Onward
Click here to buy the book.🚀 The Book in 3 Sentences
Onward chronicles Howard Schultz’s return as CEO of Starbucks just before the Great Financial Crisis.
As the company faced growing challenges, Schultz led a bold mission to revive its soul and reignite its passion for coffee.
The book offers more than just a Starbucks lore; it takes you behind the scenes and pulls back the curtain on the inner workings of the company.
🧠 Key Takeaways
A quality product is essential for creating repeat customers, building a community, and spreading the company’s mission. Without continuous improvement and dedication to your craft, maintaining a quality product becomes challenging, especially as a business scales.
While spending $6 or $7 on a specialty coffee daily may seem extravagant to some, for many, it's essential for their well-being. Despite the cost, the daily ritual at Starbucks is considered a key element for survival.
A "well-built brand" refers to more than just the quantitative aspects of a business, such as its financial figures. Instead, it includes the intangible qualities that shape the overall image and perception of the company. Neglecting or overlooking these intangibles can have impactful consequences over time. These elements collectively contribute to the strength and resilience of the brand. If a company forsakes these intangibles, it might experience a gradual decline in customer loyalty, reputation, or overall brand value, even if the impact doesn’t immediately show up in the financial statements.
When running a company, it’s important to prioritize the happiness of your employees and customers before focusing on shareholder value. Creating value for your workforce should create more pride and happiness in the workplace, which will have a positive impact on employee interactions with customers. This is crucial for long-term success, and this, in turn, will lead to sustained value for shareholders.
Instead of measuring ourselves against those with more, we’d all be better off remembering that there are countless people out there who will never have the fortune, opportunities, or material possessions that we do.
✍️ Memorable Quotes
“Starbucks has always been about so much more than coffee. But without great coffee, we have no reason to exist.”
After Howard returned as CEO, he faced a big challenge: the need to retrain thousands of partners working in Starbucks stores across the US.
It appeared that both the partners and the company had lost their sense of purpose, and the quality of their work (and the customer experience) was suffering.
Whether it was due to complacency or being overwhelmed with customers, the partners were no longer treating the pouring of espresso as a true art form, as Howard had initially envisioned.
Instead of viewing espresso-making as a craft to be perfected, the partners were just going through the motions, which was impacting the quality of the coffee and experience across thousands of stores and millions of customers. This approach didn't align with Starbucks' core values of "Respect and dignity," "Passion and laughter," and "Authenticity."
To address this issue and restore the passion and commitment of the partners, Starbucks made a bold move. In February 2008, they decided to temporarily close every single US store for a day, allowing partners to re-learn the art of pouring the perfect shot of espresso.
Despite the financial loss and criticism from the media, Starbucks stood firm. A note on the locked doors explained, "Great espresso requires practice. That’s why we’re dedicating ourselves to honing our craft."
The message was clear: without continuous improvement and dedication to the craft, maintaining a quality product becomes challenging, especially as a business scales.
A quality product is essential for creating repeat customers, building a community, and spreading the company’s mission. Since customers primarily interact with the partners, it's crucial for them to uphold the company's values and actively contribute to its success.
Misalignment or complacency among the partners could lead to the breakdown of these essential elements, which if allowed to fester, could bring down the entire business.
“So when some refer to Starbucks’ coffee as an affordable luxury, I think to myself, Maybe so. But more accurate, I like to think, is that the Starbucks Experience—personal connection—is an affordable necessity. We are all hungry for community.”
People rely on Starbucks as a crucial part of their daily routine. You can easily spot a busy drive-thru at any time, especially during peak commuting hours.
Similar to any routine, if one element is missing, the entire experience feels off. In Starbucks' case, skipping your morning coffee and egg bites on the way to work can throw off your entire day.
While spending $6 or $7 on a specialty coffee daily may seem extravagant to some, for many, it's essential for their well-being. Despite the cost, the daily ritual at Starbucks is considered a key element for survival.
From my perspective, many people feel unfulfilled in their jobs. Many individuals work out of necessity rather than choice, enjoyment, or a sense of purpose (of course, you’ve got to pay the bills somehow). The typical 9-5 grind is soul-draining for some people, and for them, their daily Starbucks routine is a brief, personal escape.
Although they may not find happiness in this job where they spend the majority of their waking hours, their small, daily indulgence provides a source of joy. It may be a pricey habit, but the satisfaction it brings makes it a worthwhile investment in their overall well-being.
“A well-built brand is the culmination of intangibles that do not directly flow to the revenue or profitability of a company, but contribute to its texture. Forsaking them can take a subtle, collective toll.”
