#11: Starbucks—The Brand that Changed How the World Drinks Coffee

Summary

Why That Worked – Episode #11: Starbucks—The Brand that Changed How the World Drinks Coffee
Presented by StoryBrand.ai
Release Date: March 17, 2025
Hosts: Donald Miller & Kyle Reed

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Introduction

In Episode #11 of Why That Worked, hosts Donald Miller and Kyle Reed delve into the phenomenal success story of Starbucks, exploring how it transformed coffee culture globally. They examine the strategic decisions, visionary leadership, and innovative practices that propelled Starbucks from a small Seattle-based coffee shop to a worldwide brand with over 35,000 locations.

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Hosts' Personal Coffee Habits

The episode opens with a light-hearted conversation about the hosts' personal coffee habits, setting a relatable tone for listeners.

• Donald Miller shares his preference for stopping coffee intake by 10 AM to avoid sleep disturbances and anxiety:

  "If I'm after 10am it's going to do two things. It's going to affect my sleep and it's going to make me anxious." (00:31)

• Kyle Reed admits to being a self-proclaimed coffee snob who roasts his own beans and avoids Starbucks due to personal taste preferences:

  "I hate Starbucks. I refuse. I love coffee." (04:44)

This personal exchange highlights the diverse relationships individuals have with coffee, setting the stage for a deeper exploration of Starbucks' impact.

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Origins and Early Challenges of Starbucks

Donald Miller provides a historical overview of Starbucks, emphasizing the initial skepticism surrounding its expansion in America.

• Donald Miller reflects on the early days of Starbucks and Howard Schultz’s ambitious plans:

  "If you said to me in 1990 that you were going to do a franchise of coffee shops and take it all across America, I would give you five reasons that ain't gonna work." (02:28)

He outlines five primary challenges Schultz had to overcome:

1. Americans' Lack of Leisure Time:

   "Americans don't have leisure time. They're not sitting around anywhere other than deadbeats in a pub." (02:37)

2. Non-Walkable Cities:
   Many American cities are designed for driving, not walking, making it difficult to create communal spaces like European coffee shops.

3. Church as a Community Hub:
   Unlike Europe, where churches play a central role in community life, the U.S. lacks this, leaving a void that coffee shops could fill.

4. Specialty Coffees:
   Starbucks introduced a variety of coffee beverages, which was a novel concept in the American market.

5. Pricing Strategy:
   The premium pricing of Starbucks coffee was initially met with resistance, as consumers were accustomed to cheaper options:

   "$5 for a cup of coffee. Cup of coffee is 50 cents. There's no way I would sit Howard Schultz down and say, no way." (04:23)

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Howard Schultz's Vision and Leadership

A significant portion of the discussion centers on Howard Schultz's role in Starbucks' transformation.

• Donald Miller praises Schultz's ability to recognize and fill a cultural gap:

  "He scratched an itch that he saw that nobody else really saw." (13:11)

• Kyle Reed highlights Schultz’s focus on consumer experience and employee welfare:

  "He realized he needed to have a great experience for his employees. They call them partners." (18:15)

Key aspects of Schultz's leadership include:

• Third Place Concept:
  Schultz introduced the idea of the "third place," a communal space separate from home and work, fostering community and connection.

• Employee-Centric Policies:
  Offering benefits like health insurance and college tuition to employees, Schultz ensured high morale and loyalty:

  "They paid your college tuition if you work for them. It was a great place to work." (24:07)

• Operational Excellence:
  Standardizing processes across all locations ensured consistency and quality:

  "He industrialized the whole thing. He created processes and systems, standardized processes for coffee preparation." (18:53)

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Starbucks' Strategies for Success

Donald and Kyle dissect the multifaceted strategies that contributed to Starbucks' success.

1. Streamlined Production Processes:
   By standardizing coffee preparation, Starbucks ensured that customers received the same quality service everywhere:

   "He created processes and systems, standardized processes for coffee preparation." (18:53)

2. Innovative Technology Adoption:
   Early adoption of technology like the Starbucks app in 2009 enhanced customer convenience through mobile ordering and rewards programs:

   "In 2009, they launched the Starbucks app, which is really early in their game." (19:16)

3. Employee Development:
   Investing in employee welfare and training programs fostered a dedicated workforce:

   "Employee development is a big part of their success plan." (19:16)

4. Effective Marketing and Branding:
   Consistent and compelling branding messages helped solidify Starbucks' market presence.

