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Howard Schultz

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Howard Schultz

Howard Schultz (born 1953, in Brooklyn, New York) is the founder of the modern Starbucks Corporation — not its original founder but the person who acquired it (1987), rebuilt it, and took it from a small Seattle chain to a global company with tens of thousands of stores. He served as CEO from 1987 to 2000, as chairman from 2000 to 2008, and returned as CEO from 2008 to 2017 during the company’s most serious crisis. He returned briefly for a third stint in 2022.

Onward (2011) documents the 2008–2010 period — his return to the CEO role, the turnaround strategy, and the deeper strategic rethinking that Starbucks required after years of growth that had diluted its core value proposition.

Biographical Context

Schultz grew up in public housing in Brooklyn, the son of a truck driver who had no health insurance when he was injured on the job. This experience — the vulnerability of working-class families to institutional indifference — directly shaped Schultz’s organizational philosophy: that a company owes its employees something beyond a paycheck, and that a business can create genuine human value for the people it employs and serves.

He joined the original Starbucks (then a coffee bean retailer, not a coffeehouse) in 1982 as director of retail operations and marketing. After a trip to Milan where he experienced the espresso bar culture — the social role of the neighborhood coffeehouse — he became convinced that the concept could work in America. After failing to persuade the original founders, he started his own company (Il Giornale), acquired Starbucks in 1987, and merged them.

Core Intellectual Contributions

Growth as Tactic, Values as Strategy

The central strategic insight of Onward:

“Growth, we now know all too well, is not a strategy. It is a tactic.”

This critique of growth-as-strategy is Schultz’s most important contribution to management thinking. The distinction: a strategy specifies what value you create, for whom, and how. A tactic specifies a mechanism for capturing or expanding that value. Growth (adding stores, entering markets, expanding product lines) is a tactic that can be used to advance a strategy — but cannot substitute for one.

Starbucks’ crisis was partly a result of using growth as a substitute for strategic clarity: opening stores because they could, expanding product lines to grow revenue, without asking whether each decision deepened or diluted the core value proposition.

The Third Place

Schultz’s foundational concept for Starbucks is “the third place” — a social space between home (first place) and work (second place) where people can gather in relaxed community. The third place concept was not invented by Schultz; it comes from sociologist Ray Oldenburg. But Schultz recognized its commercial application and built Starbucks around it.

The third place concept has strategic implications: it specifies what Starbucks is selling. Not coffee (a commodity). Not caffeine (available cheaply elsewhere). But a particular kind of social experience — the feel of belonging to a community, the pleasure of a comfortable shared space, the ritual of a personally prepared beverage.

“The Starbucks Experience: For the nearly 60 million weekly visitors to Starbucks stores in fifty-four countries, we continue to recreate the coffeehouse experience…”

The strategic implication of the third place concept: decisions that increase throughput, reduce dwell time, or strip out the sensory elements of the in-store experience may increase short-term revenue while eroding the brand’s core value.

Grow With Discipline

Schultz articulates a philosophy he calls “grow with discipline”:

“Grow with discipline. Balance intuition with rigor. Innovate around the core. Don’t embrace the status quo. Find new ways to see. Never expect a silver bullet. Get your hands dirty. Listen with empathy and overcommunicate with transparency. Tell your story, refusing to let others define you. Use authentic experiences to inspire. Stick to your values, they are your foundation. Hold people accountable but give them the tools to succeed. Make the tough choices; it’s how you execute that counts. Be decisive in times of crisis. Be nimble. Find truth in trials and lessons in mistakes.”

The phrase “innovate around the core” deserves particular attention. It provides operational guidance on the tension between innovation and brand consistency: innovation should extend and strengthen the core value proposition, not replace it. Via instant coffee (a premium instant product) innovated around the core. The Starbucks “evenings” alcohol program (wine and beer in stores) moved away from the core and was eventually discontinued.

Humanity and Profitability as Complements

Schultz consistently resists the framing of profit and values as a trade-off:

“No business can do well for its shareholders without first doing well by all the people its business touches. For us, that means doing our best to treat everyone with respect and dignity, from coffee farmers and baristas to customers and neighbors.”

The operational mechanism: treating employees (partners) well → partners care about the product and the customer → customers have a better experience → the business performs better financially. This is not altruism — it is a theory of how service businesses create sustainable competitive advantage.

Starbucks’ employee benefits — including healthcare for part-time workers, stock options for baristas, tuition reimbursement — are strategic investments in the quality of the customer experience, not charitable deductions from shareholder returns.

The Courage to Make Counterintuitive Decisions

Several moments in Onward illustrate a willingness to take costly actions in service of long-term positioning:

The store closure for espresso retraining (7,100 stores, $6M+ in direct revenue) signaled commitment to quality at real cost. The closing of 600 underperforming stores (painful for employees and communities) demonstrated discipline about where Starbucks created value versus where it merely occupied space. The investment in transformational change when financial pressure was highest — instead of cutting to short-term targets — expressed the belief that recovery required genuine rebuilding, not cosmetic improvement.

“There are moments in our lives when we summon the courage to make choices that go against reason, against common sense and the wise counsel of people we trust. But we lean forward nonetheless because, despite all risks and rational argument, we believe that the path we are choosing is the right and best thing to do.”

The Memory of Organizations

One of Schultz’s most evocative observations:

“I’ve said often that every enterprise and organization has a memory. And those memories create a path for people to follow.”

This has practical implications for turnarounds: you are not merely changing current practices but working against (or with) the accumulated institutional memory of what the organization has done and been. Recovery means reactivating dormant memories of the organization’s best self — reminding people what the experience was when it was right — rather than simply implementing new processes.

Relationship to Other Authors in This Library

  • Simon Sinek (The Infinite Game): Schultz’s “one cup, one customer, one experience” is an operational expression of Sinek’s infinite mindset — the primary focus is on advancing an ongoing commitment, not winning competitive metrics.
  • Howard Schultz and Jim Collins (Good to Great): Collins’s hedgehog concept — what can you be best in the world at, that drives your economic engine, that you are passionate about — describes Starbucks under Schultz’s guidance. The crisis occurred when the economic engine priority (growth) displaced the “best in the world” and passion dimensions.
  • Ed Catmull (Creativity, Inc.): Both books address the challenge of maintaining founding values during rapid organizational growth. Both conclude that the solution is not defensive preservation of old practices but active, continuous recommitment to core values.

Key Works in This Library

Onward: How Starbucks Fought for Its Life without Losing Its Soul (2011): Schultz’s account of his return as CEO, the turnaround strategy, and the broader lessons about growth, values, and leadership under pressure.

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