CHAPTER 7
Act Your Dreams with Open Eyes

Those who dream by night in the
dusty recesses of their minds
Awake to find that all was vanity;
But the dreamers of day are dangerous men,
That they may act their dreams with open eyes to make it possible.

—T. E. LAWRENCE (OF ARABIA)

It was a sunny Friday afternoon in August that greeted me when I walked out of the lawyers’ offices after closing the deal to acquire Starbucks. People were rushing around the streets as if it were an ordinary day, but I felt light-headed. Jerry and Gordon had signed, I had signed, paper after paper. A check had been passed across the table. I had shaken hands with everyone and accepted their congratulations. Now Starbucks was mine.

Automatically, Scott Greenburg and I strode across the street to Columbia Center, to that first Il Giornale store. At 2 P.M. on a summer afternoon, there was only one other customer, a woman standing at the window, deep in thought. I greeted the baristas, who had no idea of the transaction we had just completed. They made me a doppio macchiato—two shots of espresso, marked with a dash of milk foam in a demitasse cup—and a cappuccino for Scott. We sat on barstools near the window.

Here we were, two guys in our early thirties, who a few years earlier had met each other on a basketball court and had just now concluded a $4 million deal. It was a highly visible, career-making move for Scott as an attorney, and it propelled me to the presidency of a company I had joined as an employee.

Scott placed on the table between us the business plan, a hundred-page confidential document we had used for the private placement. On its cover were the two logos of Il Giornale and Starbucks. We had written it with meticulous care, spelling out clearly everything I intended to do with Starbucks once Il Giornale bought it. The plan had been our bible for months, and now it had come to life. It was a thrilling moment, the kind you can’t believe you’re living through. Scott lifted his coffee cup in a toast, his eyes sparkling. “We did it,” we said at the same time.

COMING HOME TO STARBUCKS

The following Monday morning, August 18, 1987, the modern Starbucks was born.

I stepped through the front door of the old roasting plant again, as I had so many times before, but now as the new owner and CEO. I headed straight to the roasting machines. The roaster greeted me with a smile and a thump on the back and then turned to attend to the cooling tray, which was swirling with freshly roasted beans. I dipped my hands into the warm, fragrant beans and lifted out a handful, rubbing them slowly between my fingers. Touching the beans grounded me to what Starbucks was all about, and it became a daily tradition.

As I walked through the plant, people grinned and hugged me and welcomed me. It was like coming home; the aromas, the sounds, the faces were all familiar. Gay Niven was there, with her bright red hair, and Deborah Tipp Hauck, who now oversaw five stores. I was happy to see Dave Seymour and Tom Walters, a roaster. But despite their good wishes, I knew, some Starbucks people felt nervous. Their lives had just been changed, and they had had no say in the decision. They knew Starbucks would change, but they didn’t know how. Would I lower the quality of the coffee? Would I ease some people out, or fail to recognize how others had grown in their jobs? Were my fast-growth plans really feasible?

At 10 A.M., I called everyone together for a big meeting on the roasting plant floor. It was the first of many.

I was more excited than nervous. I had written just a few points down on a 5-by-7 note card, to remember as I addressed the group. They were:

1. Speak from my heart.

2. Put myself in their shoes.

3. Share the Big Dream with them.

Once I started talking, though, I found I didn’t need to look at my notes.

“It feels so good to be back,” I began. The tension in the room started to ease. “Five years ago, I changed my life for this company. I did it because I recognized in it your passion. All my life I have wanted to be part of a company and a group of people who share a common vision. I saw that here in you, and I admired it.

“I’m here today because I love this company. I love what it represents.” Working together, I told them, we could take everything that Starbucks means to the people of Seattle and multiply it on a national scale. We could share our coffee mission so much more widely.

“I know you’re scared. I know you’re concerned,” I said. “Some of you may even be angry. But if you would just meet me halfway, I promise you I will not let you down. I promise you I will not leave anyone behind.

“I want to assure you that I’m not here to do anything to dilute the integrity of the company.”

It was easy for me to be able to talk like that because I had been one of them.

My goal, I announced, was to build a national company whose values and guiding principles we all could be proud of. I discussed my vision of the growth of the company and promised to bring it about in a way that would add value to Starbucks, not diminish it. I explained how I wanted to include people in the decision-making process, to be open and honest with them.

“In five years,” I told them, “I want you to look back at this day and say, ‘I was there when it started. I helped build this company into something great.’”

Most important, I assured them that no matter which investors owned how many shares, Starbucks was their company and would remain so. Spiritually and psychically, it belonged to them. Starbucks’ best days, I told them, were yet to come.

I watched their faces as I spoke. Some of them seemed to want to believe what I was saying, but were guarded. Others had that smug look of doubters who had already decided not to buy into this dream—at least not yet.

Coming back to a company I knew inside and out gave me an incredible advantage. I knew the organization, both its weaknesses and its strengths. With that insight, I could predict what would be possible, what wouldn’t be possible, and how fast we could go.