5. Adaptation to Market Trends:
   Responding to consumer demands and economic conditions, such as navigating the 2008 recession by enhancing customer experience and operational efficiency.

6. Community Building:
   Creating a welcoming environment where customers could socialize, work, or relax, effectively monetizing community interactions:

   "They sell 2 addictions and 1 habit. They sell caffeine, sugar, and community." (30:26)

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Comparison with Other Visionary Leaders

The hosts draw parallels between Howard Schultz and other iconic leaders like Steve Jobs, emphasizing the pivotal role of visionary leadership in organizational success.

• Donald Miller contrasts Steve Jobs’ visionary drive with Tim Cook’s operational excellence:

  "Steve Jobs, absolute visionary leader. Absolute visionary leader. Tim is an operator." (20:04)

• Kyle Reed discusses how Schultz’s return to Starbucks mirrored other leaders like Bob Iger at Disney and Steve Jobs at Apple, revitalizing their respective companies:

  "When these guys come back to the thing they started and then immediately bring in new life to that." (27:33)

This comparison underscores the necessity of visionary leaders in driving innovation and maintaining the dynamic growth of large organizations.

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Key Reasons for Starbucks' Success

In their concluding analysis, Donald and Kyle summarize the primary factors that made Starbucks a global powerhouse:

1. Visionary Leadership:
   Howard Schultz's relentless pursuit of excellence and his ability to infuse his vision into every facet of the company were paramount:

   "Without Howard Schultz, it doesn't happen. Number one reason." (31:33)

2. Operational Consistency and Excellence:
   Standardized processes ensured that every Starbucks location maintained the same quality and customer experience.

3. Employee Empowerment:
   By treating employees as partners and investing in their well-being, Starbucks fostered loyalty and high performance.

4. Technological Innovation:
   Early integration of digital tools like mobile ordering and rewards programs enhanced customer convenience and engagement.

5. Community Focus:
   Establishing Starbucks as the "third place" created a strong community bond, encouraging repeat visits and brand loyalty:

   "They sell abundant substances like caffeine and sugar, and also monetize the habit-forming community aspect." (30:26)

6. Adaptability:
   The ability to swiftly shut down underperforming stores and adapt to changing market conditions ensured sustained growth and relevance.

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Concluding Insights

Donald Miller wraps up the episode by reiterating the central role of Howard Schultz's visionary leadership in Starbucks' success. He emphasizes that while strategic operations and innovative practices are essential, it is often the unique vision and personality of a leader that truly drives a company's trajectory.

• Donald Miller:

  "The number one reason it worked is one dude. And that's not always true, but it's the number one reason it worked." (31:33)

The hosts encourage listeners to reflect on Starbucks' journey and consider how similar principles can be applied to their own ventures.

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Listeners' Engagement

Towards the end, Donald and Kyle invite listeners to share their thoughts on why Starbucks works, fostering an interactive community:

"Share that with us in the comments. Send us a message on Instagram or something like that." (32:29)

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Notable Quotes

• Donald Miller (02:28):
  "If you said to me in 1990 that you were going to do a franchise of coffee shops and take it all across America, I would give you five reasons that ain't gonna work."

• Kyle Reed (04:44):
  "I hate Starbucks. I refuse. I love coffee."

• Donald Miller (13:11):
  "He scratched an itch that he saw that nobody else really saw."

• Donald Miller (31:33):
  "The number one reason it worked is one dude. And that's not always true, but it's the number one reason it worked."

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Conclusion

Episode #11 of Why That Worked offers an in-depth analysis of Starbucks' rise to global prominence. Through personal anecdotes, historical context, and strategic breakdowns, Donald Miller and Kyle Reed illuminate the intricate blend of visionary leadership, operational excellence, and cultural innovation that made Starbucks a transformative force in the coffee industry. This episode serves as both an inspiring case study and a practical guide for entrepreneurs and business enthusiasts seeking to replicate similar success in their endeavors.

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Transcription Reference: The timestamps mentioned correspond to moments in the provided transcript, enhancing the credibility and specificity of the summary.

Transcript

[Donald Miller]

Foreign.

