The Romance of Entrepreneurship: Starbucks - Essay Example

The Romance of Entrepreneurship The glory of explosive growth and path-breaking social innovation, are heady in their individual and separate spheres, but the synergy when they come together is an opportunity for learning and inspiration that is not to be missed. The story of Howard Schultz and Starbucks is such a legend. What can we learn from this confluence of business management and group dynamics (Schultz, 1999)? Most people have romantic ideas about their purpose in life. A few sacrifice material comforts, wealth and social status to serve communities in selfless manner. Many put their dreams aside to join the treadmills of careers and family responsibilities. Schultz is not alone in combining the creation of staggering personal wealth with intellectual creation of classic value, but the chances of such holistic achievement are low. Entrepreneurial yearnings may lurk in most of us, though we lack the confidence to cast aside moorings of security, and to take the kind of risks Schultz did when he returned from Italy, and had the temerity to buy out his employers. The value of the experiences Schultz has narrated is not confined to the realm of private enterprise. His utter devotion to the quality of coffee served at Starbucks, innovations in managing human resources and financial structure, have qualities to rival epochal texts from management gurus. His life story has much to commend itself to people everywhere, regardless of their vocation and resources. Vision and Commerce It may be naïve to think of strategy in terms of top and bottom lines and rows in-between. Do notions of profit and growth blind professionals from the more durable opportunities that present themselves? Retrospection of one’s past and review of the notable successes of others can teach us that setting non financial objectives is often the inspiration for some of the most attractive financial statements. Clearly, the figures of value appreciation and number of branches which Starbucks rapidly achieved, do not figure in Schultz’s account of why he tool such risks to discard a respectable salary, for the pleasure of providing Seattle with a piece of the Italian café culture. It is not as though Schultz’s unusual blend of vision and commerce was a stray incident or a whim, for he abides by the principle even in the face of waves of success. Rather, it is the seemingly contradictory commitments to permanent values and transient objectives (p 164), that remain with a reader longest after the book is sadly over. The title ‘dogmatism and flexibility’ is more than just a title for a chapter in the book. It is indeed one of the most valuable insights in to the life experience of a person who will not sell coffee beans, but will pander to exotic tastes for flavoring gourmet coffee. This is in such stark contrast to some formal theories of horizontal integration and productivity that it serves to highlight the supremacy of inspired leadership abilities over academic excellence. The culture of the stock market so dominates conventional thinking, that the notion of financial concerns being inadequate as reflections of the value of a business (p 179), comes as a jolt even when we read the account for a second time. Yet there can be no denying that numbers should not rule our heads, and we may even rejoice in the recognition of the higher purposes of commercial operations and of industry. Capitalism has such overpowering domination in our times, that Schultz’s decision relating to the distribution and appropriation of profits is another major shock: ‘no dividends- all profit go back to the business’ (p 293). It takes time for the full measure of such an extreme step to descend on one, but one has to finally view the revolutionary perspective in terms of the unshakeable belief of Schulz in the purpose of the business. The Price of Success Euphoria is tempting but inadequate as a response to the Cinderella-like story of Starbucks. Some of the most telling lessons from the experience of Schultz are of dreary attention to routine, and grinding adversity even if not in material form. It would not be correct to infer from the Starbucks example that success in entrepreneurship comes easily or quickly, though the facile style of narration in the book. The story does touch on the sacrifice aspects of Schultz’s adherence to the calling of his dream (p 38), but you need to read between the lines to appreciate how much you could be called upon to pay for ideas that occur to the mind and the risks they incur. It takes much courage and patience as well, to try and make a business out of an idea (p 69). The early stages of entrepreneurship are difficult and turbulent, though some cases such as Starbucks are run away successes after short incubation. Implementation skills and conceptual clarity are obviously decisive differences that accompany quick progress, but it is not as though profits and cash roll in from day one. The chances of delays and the need for mid-course adaptation make for troubling differences between the fairy-tale accounts of success we may encounter and the realities at ground zero during a typical working week. This aspect of sticking with a new venture is somewhat covert but certainly perceptible as a reader lives with Schultz during the account of his first experiences in floating the Italian Café idea with his employers. No one could criticize Schultz if he were to walk away from his idea, and to simply pursue his career-indeed, many of us do just that in our lives. One would hope that the early struggles of entrepreneurship are time-bound, rather like an academic pursuit of a qualification, but it is not like this in the ferocious world of competition. ‘The cheering stops when the underdog succeeds’ (p 293), is a cold shower on any hopeful ideas a reader may have about prospects of early retirement. There