A conversation about the culture of Starbucks, about the definition of success, about coaching and sources of inspiration.
Scott Bedbury is father, husband, and CEO of Brandstream, an independent brand development consultancy. In his corporate career, he helped as a marketing executive to position two companies – Starbucks and Nike – as global brands. Since leaving Starbucks, Scott has advised major corporations and Silicon Valley startups. He is also an author of A New Brand World; 8 Principles for Achieving Brand Leadership in the 21st Century.
Who are you and what is your vocation?
I consider myself a father, husband, son and a CEO – in that order. I think that many people don’t get that one right. They are asked what they do and they answer with a job or work purpose 99% of the time. Your role as a parent, husband or lover is far more important. In my perspective, that is just part of unlocking the human potential, enabling people to be at ease. People shouldn’t feel conflicted or torn. In many places they don’t ask for that combination, people just work really hard and suddenly life falls apart.
When I was at Starbucks I encouraged one of my writers to go to a coffee house if he didn’t feel inspired to write at the office. He hesitated “Well, the nearest Starbucks is two miles away.” I convinced him “You don’t have to go to Starbucks, but any coffee house. Just go somewhere, wherever you need to write”. I think that is accepting talent on its terms.
I once spoke to Shelly Lazarus, at the time CEO of Ogilvy and Mather Worldwide about the creative process. She said that her best writer lived on a ranch in Texas. He would come to New York once a month for two or three days. That’s about all he could handle – he was not a big city guy. Thanks to the Internet a lot of work could be done remotely. In terms of coaching, you just have to figure out what makes people tick. If you take away the things that make them human, you really haven’t done anyone a favor.
My mission in the business world has always been to make companies better, not just bigger. I try to make them more valuable and better global citizens; treat their employees fairly and treat the communities that sustain them well.
I met Howard Schultz twenty-one years ago – if you haven’t studied Howard, I would read his first book Pour your Heart into it. He bought Starbucks from the three founders in 1986 roughly $3 million dollars. At that time it was a very small business and had a small number of stores. He wanted to put espresso machines into the stores and begin serving drinks, something Starbucks had not done in its first 16 years. It had sold coffee beans, spices and coffee machines. They didn’t actually sell Cappuccinos or Lattes. Howard had been to Milan – his first trip outside the country, where he experienced the coffee culture. He returned from Italy and said that he had seen the future and it would be selling ‘Cappuccinos’ and ‘Café au laits’.
The founders said that it complicated their business model, would require lots of capital to buy refrigerators for milk, someone would have to train baristas etc. Howard quit. He had no money, his wife was pregnant with their first child, he didn’t own a house yet. He borrowed 500 dollars here and 1000 dollars there – from friends he had made in Seattle – and started his own coffee shop. He called it “Il Giornale”. He ended up building three stores in the first 18 months. This was in the year 1986. He went back to the Starbucks founders, showed them his financials, and told them that Americans would indeed pay $2 for a coffee, which no one had ever thought possible. Back then a cup of coffee was 75 cents. But a handcrafted espresso drink was worth more.
“Good for you, Howard.” they said, “But we don’t want to do that. If you want to buy the company it will $2.8 million dollars He took his spreadsheets and made more than 200 presentations to raise the money. Only twelve people invested while the rest of them laughed at him for wanting to give full health care coverage to employees who only worked half-time. No one had ever done that in the United States at the time. Less of 5% of the McDonalds employees had healthcare. That was reserved for managers.
Howard also told prospective investors that he wanted to give company stock to every employee, no matter how much money they made, no matter their job and no matter their positions. He would pay bonuses with stock rather than cash. Few baristas had any idea what Starbucks would become. Within a few years, many of those them were able to pay the down payment for their house with stock.
Howard believed in treating his employees with dignity and respect, something father had never felt from his employers. His family was very poor and lived in housing projects in New York. His dad never employment benefits, working part-time jobs most of his life. This forever changed Howard. He was inspired to never leave his employees behind.
In 1991 Howard took the company public and in 1995 he brought me in. At that time Starbucks had stores in 15 US markets. In the first year there, we went from opening one store per week to opening one store per day. 24 months later we were opening three per day. Nine months after I joined we opened our first international store in Japan. We also launched Frappuccino in the summer of 1995. It was a big year.
Howard’s love for his employees is reflected in the fact he seldom if ever used that term. Her preferred to call them all “partners”. If you just started a week ago, you were considered a partner at Starbucks.
We called the corporate headquarters Partner Support Center. We never wanted to make corporate more important than the front line. We were all there to serve each other, especially our store partners. We ended up attracting and retaining great people. The turnover for Burger King or McDonalds is between 200-300% per year. At Starbucks the turnover for college kids was only 55%. The turnover for retail store manager at a place like the Gap was 100% – once a year you had a new store manager. At Starbucks our manager attrition was only 12%.
We ended up with a team that knew the customers. They may not have known their customer’s names, but they remembered their drinks. The very thing that seemed ridiculous to 200 potential investors had made Starbucks so successful. Howard was the first to see that.