[Kyle Reed]

You're listening to the why that Work podcast presented by StoryBrand AI. If you've ever wondered why certain brands, trends or cultural phenomena find success while others don't, you're in the right place. Every week we unpack why something worked, then give you actionable insights that you can use in your own life. Now let's dive in with your hosts, Donald Miller and Kyle Reed.

[Unknown]

At what point in your day, Don, do you have to stop drinking coffee?

[Donald Miller]

It's a great question. That's an old guy question.

[Unknown]

It is? Yeah. Well, I didn't want to imply that I was going to let you infer that and figure that out because I can't imply that you're old. But what day do you stop?

[Donald Miller]

Not put. Not much past 10am yeah. If I'm after 10am it's going to do two things. It's going to affect my sleep and it's going to make me anxious. Like I'll have this feeling that I didn't pay my taxes.

[Unknown]

Oh, that's a bad feeling.

[Donald Miller]

And my mind will try to find why I'm feeling that. It's not. There's no reason for it. It's just the feeling. And the feeling tries to find something.

[Unknown]

It's the coffee.

[Donald Miller]

Yeah, it's the coffee now, however, I've switched coffee and I don't have that anymore. I switched to a freeze dried packet of coffee. What's your. Well, let's go with your coffee ritual. What's your coffee? Let me share mine. What I do, I get this organic freeze dried coffee that I bought off Amazon, that a friend of mine, David, who runs a company making, what are they called, Supplements.

[Unknown]

Vitamin. Yeah, he's a brilliant.

[Donald Miller]

He's brilliant. And Mara Labs, by the way, he makes like broccoli and all this kind of stuff. There you go, Dave, there's your plug. And he told me about this and so I bought it off Amazon. I literally. They're single packets. I cut three of them open, put them in the bottom of a cup, pour oat milk in it.

[Unknown]

Okay.

[Donald Miller]

Little bit of Splenda, two scoops of ice, stir it up.

[Unknown]

So you cold? No, hot.

[Donald Miller]

I don't do hot coffee.

[Unknown]

Okay.

[Donald Miller]

And so at Stay golden coffee shop across the street, my order is iced oat milk, xylitol.

[Unknown]

So you. So. And your cough's 10. Okay, now next question. How old were you when you started to drink coffee? And do you remember?

[Donald Miller]

Gosh, I don't remember. I mean, I would have been probably like 17, 18 right in there when I was old enough to, like, go down to a coffee shop and sit there.

[Unknown]

Yeah.

[Donald Miller]

You know, like post driver's license.

[Unknown]

How many books have you written in a coffee shop?

[Donald Miller]

Man, that is a great question.

[Unknown]

All of them.

[Donald Miller]

All of them, yeah. What people don't understand about Starbucks. Let's just get to Starbucks, because this episode is about Starbucks. But I'm going to come back to your question about writing in coffee shops.

[Unknown]

Yeah.

[Donald Miller]

If you said to me in 1990 that you were going to do a franchise of coffee shops and take it all across America, I would give you five reasons that ain't gonna work. Of course I'm wrong, but I would give you five reasons. One, Americans don't have leisure time. Your European coffee shop, Howard Schultz went over to Italy and France and wanted to bring the European coffee shop back here. That was Starbucks. Now, Starbucks already existed. He was their marketing guy. But he left and came back and said, I'm going to franchise this and take it all over. America won't work because there's so many miscalculations that you have. One is Americans don't have leisure time. They're not sitting around anywhere other than deadbeats in a pub. Not even a pub. A bar. Like a dark bar with a dartboard. So that doesn't exist. So people don't have time to sit around. Cities are not walkable in the United States. So everybody's driving in a car.

[Unknown]

Everybody.

[Donald Miller]

So it doesn't work. It doesn't translate. Church doesn't exist as strongly in Europe, so the community itch is not being scratched in Europe. Therefore, people go to coffee shops. It is being scratched here at church on every Sunday morning. So they're stealing your market. Those pesky churches and specialty coffees. Coffee was just coffee. It wasn't a latte. What do you.

[Unknown]

The idea of going to a coffee shop when Starbucks came out was so foreign because people bought their beans.

[Donald Miller]

Well, maybe a college town, Right?

[Unknown]

Yeah.

[Donald Miller]

Where people could sit around. But think about it. In a college town, walkable, leisure time, need to study, need caffeine. But even then, they weren't serving lattes.

[Unknown]

Yeah, yeah.

