbucks to introduce its products to our customers. In a way, this was surprising. Despite the pummeling the company was taking in the press and on Wall Street, we remained a brand others wanted to be associated with. Our role as a discriminating curator of music and books could extend to other things. Obviously, Starbucks was not interested in once again cluttering store shelves with irrelevant products—we had learned that lesson—but the power of our brand's affinity was yet another under-utilized asset, a subtle but important truth.
One day, in conversation with a provider of online financial services, Adam posed a question: Would the company be willing to give its content away for free, but only to customers in Starbucks stores? The answer, he was told, was yes. Dots began to connect.
Our customers were already inviting Starbucks into their digital lives through their social networks. What if we extended that emotional connection by giving them more reason to meet us online? What if we partnered with, say, news organizations, book publishers, and music companies to offer our customers who were using the Starbucks in-store networks free access to exclusive digital content? Yes, for years we had been introducing people to new music and books in our stores, but this would be different, an even more dynamic, multifaceted way for us, as a retailer, to add another level of value to people's experiences in our stores. Someone sitting at a table using a laptop would, for instance, be able to watch an exclusive movie preview, get free access to premium services, read newspaper articles he or she otherwise might have to pay for or that others could not yet access. And, because our networks are hyperlocalized, maybe we could further connect customers to places and activities in their communities. A farmer's market. A restaurant. A play or an upcoming blood drive.
The potential was exciting. Creating a Starbucks digital network that served as a private channel for our customers could further bridge the virtual world of the Internet and the physical world of stores as well as the neighborhoods where we do business. Such an innovative tool extended the third place experience and stayed true to one of the original three pillars of the Transformation Agenda: reigniting Starbucks’ emotional attachment with its customers.
Meanwhile, in April 2009, something curious was happening in our business. For the first time in almost a year, Starbucks’ US comparable store sales were creeping upward. Although still distressingly deep in negative territory, April's negative 7.2 percent comp sales were an undeniable improvement over March's negative 8.1 percent, which had been better than February's negative 8.3 percent comp decline. These were incremental improvements from which it was too early to draw any conclusions, but the data were encouraging: Customers were starting to spend a little more money at Starbucks.
Chapter 30
Balance
The first time I walked through the narrow doorway and into the unassuming corner shop on Via Montenapoleone, the most fashionable and expensive street in Milan, I was unexpectedly overcome with emotion. Inside, the unassuming Coltelleria G. Lorenzi was a silent symphony. A simple yet unbelievable execution of nonverbal, visual excitement.
Softly lit displays beckoned me to admire a mind-boggling assortment of handcrafted knives, razors, and cutlery. There were scissors of all varieties—85 for manicuring alone—many forged from steel, some made especially for trimming thick beards, others for cutting delicate fingernails. In all, thousands of items were displayed under glass as if in a museum. I could literally feel the passion, the expertise, that had been put into this space. Such reverence.
“Who is this?” I asked my friend Plácido Arango, who had brought me here. Plácido is an accomplished businessman and one of the most genuine people I've ever known; his company, Grupo Vips, operates Starbucks stores throughout Spain. We share a respect for artisans of all kinds. “Mr. Aldo Lorenzi,” he told me. “His father opened this shop many years ago.”
Every time I returned to Milan, I visited the shop, but I never saw Mr. Lorenzi. Finally, in 2009, Plácido asked an Italian friend, Angelo Moratti, if he would introduce me to Aldo.
“He doesn't speak any English.”
“Do you think he's ever heard of Starbucks?” I asked.
“No, he's never heard of Starbucks.”
“Do you think I can sit down with him?”
“He won't do it.”
“I have to meet him.”
“Howard, he's not going to do it.” But Angelo agreed to call. Mr. Lorenzi was hesitant, but he kindly acquiesced.
“He'll meet you for a few minutes tomorrow.”
It was about 10 a.m. when Plácido, Angelo, and I arrived at 9 Via Mo
ntenapoleone. A tall, elegant gentleman, impeccably dressed in a suit and tie, quietly escorted us into his office. We sat down. Angelo translated as I first thanked Mr. Lorenzi for giving me a few moments of his time.
The planned 20-minute visit extended through the afternoon. The three of us listened, entranced, as Aldo Lorenzi spoke with humility and respect about his family and the business his father had founded in 1929—and what it means to him to be a merchant. I took notes on a small pad.
At one point, he asked me a question. “How many stores do you have?”
“I'm embarrassed to tell you,” I said.
“How many?” he asked again.
“Sixteen thousand.” I watched his expression change to disbelief as he heard the Italian translation. “Did he say 16,000 coffee stores?” He shook his head. “I could never even have two.”
At the end of our visit, Mr. Lorenzi handed me a gray paperback book translated into English from Italian. I read the title: That Shop in Via Montenapoleone, by Aldo Lorenzi. Its thick, textured cover and creamy pages felt as handcrafted as the cutlery encased in glass, and on the flight back to the United States I sat back and turned to the first chapter. “I love our shop . . . ,” read the first sentence, written with the conviction of a man who truly knew his trade. I was hooked.
In the months to come, I kept the book close to me. It was one of the few items that took up space on my desk and came with me on business trips. I shared it with friends and partners, but mostly I took tremendous joy in reading Mr. Lorenzi's words to myself. More often than not, a sentence or a paragraph reiterated my own philosophies, but at the same time made me think about retail, our shared profession, in an even more romantic yet practical light:
I want to write pages that have their own poetics about the things I make or do, but at the same time I want them to be like the pages of a manual, down-to-earth instructions, exact and useful information about our job. It is a job that has been transformed with the passing of time and yet it has remained the same.
Despite our differences in culture and business and age, this 73-year-old Italian owner of a solitary knife store spoke my language. He had much to share, and I still had much to learn.
