Insurgent companies are on a mission. They are clothed in a nobler purpose, defined by the founder, that gives the organization a point to rally around and lends clarity to strategy and decision making. Google’s Larry Page and Sergey Brin insisted their company should innovate continuously and “do no evil.” Zappos’s Tony Hsieh vowed to “deliver happiness” by building “a business that combined profits, passion and purpose.”
By contrast, large incumbents find it hard to keep their founding missions in focus. Companies at the top have no common enemy. They have no reason to transform the industry they dominate and no better proposition in an industry where they set the standard. Instead, bloodless metrics dominate strategy discussions: “We want to deliver best-in-class total shareholder return” or “We want to outperform our peers on margin.” Delivering numbers for distant stakeholders replaces the passionate focus on customers, which fueled the company’s earlier growth.
How does a company recapture its sense of a nobler mission? That’s the problem Howard Schultz faced in 2008, when he reclaimed his seat as CEO of Starbucks. The coffee chain’s performance had lagged in his absence, causing a nosedive in its stock price. In his book “Onward: How Starbucks Fought for Its Life without Losing Its Soul,” Schultz describes the process of reviving the company’s founding passion by reasserting its original standards of service and customer focus. As he put it in a 2011 National Public Radio (NPR) interview with Linda Wertheimer, “We needed to go back to the core principles of our company . . . source and roast the highest-quality coffee in the world, and deliver it perfectly to our customers.”
After many years extraordinary success, Starbucks lost its way in the mid-2000s, when it began focusing more on growth and its stock price than protecting the customer experience. Though the company long maintained quality by owning its own stores instead of franchising, hasty and undisciplined expansion led to cannibalization and distanced leadership from the front line. The store experience itself began to feel mechanized, threatening the company’s carefully cultivated bond with its customers. New, more efficient espresso machines, for instance, were so tall they discouraged conversation with baristas. Resteaming milk saved on costs, but compromised quality. Breakfast sandwiches sold well, but made the stores smell like burnt cheese instead of freshly roasted coffee. “I felt [it] was diluting the integrity of the coffee romance,” Schultz told NPR.
That romance, of course, was at the heart of Starbucks’s nobler mission. To revive it, Schultz immediately refocused the company on its core value proposition and challenged the organization to replace short-termism with a long-term focus on innovation. In early 2008, he closed 7,100 stores for several hours in a highly public, but very expensive, effort to retrain baristas in the art of making the perfect espresso. He then permanently closed 900 stores worldwide, most of which had been opened in the previous 18 months. He announced that Starbucks would no longer report same-stores sales, arguing that the practice distracted from real issues. And he sponsored innovation initiatives, such as the introduction of the company’s new Clover brewing technology.
Schultz also turned the spotlight back on the customer. “Not unlike the English pub in the UK,” he said, Starbucks serves as a “third space between home and work, an extension between people’s lives, at a time when people have no place to go.” To get back in touch with customers, he turned to the people who know them best: front-line employees in the stores. He actively sought their thoughts and opinions and also launched an online initiative to gather comments directly from coffee drinkers.
What’s happened since then demonstrates the power of returning to the core. Starbucks’s stock price has risen almost 300%—from around $18 a share in early 2008 to more than $65 today. By refocusing Starbucks on its original mission and backing it up with clear strategies and initiatives, Shultz coaxed an incumbent to act a lot more like an insurgent. As he explained to Wertheimer, “The question you have to ask yourself is, ‘Can something get big and stay small?’”