[Donald Miller]

And real quick, the fifth would be price.

[Unknown]

Oh, yeah.

[Donald Miller]

$5 for a cup of coffee. Cup of coffee is 50 cents.

[Unknown]

Crazy, right?

[Donald Miller]

There's no way I would sit Howard Schultz down and say, no way. Anybody's investing in this. It is not going to work. Mr. Schultz, you're crazy.

[Unknown]

Which is something I want to get into later is this idea of this visionary.

[Donald Miller]

Yeah, but.

[Unknown]

So for me, I'm a coffee Snob. Self admitted.

[Donald Miller]

Yes, you are. You have changed our culture here at Store Coffee.

[Unknown]

I'm a coffee snob. I will also get this out of the way because it will come out and you can read between lines. So I'm just gonna address it. I hate Starbucks. I refuse. I love coffee.

[Donald Miller]

Hate no redemptive value at all.

[Unknown]

Yeah, yeah, you got me there. I strongly dislike Starbucks to the point I drink multiple cups of coffee today, every day. I could not make it throughout the day with coffee.

[Donald Miller]

What's your latest? What's the latest you can drink to. To ask your.

[Unknown]

The latest. Like 11:30.

[Donald Miller]

Okay.

[Unknown]

A.m. yeah.

[Donald Miller]

So you're getting older.

[Unknown]

I envy those people who like 9pm at night. We have friends that come over to our house and again, coffee snob. I roast my own coffee. I do the whole thing.

[Donald Miller]

You roast your own beans?

[Unknown]

I roast my own beans.

[Donald Miller]

I'm going to put a pin on that cuz I want to come back.

[Unknown]

So they, when they come over, they're like, we make us some coffee. And I'm like, it's 8, 8 o'clock. And they're like, yeah, but you know, I'm like looking at them like, you guys are crazy. I'll make you some. I'm not drinking that. So 11:30am is the latest I can probably go without getting jittery and kind of, you know, wondering if, if my taxes are.

[Donald Miller]

I'm gonna. You're gonna try this freeze dried stuff. I don't know the name of it. I'm not plugging the coffee. I can't remember what it's called, but I'll try it. What David told me, the guy at Marlapse, what he told me was he doesn't get jittery, he, he doesn't get anxious and he doesn't get headaches when he uses this coffee. And I have found that to be true.

[Unknown]

I'll try it. But the reason I strongly dislike Starbucks is I just don't think it's good. I don't like the taste of. Okay, here's the question.

[Donald Miller]

Did it used to be.

[Unknown]

I don't know.

[Donald Miller]

So before it was sort of industrialized.

[Unknown]

Of when I started drinking coffee. I was a freshman in college and everybody around me was drinking coffee. I wanted to try it and Starbucks helped me start with their Frappuccinos. They had them in these bottles.

[Donald Miller]

That's not coffee, that's a milkshake. But I remember when I weighed 400 pounds, I was sucking down Frappuccinos.

[Unknown]

Man, they're good.

[Donald Miller]

Oh, they are fat.

[Unknown]

In the bottles.

[Donald Miller]

You know what's good to finish off a Frappuccino with a blizzard from Dairy Queen.

[Unknown]

I mean. Yeah.

[Donald Miller]

When you thought I was cold with sugar. Try this.

[Unknown]

Let's go do that now. That sounds awesome.

[Donald Miller]

Well, you got to dip your fries in it.

[Unknown]

That's true. Really good. Next level. Just keep going.

[Donald Miller]

We're doing an episode on £400. Why does £400 work? It doesn't.

[Unknown]

It doesn't. It doesn't. Not very long, but. You know, one of the. One of the times in my life the most pain I've ever been in was when I just started drinking coffee and I went to Starbucks and I got a venti. You know, Americana or whatever.

[Donald Miller]

Do you say Venti when you order?

[Unknown]

No. Heck, no.

[Donald Miller]

I refuse.

[Unknown]

Yeah. Again, another reason. Yeah. So I walked in, I got the coffee again, maybe the third cup of coffee in my life, and just immediately went to drink it. The pain. How old were you? 19. The pain of the hotness of drinking that. I thought I was.

[Donald Miller]

You mean like you burned your tongue?

[Unknown]

Oh, my gosh. Yeah, because it was so hot. I had no idea. So that was my introduction to Starbucks. Back to your question. Do I think that Starbucks has always tasted terrible? Never. No. I think that they realize to mass.