A "well-built brand" refers to more than just the quantitative aspects of a business, such as its financial figures. Instead, it includes the intangible qualities that shape the overall image and perception of the company.
In Starbucks' case, these intangibles might include things like the smell of coffee as you walk into the store, the customer service and sense that you belong to that store’s community, the “magic” of the barista making your beverage right in front of you, and the emotional connection customers feel with the brand as a result of all of that.
While these elements might not directly contribute to immediate revenue or profit, they add a unique and positive "texture" to the company, and in a great way, are responsible for creating loyal customers.
The key insight here is that neglecting or overlooking these intangibles can have subtle yet impactful consequences over time. These elements collectively contribute to the strength and resilience of the brand. If a company forsakes these intangibles, it might experience a gradual decline in customer loyalty, reputation, or overall brand value, even if the impact doesn’t immediately show up in the financial statements.
As Warren Buffett and Charlie Munger often stress, understanding the qualitative aspects of a business, like its brand strength, is crucial for long-term success and should be considered alongside the quantitative financial metrics when analyzing an investment.
In some ways, these intangibles can actually be more important than the numbers. They can also be more difficult to conceptualize and wrap your head around, especially if you’re dealing with a company outside of your circle of competence.
This is why it’s so important to stay within that circle and invest in what you know. Understanding those qualitative aspects are what can give you an edge over other investors who don’t have that same level of familiarity.
“As I saw it, Starbucks had three primary constituencies: partners, customers, and shareholders, in that order, which is not to say that investors are third in order of importance. But to achieve long-term value for shareholders, a company must, in my view, first create value for its employees as well as its customers. Unfortunately, Wall Street does not always see it the same way, and too often treats long-term investments as short-term dilution, bringing down the company’s value. Adopting this mentality, was, in large part, how Starbucks had become complicit with the Street. For the past two years in particular, we—and I saw “we” because no one person had led the charge—chased the pace of growth by building stores as fast as we could rather than investing in sustainable growth opportunities. The top line grew fast, but in a way that, for a variety of reasons, was impossible to sustain, especially when combined with the macrofactor of a tightening economy.”
In simple terms, Howard is saying that when running a company, you need to prioritize the happiness of your employees and customers before focusing on shareholder value. He believes that creating value for your workforce and customers is crucial for long-term success, and this, in turn, will lead to sustained value for shareholders.
Having said that, with the recent rise of unionization efforts within the company, there are times when it seems that the happiness of Starbucks employees is an insatiable thirst. Starbucks partners had it pretty good to begin with — benefitting from health care coverage, stock options, and more.
Still, the goalposts continue to move. This has been a slow-growing cancer in the company, and how it will be resolved is yet to be seen.
Continuing on, Howard also criticizes the short-term focus of Wall Street, stating that it often sees long-term investments as immediate losses. Wall Street wants better results every quarter and doesn’t want a company to do anything that will result in a lower share price. This emphasis on the short term often comes at the expense of what’s best for the company over the long term.
In the case of Starbucks, he points out that the company, in its pursuit of rapid growth, built stores too quickly without considering sustainable opportunities. While this strategy boosted short-term revenue and made Wall Street feel good, it was not viable in the long run and resulted in a lack of focus within the company, a lower-quality product, a weakened brand, and unhappy customers and partners.
“‘Can this lady tell us what is her dream for her family?’ The woman, whose name was Mukamwiza Immaculate, responded clearly and quietly, and I sensed Gilbert was slightly taken aback as he translated her words. ‘She would like to make an income so she can buy a Friesian cow so she can get more milk for her family. That would be her dream.’ I, too, was taken aback.”
As Usher once sang, “It’s the simple things in life we forget.”
To many of us over here in the United States, a Friesian cow might seem like a laughable thing to dream about, especially when you find out that one only costs about $500.
Many of us will spend $500 on a whim without thinking twice about it.
You can go down to the Bellagio and see hoards of people take that amount of money (and much more) and almost literally throw it away, but the fact that someone’s dream is to own a $500 cow should remind you of just how fortunate you are.
It’s easy to lose sight of that. In a world where people are consumed by social media and are constantly comparing their lives to others, it’s easy to get down on yourself about what you don’t have instead of what you do.
I’m certainly guilty of that. It’s an incredibly difficult thing to overcome.
It’s hard to remain grateful when comparison, the thief of joy, is a constant presence. But we should all strive to get rid of that.
Instead of measuring ourselves against those with more, we’d all be better off remembering that there are countless people out there who will never have the fortune, opportunities, or material possessions that we do.
In doing so, your life may start to look a bit brighter than before.