I admire Howard for his passion, his values and his commitment. Howard wasn’t perfect. He was often self-critical despite our success. We were succeeding by any measure, but if we didn’t hit our store growth targets he would become troubled, thinking that this was the beginning of the end. It took Howard a number of years before he fully “owned” his success. His father died one year before Starbucks became a success.
I think that everyone takes inspiration from somewhere – for me, I took most of the inspiration from my mother. She passed long time ago. Always when I try to do something I think of the way she would respond, what she would say when stressed. Never a bad word. Early in my career, when I would have to speak before a large room full of hundreds of people, I would imagine her standing in the back beaming with pride. 35 years later I still do that sometimes when I am feeling a little uncertain.
Why was your mother inspiring to you?
She was one of kindest people I ever knew. Completely selfless and committed to the needs of others. Always positive and uplifting.
Some people take their inspiration from running five miles per day, or they take their inspiration from some abstract figure. I think that it is important to understand where people derive their inspiration from. I left Nike when my mom was really sick. I took a year off from my career to take care of her. Nike kept me on the payroll for a year hoping I would come back. The more time passed, the more I felt that I was done with what I wanted to do there. My mom actually challenged me to write a book while I was not working. I dedicated the book, A New Brand World, to her. Incredibly, she stayed alive long enough to see it published. The night before the first day of my two-week media tour, my brother called me to tell me she didn’t have long. I canceled the tour and was lucky to be with her when she passed.
Everyone derives energy from somewhere. If they don’t, they need to find that source of inspiration. We are all different, you cannot force anyone to spend time with their kids if they don’t like their family. I always found it useful to understand where people get their inspiration, their energy and their happiness from. Often times it is not at work. It goes much deeper. That is the fire the lights their way.
How would you define success?
I wouldn’t define it in financial terms by any means. I’m kind of in the Maslow theory on that one – success is getting to a point where you really don’t want anything. You have what you need and you are happy with that. You are comfortable in your own skin and not craving for something more. I don’t think that happens when you become a billionaire. That will basically just screw you up. I have been successful in dodging extreme wealth. I turned down Jeff Bezos just after he moved to Seattle and began Amazon. Instead of quitting Starbucks and working for him, I coached him a bit when I could. He returned the favor and got me on his IPO as part of a “friends and family” investment.
I should have hung on to the stock. I sold it for three times the value just 3 months later. Today, that $25,000 would be worth $7-8 million dollars. But then again, it might have changed me for the worse. I also turned down Meg Whitman the week after she joined eBay, also ahead of its IPO. And I turned down Steve Jobs in 1998. In hindsight I would have done nothing differently. I kept my kids, kept my marriage, kept one home for nearly 20 years near Seattle. I consider being married 33 years one of my greatest achievements. Not sure how she put up with me but here we are.
I think society is at a tipping point in terms of celebrity status and a blind respect of those with wealth. Australians call it the tall poppy syndrome – they think there’s a danger in standing taller than somebody else. You’ll get knocked over. When you are in Australia, the best Aussie rule footballers will be standing in the bar right next to you. They try not to put people on pedestals like we do in the United States with the Paparazzi. Part of success is staying humble and real.
The most successful human trait that anyone can have – I’m not very good at it, but I try – is just being present. To be in the moment, whatever that moment is. If the moment is with your employee, you are fully present and are not looking at your phone. For parents, it is invaluable to be present with your kids. With small kids, it’s important to get to their eye-level. That means more than ever given our distractions. We live in a world of distractions, where it is super hard to stay present.
You can feel it when someone is fully present, likewise, you can feel if someone is not present. I see families, where the kids and the parents are all focused on their phone throughout the whole dinner. That happened even before the smartphones. I remember one time in New York City – I watched a couple at a super nice restaurant on a beautiful evening on a patio, the couple sat down and they never said a word. It wasn’t like they didn’t like each other – that just wasn’t what they did. They just sat and had dinner.
You should read Howards first book that was published in 1996, he wrote a second book upon returning to Starbucks as CEO, when Starbucks was in trouble. The first book is really from the heart – Pour your Heart into it. He talked a lot about the people that made Starbucks what it is. He tried hard to be present in the life of everyone that helped him build Starbucks. His commitment to all of us was incredible. I never took it for granted.
Another book that I highly recommend reading is written by my other boss – Phil Knight, the co-founder of Nike. He just published a book called Shoe Dog – in May 2016. He is a very private man, you might find only a few videos on the internet of him before the book came out. He never took the spotlight for anything. He resisted it at every turn. Despite his schedule, Phil was a devoted family man, married to the same woman for more than forty years. While his mother was alive he tried to call her every day no matter where on earth he was.
The book starts in High School when he tried to be a runner and ends in 1980, right before Nike went public. It is not about the big flashy Nike you see today, it is about purpose, passion, the team and the human beings that created the company with him. Phil wrote every word – there was no other writer involved. He always wanted to be a writer. He told once me: “I went to college and I knew I wanted to work in business, but at one point I gave serious thought to being a writer.”
You see this come out when you read Phil’s book. It’s a memoir – it is not a hardcore business book. It is a testament to human connection, to believing in yourself and those who try and help you. It is filled with gratitude, resilience, courage, humility, wisdom, and love. That, in the end, is what made Nike one of the greatest companies on earth.