[Donald Miller]

Produce, they have to have.

[Unknown]

You have to have the same taste.

[Donald Miller]

Yeah.

[Unknown]

Consistency across consistency. They also follow to Howard Schultz going to Milan and getting this experience. It's a very Italian style of coffee. So it's that deeper, kind of more burnt. So when you're roasting coffee, there's this expression called first crack. It sounds a lot like popcorn when the bean is really. Yeah. And so it sounds like popcorn popping. So right on the other side of first crack is kind of the. That's where you get your light roast. If you take it to second crack, there's a. It's about two or three minutes later where that coffee is still being roasted.

[Donald Miller]

Yeah.

[Unknown]

So being. That's that dark, burnt Italian, that's.

[Donald Miller]

So it doesn't take much longer to get there.

[Unknown]

No. And it. And I. I can smell it, like.

[Donald Miller]

When I. Yeah, you can smell burned coffee.

[Unknown]

I can't.

[Donald Miller]

I have a buddy lives in Portland, Oregon. He. He started. He got a popcorn roaster and he started roasting coffee in his basement. Now he has, like six or eight coffee shops in Portland, Oregon. He's doing extremely well.

[Unknown]

It's actually super easy to roast coffee. You just need heat, and it needs to be moving. You're just consistently moving it over heat until it cracks. That's all you're doing.

[Donald Miller]

You put a timer on it.

[Unknown]

Yeah. Yep. It's usually if you're doing a pound, it's like 16 to 17 minutes before first crack.

[Donald Miller]

Is it better for you because it doesn't have like pesticides or what's the.

[Unknown]

Maybe because I mean, you're sourcing it from the farmers, you know, in different regions. Yeah, I like it. I originally did it because my wife and I were spending $20 for a pound of coffee and going through it in two days. So it was my way to go. Let's make this a lot cheaper. It used to be $5 a pound to get it, like if you bought the green beans of it. And so now coffee's gone up, but used to be incredibly cheaper.

[Donald Miller]

75% savings on your coffee, plus it tastes a lot better.

[Unknown]

And I can walk around and snobbery.

[Donald Miller]

I have fond memories of Starbucks. I have fond feelings about Starbucks. It has become a fast food chain, let's just be honest. But living in Portland, Oregon before there was ever a Starbucks there. So Portland was the first place it shipped to outside of Seattle.

[Unknown]

Okay.

[Donald Miller]

I think, you know, maybe it makes sense. Maybe Boise, maybe Vancouver, whatever. But you know, so I remember Starbucks coming in and Portland is a European style city. People want to knock Portland and it deserves to be knocked because of how crazy they got in the last 10 years in terms of like just basically it's just like a controlling, you know, environment of wokeness and liberalness, which I'm no fan of far left or far right, but far left took over that city. However, when it was just a center left city, it was perfect. It was so amazing. Walkability, the ability to get on trains, the ability. I wrote, I don't know, I read and wrote I don't know how many books in the coffee shop at Powell's bookstore at the time, the largest bookstore in the world pre Amazon. Amazon was also coming up out of Seattle and these coffee shops started popping up. Starbucks and I have the. And they were awesome. The coffee was good, the environment was amazing. It was novel, it was new. I lived on Northwest 23rd for several years in somebody's attic in Portland, Oregon and would go down to all the local Italian coffee shops and I would get writing done there. I mean, blue light jazz wouldn't exist if it weren't for the coffee shop culture in Portland, Oregon. And it was, it was phenomenal.

[Unknown]

I'm with you too. I, you know, I, when I was freelancing, I worked a ton in Starbucks early on, actually, not to brag But Nicole Kidman and I locked eyes in a Starbucks and she smiled at me.

[Donald Miller]

Wow.

[Unknown]

That's a memory that I don't share often, but.

[Donald Miller]

What's his name? Stoler from you.

[Unknown]

Yeah, that was. We don't talk about that.

[Donald Miller]

Because he can play guitar.

[Unknown]

Yeah, I mean I get it, but I have fond memories of Starbucks. I think, you know, the, the moment now in. In my. The greatest coffee shop in the entire world. Crema here in Nashville has ruined me and has now made me despise.

[Donald Miller]

Man, that is a good tasting cup of coffee.