But in the few days after that, I learned that there was one serious gap in my knowledge: Morale at Starbucks was terrible. In the twenty months since I had left, divisions had grown within the company. People were cynical and wary, beaten down and unappreciated. They felt abandoned by previous management and anxious about me. The fabric of trust and common vision that Starbucks had had when I first joined had frayed badly.

As the weeks went on, I learned the full extent of the damage. It quickly became obvious to me that my number-one priority would have to be to build a new relationship of mutual respect between employees and management. All my goals, all my dreams would amount to nothing unless I could achieve that.

This realization was a great lesson to me. A business plan is only a piece of paper, and even the greatest business plan of all will prove worthless unless the people of a company buy into it. It can not be sustainable, or even implemented properly, unless the people are committed to it with the same heartfelt urgency as their leader. And they will not accept it unless they both trust the leader’s judgment and understand that their efforts will be recognized and valued.

I had seen, with the small Il Giornale team, how much a few people can accomplish if they believe in what they’re doing, with fervor. Starbucks could be so much more, I knew, if its people were motivated with the same zeal.

The only way to win the confidence of Starbucks’ employees was to be honest with them, to share my plans and excitement with them, and then to follow through and keep my word, delivering exactly what I promised—if not more. No one would follow me until I showed them with my own actions that my promises were not empty.

It would take time.

EMBARKING ON THE FAST TRACK

“Lack of experienced management” was one of the risk factors I had noted in my acquisition document. That was an understatement. I had served for less than two years as president of a company of any size. Dave Olsen had run only a single café for eleven years. Ron Lawrence, our controller, had worked as an accountant and controller for several organizations. Christine Day was adept at handling everything we threw at her, but she had never worked as a manager.

The four of us now had to figure out not only how to merge Il Giornale and Starbucks but also how to open 125 new stores in five years, as we had promised investors. We figured that as our expertise increased, we should be able to open 15 the first year, 20 the second, 25 the third, 30 the fourth, and 35 the fifth. No problem. Sales would grow to $60 million, and profits would grow in tandem. The plan looked great on paper.

I had never attempted anything remotely similar, and in order to do so, I knew I needed to learn quickly, hire experienced managers, and take steps immediately to win over the support and enthusiasm of Starbucks’ people.

But realizing what was necessary hardly prepared me for the enormity of the undertaking. Within days, I felt as if I were in a wind tunnel, going in the wrong direction. Urgent issues and problems of a complexity I had never faced before came rushing at me. Any one of them might knock my head off.

That first Monday morning, I was informed that a key Starbucks coffee roaster and buyer had decided to resign. His departure left us with not a single experienced buyer and only a handful of junior roasters. Literally overnight, Dave Olsen had to master the incredibly complex skills of buying and roasting coffee. Luckily, he jumped in with gusto.

That opportunity turned out to be a godsend for Dave. It gave him, in his field, the same chance I was getting: the chance to grow into a new job. He began to travel around the world to the leading coffee-producing countries, to get to know producers, and to learn about the agriculture and economics of coffee. He had always been our most-valued “nose” for coffee, with the discrimination of the finest winemaker. Now, as he explored different sources and blends, the range of coffees Starbucks offered got even better.

We all got used to doing the impossible. In the first two months, Ron Lawrence had to close the offering, merge the financial records of Starbucks and Il Giornale, put a new computer system in place, switch accounting systems, and conduct a fiscal year-end audit. “Okay,” he said, after taking stock of his tasks, “what else?”

My own urgent list kept getting longer as well. I knew I needed someone to help me run Starbucks, someone who had experience as a corporate executive. I turned to a man I had met through mutual friends, Lawrence Maltz. Lawrence was fifteen years older than I and had twenty years experience in business, including eight years as president of a profitable public beverage company.

Lawrence invested in Starbucks and joined the company as executive vice president in November 1987. I put him in charge of operations, finance, and human resources, while I handled expansion, real estate, design, marketing, merchandising, and investor relations.

Our little management team didn’t examine our motives for wanting to grow fast. We set out to be champions, and speed was part of the equation. When I looked into the future, I saw a bold, vividly painted landscape—not a still life in subtle muted colors.

Now that we had merged with Starbucks, our Il Giornale goal of opening 50 stores in five years no longer seemed so farfetched. That’s why I promised investors in 1987 that Starbucks would open 125 stores in five years. We would go public, someday. Customers would respect our brand so much that they would talk of “a cup of Starbucks.” Long lines would form out the doors of newly opened stores in cities far from Seattle. Perhaps we could change the way Americans drank coffee.

It was a stretch, and plenty of people told me it was impossible. But that was part of the appeal, for me and for many other people at Starbucks. Defying conventional wisdom, achieving against the odds, offers a thrill that’s hard to top.

But my view of a successful business wasn’t just measured in number of stores. I wanted to create a brand name respected for the best in coffee and a well-run company admired for its corporate responsibility. I wanted to elevate the enterprise to a higher standard, to make our people proud of working for a company that cared for them and gave back to their community.

