Flavor of the Day: Perseverance
Howard Schultz, the 46-year-old chairman and chief executive of Starbucks Coffee Co., knows a thing or two about small business. After all, it wasn’t all that long ago that Starbucks was one itself.
In 1982, the year Schultz joined the company as director of operations and marketing, Starbucks had only four stores. Today, the Seattle-based behemoth has more than 2,000 retail outlets worldwide, including a number in Asia, Europe and the Middle East. The $1.3-billion company, the world’s largest specialty coffee retailer, plans to open at least a store a day for the next two years.
Despite Starbucks’ supercharged growth, the company has managed to retain a decidedly small-firm flavor. That’s in large measure because of Schultz. At Starbucks, Schultz greets all new hires through a video presentation in which he discusses the company’s history and his personal experiences there. In addition, new part-time hires are paired with more experienced employees who mentor them. That kind of attention helps keep employee turnover down to 60% annually, less than half the industry average.
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Question: What are the major issues facing small business in the next millennium?
Answer: I don’t on any level believe that the next millennium will present unique challenges to small businesses. I actually think the opposite is true, that the customer is looking for and responding to more intimate experiences. Also, never before has there been such an abundance of accessible capital for entrepreneurs and small businesses. If you have a good idea, you can get funded.
Q: Can small businesses compete against big corporations?
A: Yes, I think they can. There are many advantages small businesses have over large companies. It begins with the personal relationships small businesses can have with their own people and, in turn, the relationship people representing the company can have with customers.
A small business can break all the rules and do everything to exceed the expectations of customers. It can go way beyond the status quo.
For instance, I recently walked into a London-based cheese store, a sole proprietorship, that was 100 years old. The person behind the counter had such passion and so much pride in what he was selling, the history of the store, the cheeses being sold and how they were displayed. I reacted to that passion. I walked out of there having spent $40-$50 on cheese that day.
A small business has the opportunity to create that kind of intimacy. Good service, education and value added experiences are more important to the consumer than ever before.
Consumers today are looking for meaningful relationships with companies. They want relationships based on trust and dependability. Small businesses have a great opportunity to deliver on those expectations and differentiate themselves from larger businesses.
Q: What advice would you give to an aspiring entrepreneur?
A: Entrepreneurs experience many days and nights that look bleak. But the difference between really winning big and not is perseverance. You have to believe in your dreams. I’m living proof of somebody who came from the other side of the tracks and made it. That’s why I love being around entrepreneurs so much. I was there myself.
Q: Do you think the Web is a friend or foe of small business?
A: The Internet represents the death of distance. What I mean by that specifically is that almost every product, service and piece of information is going to be accessible to the consumer. In most cases, that was well beyond the consumer’s reach in the past.
We are in the embryonic stages of the Internet Revolution. Therefore, this is an unbelievable time to both be watching this thing unfold and for the entrepreneur to leverage the capabilities of the World Wide Web. I think the Internet is one of the significant paths an entrepreneur should be looking at. It’s wide open.
I’m a founding investor of EBay and Drugstore.com and sit on the boards of both companies [EBay and Drugstore.com are successful publicly traded start-ups]. In both cases, the management teams identified a significant opportunity, went after it with a vengeance and created a great business both for their customers, their employees and their shareholders. The opportunities for the entrepreneur are definitely there.
Q: You pride yourself in trying to run Starbucks like a small business. Why?
A: The question we ask ourselves all the time is how you get big yet stay small [in spirit]. And the way you do that is to make absolutely sure that the values and guiding principles of your start-up remain true and consistent as your company grows and gets much larger.
At Starbucks, I have focused from the beginning on our people. There are now 40,000 of them worldwide and each one receives comprehensive health care and equity in form of stock options. If the goal is to build trust and earn the confidence of your customer, then you first have to make sure you’ve built trust and earned the confidence of your people. That’s what we’ve done and continue to do. That has been the key to our success.
Training is at the forefront of everything we do. We still spend more money on training than on advertising. Our partners are our most import asset and not just a line item on a balance sheet. We haven’t forgotten that.
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Howard Schultz will give a keynote address at The Times’ Small Business Strategies Conference from 9:45 to 10:45 a.m. Sept. 24.