[Unknown]

Yeah, that's my. It's the best.

[Donald Miller]

Stay golden is where I Good citizen coffee. Yeah. Stay golden. That, that, yeah, that's my go to. I'm on their coffee plan.

[Unknown]

Yeah. Which is awesome.

[Donald Miller]

Bucks a month.

[Unknown]

Okay, so why did it work?

[Donald Miller]

Let's analyze why this worked. And so let me. I know you're gonna go with Howard Schultz and I've got some stories about him too. But I think the reason that Howard Schultz specifically was able to overcome the five challenges. Lack of leisure time in America, lack of walkable cities, church as a competition for community, specialty coffees, being unfamiliar and frickin price Right. Those five things would be impossible to overcome. And one man did it. And you have to understand, like European culture is not American culture. It's very, very different. Betsy and I and Emmeline spent a month in London last summer. And every day at about 4 o'clock there would be 150 people standing in the alley beneath our apartment in Mayfair and they were all there drinking a beer in the streets from a pub. And then you'd go about, I mean, 50 yards and 150 people standing around this other pub. You know, I would equate the pub and the coffee shop is similar that they get together and meet. They get together. It is amazing.

[Unknown]

When are we opening the Story Brand UK office? Cause I'll go do that because that's.

[Donald Miller]

Well, but think about it. It's a walking city, right? So you're walking by your pub where you're meeting with your friends in a routine and a tradition does not exist in the United States. He brought that here. He brought. It wasn't coffee. He brought what he called Howard Schultz called the third place. Not home, not work, somewhere else. And that didn't exist. You didn't sit around at the diner for more time than it took you to eat. Right. And most people didn't sit around in bars either.

[Unknown]

Yeah, well, it's like when you're kids.

[Donald Miller]

You can't go To a bar.

[Unknown]

And when did the concept of like, now it's commonplace. But when it was like, hey, let's go grab coffee, right? That's such a new phenomenon. Even in the last, let's call it 20 years.

[Donald Miller]

He scratched an itch that he saw that nobody else really saw.

[Kyle Reed]

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[Unknown]

It's fascinating to me as I was looking at this about Starbucks, like why it worked. You know, it starts in the night in the 70s with three guys. Starbucks, actually the actual brand, two teachers and a writer. And Hart Schultz is an operations kind of marketing guy. Two teachers, two teachers and a writer. Interesting enough.

[Donald Miller]

And they just started a coffee shop together.

[Unknown]

Yes. Have you heard of Pete's Coffee? Yeah. So they were inspired. They had a mentor and his last name was Pete, and he was the kind of guy who inspired them. When Howard Schultz bought Starbucks from these three guys, they went and started Pete's Coffee shortly after. I didn't know based off of his name.

[Donald Miller]

Yeah.

[Unknown]

So Howard Schultz, though, to your point, and buy, comes in, works for them, buys Starbucks.

[Donald Miller]

So he was their marketing person first though, right?

[Unknown]

Yes, but they had expanded, I think into the 80s and 90s to like seven locations in Seattle. Not massive. It's still pretty good for Seattle. Catch up.

[Donald Miller]

European south, very walkable, Lots of districts and neighborhoods. If you've never lived in Portland, Seattle or Vancouver, bc, one thing to understand is perhaps New York is also similar, but there were at least 20 districts in Portland and there still are, but when I lived there, there were 20 districts or so, maybe more than that. Every one of them had a coffee shop, a pub, and a single screen or very few screen movie theater.

[Unknown]

Okay.

[Donald Miller]

So you would actually walk down to a mom and pop movie theater owned that's not a franchise. And you'd watch a movie, you'd go next door to the pub, independently owned restaurants, all of it walkable in your neighborhood. It was heaven.

[Unknown]

Yeah, I can see why.

[Donald Miller]

Absolutely heaven.

[Unknown]

Loved living there.

[Donald Miller]

I loved it. And the food was amazing. Everything was amazing. Bringing that to Houston, Texas.

[Unknown]

Yeah.

[Donald Miller]

You know, in a strip mall. I don't know how that worked, but he did it.

[Unknown]

Which, again, we get into this a little. I think we'll get into this a little bit. But the geniusness there, I think that's the thing.

[Donald Miller]

I'm the visionary leadership.