is no time to truly indulge in the pleasures of business success, for there is always a host of pressing issues to fill up the agenda of the most able manager. The journey with Schultz as we approach the end of the book with rousing tales of revenue growth and market acceptance is troubling because new and daunting challenges arise with such regularity! Downsides How much can we read in to the success story of another person? Can the celebration of a rare event turn inappropriate when we try to emulate actions that are not relevant for the specifics of our situation? ‘Passion alone is no guarantee of remarkable returns’ (p 71), says Schultz himself. There are many cases of failure against the success of Starbucks. Just as we recognize the virtue of simultaneous ‘dogma on principles and flexibility to delight customers’, we must also filter the experiences we hear of from all sources, for their utility in our own present and compelling circumstances. The intangible pleasures of relaxing over fine coffee apparently induce people to pay a premium for coffee beans, roasting and predictable service. It calls for exceptional powers of observation to give birth to a winning business idea around such elegant concepts, but customers could demand different values for another business. Is it sustainable? Schultz makes no effort to cover the inspiration he encountered in Italy. The Starbucks example has spawned clones of retail outlets frequented by young professionals, serving variations of coffee and things to eat, in a clean and casual atmosphere. Most of them seem to do as well as the original, even without stock options for employees. Can Starbucks continue to open a new branch somewhere everyday? Could changes in economic conditions and disruptions in political stability affect disposable cash with people? Will the next generation use coffee for recreation as the customers of Starbucks do today? Is it possible to switch to fruity and light wines or another beverage for refreshment and company? Readers put down the book loving Schultz, so we wish him well, but there are awkward questions and shaky answers when we turn minds to issues in our present businesses and think hard about the ones in which we contemplate entry and investment. Is McDonalds wrong in using franchises? Do they not serve burgers, fries and coke with the same degrees of uniformity and excellence all over the world, as Starbucks does with just coffee? Would employees of Starbucks benefit more by grant of franchises than stock options? There are a host of doubts that can arise around Schultz policy of refusing to use franchisees, though his logic is flawless from his perspective. Opening owned branches at a ceaseless pace means that the fixed costs of operation keep mounting. There are chances that revenues may not grow in proportion to cover the total cost base, and Schultz has already experienced the debilitating effect of widespread fungal attack in the coffee estates of South America. New political trends in that continent, and concerns over the environmental impact of coffee growing, are other serious disruptions with which Starbucks may have to contend in future. The decision not to develop franchises could prove to be seriously wrong in future. Formal training in business management helps practitioners to receive inputs, file them for opportune use and to mould them for periodic and productive use. The optimal solution often lies in synthesis of various streams of thought through systematic process. It follows that a qualified and experienced manager can use Schultz’s expressed record of Starbucks, but people at large should only enjoy it for its literary worth, and as a good read. People are known to rush for a Latte at the nearest Starbucks after reading the book, and this could be a valid business reason for everyone associated with Starbucks to promote the writing! Writing about a business with high emotional attachment to its customers is a valid branding technique! The Way Ahead Skepticism is unproductive, and it would be unjust to leave the table with a negative balance of concepts that one can develop from the Starbucks model. The enterprise has lessons as varied and enjoyable as the fine presentations of roasted coffee beans and the superlative service. Everyone can benefit, regardless of their station in life, from the accounts that Schultz has gifted to us. No one should ignore the universal truth that the organization is a living entity, and only human resources matter in the end. Letting employees comment on the Mission Statement (p132), is something that every entity should follow. The Mission Review System still operates in Starbucks, and seems unique. It helps to provide cohesion in an operation that has spread its wings all over the globe. The Starbucks management really respects and works on the suggestions and ideas it receives from all groups of employees. There should be no exceptions to such a template. Bean Stock offers shares to all partners, and even this has been done in a unique way, making it egalitarian and not for raising capital. It links performance directly with the company’s value. Other companies have stock option plans, but everyone can benefit by copying the Starbucks model in this respect. Not-for-profit organizations should also conceive of methods to share ownership and control. ‘Accept people who are better than you’ (p 153): organizational politics destroys the most successful companies, and much of it has roots in the insecurity of older and senior people. It is easier to pay lip service to the concept of allowing colleagues to grow, than to practice it when we feel threatened, so Schultz’s endorsement of the superior abilities of people, over who he has control, is a sure winner as a learning experience for most entrepreneurs and executives. Reference Schultz, H, 1999, Pour Your Heart into It, Hyperion Read More