At the very heart of being a merchant is a desire to tell a story by making sensory, emotional connections.
Once, twice, or 16,000 times.
Ideally, every Starbucks store should tell a story about coffee and what we as an organization believe in. That story should unfold via the taste and presentation of our products as well as the sights, sounds, and smells that surround our customers. The aroma of freshly ground coffee. Interior hues, textures, the shapes and materials of furniture and fixtures, as well as their origins. The art on the walls. The music. The rhythm of the coffee bar and how our partners move and speak behind the counter—and what they speak about.
Each store's ambience is the manifestation of a larger purpose, and at Starbucks each shop's multidimensional sensory experience has always defined our brand. Our stores and partners are at their best when they collaborate to provide an oasis, an uplifting feeling of comfort, connection, as well as a deep respect for the coffee and communities we serve. As Aldo Lorenzi understood, Starbucks Coffee Company's challenge has always been to authentically replicate this experience hundreds upon thousands of times.
When it comes to telling Starbucks’ story, my taste for the charm of a neighborhood café might seem at odds with my ambitions for the business. Yes, I have long believed that Starbucks can create authentic, personal experiences while at the same time be a profitable global company. Yes, I want our stores’ interiors to personify our values but also to be buildable at scale. Yes, I want our baristas to serve customers with a sincere smile and also with speed, and yes, I believe our flavors and environments can reflect local cultures as well as deliver consistent tastes and quality; a store in Japan that offers lattes infused with the revered sakura flower should also serve brewed coffees whose tastes visitors from the United Kingdom will recognize as Starbucks’.
Whether Starbucks stores could feel small as the company grew big, balancing efficiencies with romance, was a question people constantly asked me, and I was routinely criticized for daring to believe such a balance could be achieved. But striving for balance between extremes is a trait that has long set Starbucks apart from so many other consumer brands. And while over the years my attention has wandered from time to time, at no point have I ever given up my intention that Starbucks should find equilibrium between the personal and the profitable and deliver shareholder value through the lens of social conscience. As Starbucks neared its 40th year, 2011, I was asking everyone at the company, directly and indirectly, to balance an entrepreneurial enthusiasm with the rigor that complex organizations require.
In the summer of 2009, two specific initiatives to enhance our in-store experience were under way. One involved interior design. The other, customer service and partner engagement.
Both initiatives had been percolating in pockets of the company for months, in some cases years, and each promised dramatic improvements if executed well. But change, even when for the better, is sometimes uncomfortable. Sometimes unwelcome. Our partners, customers, and the marketplace were in for some shocks.
We are proud to have a traditional type of shop, which had remained true to itself over the years, but it must not be forgotten that this creates the need to keep it “fresh.” The more that furniture, floor and fittings age, the greater the need for meticulous and periodic maintenance. Old is beautiful, but not if it is neglected.—Aldo Lorenzi, That Shop in Via Montenapoleone
I did not recognize our own store.
Located at the bustling corner of Pike Street and First Avenue in downtown Seattle, directly across the street from the Market, this Starbucks interior space had a familiar yet fresh feel. In spirit it reminded me of our original location, but with a renewed energy. The aura was rustic and earthy but modern. The muted colors naturally warm. As I moved into the space, past customers sitting at a long communal table, some sipping coffee or tea out of ceramic mugs, Arthur Rubinfeld, our president of global development, explained what I was seeing. And what I was not.
The materials used for the store's floor, ceiling, wood columns, cabinets, even door handles had been preserved from nearby buildings and farms, made from fallen trees, or recycled from items like laundry detergent bottles and old wine barrels. The long wood table had once been used in a local restaurant after it was reclaimed from a Seattle-area home. The slate menu behind the bar came from a classroom at Seattle's Garfield High School. Burlap coffee bags lining the walls were from our Kent, Washington, roasting plant. The leather on the face of the coffee bar was recycled from shoe and automobile factories. Amazing, I thought.
Above me, LED and compact fluorescent lights were using less energy than regular bulbs. In the restrooms, dual-flush toilets and low-flow faucets reduced water use. Even the paint was carefully chosen to avoid interfering with the store's coffee aroma, and much of the waste generated during construction had been recycled. The entire store was built to be LEED certified—meaning that it meets stringent standards to reduce its environmental impact.
First and Pike was not an anomaly. Eventually, all of our new company-owned stores worldwide would also qualify for LEED certification. And in a few months, July 2009, I would travel to Paris for the opening of our store in Disney Village, where materials had been reclaimed from French wine barrels and old champagne racks and recycled from mobile phone parts and aircraft tires. Coffee grounds from the store, I was told, would likely be donated to the amusement park, where they would be used for composting.
Standing inside the First and Pike store, I looked around. The space was beautiful. So much more than an extension of an existing design, this was a reimagined experience that enhanced the sense of community and reinforced our coffee heritage while demonstrating and encouraging environmental consciousness.
I was extremely proud of what Arthur and his team
had brought to fruition in the year since he had accepted my request to return to Starbucks and overhaul our store development.
“We have to let people know Starbucks is coming back,” I recall saying to Arthur just before I returned as ceo. I hoped my old friend would accept my offer to head global development. “Arthur, we can do it again,” I all but pleaded.
A successful transformation required that I put the right people in the right positions, and I knew upon my return that Arthur would be a linchpin in fixing two significant problems: Starbucks’ bloated real estate portfolio and its stale store designs. Given our mutual respect, plus Arthur's balanced approach to business and creative, I felt he was uniquely qualified to resurrect the level of innovative, brand-defining aesthetic that he had brought to Starbucks in the 1990s.
Onward: How Starbucks Fought for Its Life Without Losing Its Soul Page 31