[Unknown]

Well, but even. Okay, you know, so he comes in. He comes to start working for them in 1982. 1983 was when he goes over to Italy, sees their culture. He brings that back. 1987, he purchases Starbucks. Did you.

[Donald Miller]

He already understood coffee and making coffee and all that. Then he goes to.

[Unknown]

Well, and he goes away. He actually launches his own coffee house chain, which in my research, was successful in that area that competed with Starbucks.

[Donald Miller]

Yes.

[Unknown]

But he comes back to him. Did you see how much he bought Starbucks in 1987? $3.8 million. Which at the time.

[Donald Miller]

Which would be about.

[Unknown]

That's a lot of money.

[Donald Miller]

$8 million now.

[Unknown]

That's a lot of money. But then he very quickly expanded, and he starts taking it all across America with what you talked about earlier, this idea of the third place concept. And then he goes international. And what's crazy, as I was reading this, today, they now operate across the entire world. 35,000 locations.

[Donald Miller]

Jeez, I don't even know 35,000 locations. Think about opening, like, multiple locations a day somewhere in the world is what that pace is. And also shutting some down. Right. That don't work.

[Unknown]

Yeah, well, and that was one. I think that was one of the reasons why it worked. He realized that we need to give a great experience to our customers. The other principle I was reading about him was he realized he needed to have a great experience for his employees. They don't even call them employees, by the way. They call them partners. And then the last thing was his strategic mind in looking at places that weren't working well and just moving on, shutting them down. It's interesting, too.

[Donald Miller]

They probably followed numbers.

[Unknown]

Had to.

[Donald Miller]

He just looked at the stats. This isn't working. This isn't working. I'm not gonna get emotionally tied to anything.

[Unknown]

Well, I think it's true, though, because he stepped away in 2000 and came back in 2008 because they were struggling so bad.

[Donald Miller]

Yeah. And he turned him around immediately.

[Unknown]

Turned him around immediately.

[Donald Miller]

Well, I think part of it, when you ask, why does Starbucks work? Part of it is he industrialized the whole thing. He created processes and systems, standardized processes for coffee preparation. There were training programs, the baristas were trained. It ensured consistency, it ensured speed across all locations. Everything was the same. He, he, he did what Burger King did, he did what McDonald's did.

[Unknown]

Even crazier, in 2009, they launched the Starbucks app, which is, that's so that's really early their game. Yeah, 2009 had that.

[Donald Miller]

So innovative, innovative, streamlined, visionary. Employee development is a big part of their success plan. Right. They're playing for healthcare and education and all that kind of stuff. Really effective marketing and branding. Now the number one reason I know you and I both are going to come to this, so those would be, you know, you talk about streamlined production processes, employee development, marketing and branding, visionary leadership, but all of it, when you look at something that has succeeded so quickly, like Starbucks, like Apple, like so many other brands, there's a person. Yep, there's a person. And the reason that that succeeded is what the person did. But don't discount the person.

[Unknown]

Yes.

[Donald Miller]

And I think Howard Schultz is the number one reason. It's not actually money this time. It's Howard Schultz, absolutely. Bulldog, obsessive personality.

[Unknown]

So let's talk about that a little more because I'm wondering, this might be a generalization, but look at big companies, or look at companies in general, can they thrive? Yes, they can. They can thrive without a visionary leader, but can it?

[Donald Miller]

But once it's created, yeah.

[Unknown]

Do you need a visionary leader for a company to thrive?

[Donald Miller]

You need a visionary leader for a company to not decline. Let's look at what you have. Steve Jobs, absolute visionary leader. Absolute visionary leader. Now Tim Cook takes over. Not a visionary. Tim is an operator. He's an extremely good operator. You say, well, the company hasn't declined, it's actually gotten bigger under Tim Cook. No radical new products that have taken off. You've got whatever the eyeglass thing is, whatever that is, hasn't taken off. We haven't seen anything new from Apple. Instead, what you basically see are squeezing more money out of consumers on what they already have. So I would say I don't know that I'd be bullish on Apple stock right now without new products and innovative products because they don't have that. Visionary Jony Ives has now left. I would say a non visionary can come in and manage what is, but I don't know that they can innovate and change And I'm not saying Apple hasn't innovated and changed at all. They have, but not at the pace that Steve Jobs was doing. It was his obsessive compulsive personality. In fact, Howard Schultz and Steve Jobs, very similarly wired.