In those early days, as I worked to build trust, I began to envision the kind of company I ultimately wanted to create. Fostering an atmosphere in which people were treated with respect wasn’t something I considered an intriguing option; it was essential to the mission of Starbucks. We could never accomplish our aims unless we shared a common vision. To attain that ideal, we needed to create a business that valued its people, that inspired them, that shared its rewards with those who worked with us to create long-term value.

I wanted to build a company that would thrive for years because its competitive advantage was based on its values and guiding principles. I wanted to attract and hire individuals who worked together with a single purpose, who avoided political infighting and loved reaching for goals others thought impossible. I wanted to create a culture in which the endgame was not only personal gratification but a respected and admired enterprise.

Instead of a small dream, I dreamed big.

If you want to build a great enterprise, you have to have the courage to dream great dreams. If you dream small dreams, you may succeed in building something small. For many people, that is enough. But if you want to achieve widespread impact and lasting value, be bold.

Who wants a dream that’s near-fetched?

CHOOSING AN IDENTITY

After the acquisition, I had to make a critical decision about our identity: Should we keep the Il Giornale name, or should we consolidate under the name Starbucks?

For most entrepreneurs who have founded their first company, giving up its name is like throwing away their baby. I certainly felt attached to Il Giornale, which I had created out of nothing. But the Starbucks name was so much better known, and I knew in my heart that it was the right choice. Still, I owed it to the original Il Giornale team to carefully weigh the pros and cons.

To confirm my instincts, I went back to Terry Heckler, who had helped name Starbucks years before. He has since named several other successful products in Seattle, including Cinnabon, Encarta, and Visio software. I decided to hold two meetings—one with major investors and another with employees—to debate the issue. I asked Terry to present his recommendations at both meetings.

His opinion was unequivocal. The name Il Giornale, he said, is hard to write, spell, and pronounce. People find it obscure. After less than two years of operation, it was too new to have widespread recognition. Italians were really the only ones with a legitimate claim to espresso, and none of us was Italian.

The name Starbucks, in contrast, has magic. It piques curiosity. Around Seattle, it already had an undeniable aura and magnetism, and, thanks to mail order, it was beginning to be known across America, too. Starbucks connoted a product that was unique and mystical, yet purely American.

The hardest part was convincing the original Il Giornale employees, who loved the Italian name because it captured the romance of the authentic espresso experience. The small Il Giornale team had grown as tight-knit as a family and was afraid of losing what they had worked so hard to build, swallowed up by what they perceived to be a giant with a fifteen-year tradition.

After much soul-searching, we finally opted to take the Il Giornale name down from the espresso bars and replace it with Starbucks. Throughout the process, I knew I had to leave my ego at the door. I wanted everyone involved to make the best choice for the long-term value of the business and select the name that would best differentiate us from the competition. Having a name that people could recognize and remember, a name people could relate to, would provide enormous equity. That name, clearly, was Starbucks, not Il Giornale.

To symbolize the melding of the two companies and two cultures, Terry came up with a design that merged the two logos. We kept the Starbucks siren with her starred crown, but made her more contemporary. We dropped the tradition-bound brown, and changed the logo’s color to Il Giornale’s more affirming green.

One by one, we also transformed the look of the original Starbucks stores, from brown to green, from Old World traditional to Italian elegance. In the process, we also remodeled and remerchandised them so that all were equipped to sell both whole-bean coffee and espresso drinks. That combination created a new type of store, more than retail but not restaurant, that has been Starbucks’ signature pattern ever since.

It’s a marriage that has lasted.

A VITAL SHOW OF CONFIDENCE

By December 1987, as new stores prepared to open in Chicago and Vancouver and the quality of the coffee remained high, initial doubts some employees had about my intentions began to fade. Trust began to build.

I wanted people to feel proud of working at Starbucks, to believe in their hearts that management trusted them and treated them with respect. I was convinced that under my leadership, employees would come to realize that I would listen to their concerns. If they had faith in me and my motives, they wouldn’t need a union.

Fortunately, one employee in a retail store also questioned the need for the union. As a college student, Daryl Moore had started at Starbucks in 1981 as a part-time clerk in our Bellevue store. He later worked for six months in the warehouse and voted against unionization in 1985. Although he comes from a blue-collar family, Daryl didn’t see the need for a union as long as Starbucks managers were responsive to employee concerns. He had left Starbucks to try his hand at starting a business but returned in late 1987 to work as a barista in our Pike Place store. When he saw the changes I was making, he began philosophical debates with his colleagues and with the union representative, whom he knew. He did some research on his own and began an effort to decertify the union. He wrote a letter and carried it to many stores in person to get signatures of people who no longer wished to be represented by the union. When he had a majority, he presented the letter to the National Labor Relations Board in January. As a result of Daryl’s efforts, the union no longer represented our store employees, although it did continue to represent our warehouse and roasting plant workers until 1992.

When so many of our people supported decertification, it was a sign to me that they were beginning to believe I would do what I had promised. Their distrust was beginning to dissipate and their morale was rising. Once I had their full support, I knew I could count on them to work as a team and imbue them with the enthusiasm they would need to spread the word about Starbucks coffee around the country.