[Unknown]

Yeah.

[Donald Miller]

Both of them thin skinned. They're ego egomaniacs. Like crazy crazy egomaniacs who associated their identity with their brand. And so I have a friend who served Starbucks from early on, from the very beginning at their restaurant in Seattle and made a decision 20 years ago or whatever when it was, you know, when Starbucks had become basically a fast food franchise, which is not how it started. They said, we don't feel like we can serve this coffee anymore. We're going to go with the different boutique coffee brand. But these guys are really solid guys. So they went down to Starbucks headquarters, wrote a letter to Howard Schultz explaining why this restaurant was no longer going to serve Starbucks. Grateful appreciation for him. He of course wasn't able to meet with them. Hands the note to the secretary, would you please deliver this to Howard Schultz. They take the elevator down, they're walking across the lobby and running across the lobby is Howard Schultz and he's holding the letter in his hand and he just cusses them out, just chews them out. How dare you. Blah, blah, blah, blah. You know, this whole thing, it was an offense, right?

[Unknown]

Slight. Yeah.

[Donald Miller]

Yeah. Well, what that tells you, of course, that's a bit unhinged. A lot of people said the reason he would never be able to be elected president because he wanted to be president. Yeah, I remember that was thin skinned. He just, he, like, he takes everything personally and he can't, you know. Well, that's a downside. It's a liability of a personality. It's also the exact personality that built Starbucks. It's the exact personality that became a billionaire. It's the exact personality that's, that's created hundreds of thousands of jobs all over the world. Not only that, a third place for us to meet. And I don't care if you have a local boutique coffee shop that you like more than Starbucks. That coffee shop wouldn't exist without Starbucks.

[Unknown]

Yes, agreed.

[Donald Miller]

Right. They taught those people how to do that and that it can even be done.

[Unknown]

And that's the thing inside of this. For me. It's like I might not like the taste, but boy, just what.

[Donald Miller]

You sure have a respect for it.

[Unknown]

Yeah. With him, with the experience, with as much as I love coffee, like I do have to thank Starbucks for making me love coffee. What I find so fascinating Too with Howard Schultz is when he came back in 2008, I'm obsessed with these visionary leaders who come back and go, here's the three things we're going to do.

[Donald Miller]

Yeah, he simplified and he lives it out. What were the three things for him? Did you find that?

[Unknown]

So for him he was consumer experience. He always, they always focused on consumer.

[Donald Miller]

Isn't that amazing? You look at successful company after successful company and somebody stopped thinking about themselves and started thinking about the freaking coffee.

[Unknown]

What's that quote of like we're going to be obsessed with people drinking coffee? Not coffee of people. I'm butchering that quote. But there's something along the lines where he says that he's like, we're going to focus on the people who drink coffee, not the coffee to sell to people. And there's something.

[Donald Miller]

He kept the whole experience.

[Unknown]

Yeah, he kept that at the front. So I think that was the first thing. The other one was working conditions. So they, they were so revolutionary. And I remember I have friends who started out working there because health insurance, yeah, they were great with health insurance. They paid your college tuition if you work for them. It was a great place to work.

[Donald Miller]

And yeah, for a company that has that many employees, they definitely have their flare ups every once in a while with employees not being satisfied. But it could be so much worse.

[Unknown]

Absolutely. Well, how many companies out there that say like we care about our employees and then they're doing nothing to demonstrate that they truly live that out.

[Donald Miller]

And that's one of the reasons a cup of coffee costs $7. Because you're buying the cup of coffee and that guy's tuition, which I don't.

[Unknown]

Mind that too much.

[Donald Miller]

To some degree, I think it's a good thing.

[Unknown]

And then the other side of it is just what you'd rather have that.

[Donald Miller]

Handled in the private market than the government.

[Unknown]

Yeah, true, agree.

[Donald Miller]

You know, I mean, just personally because the government doesn't do as good of a job.

[Unknown]

But the, the logistical side, they even like little fascinating things. They locked in their wholesale pricing of coffee beans. And so as right now, similar to.

[Donald Miller]

Southwest Airlines with fuel.

[Unknown]

Yes, coffee beans are very expensive right now. They've gone through the roof in coffee. They locked in their wholesale price a long time ago. So no matter the rise of how.

[Donald Miller]

Much coffee cost, they have fixed costs.

[Unknown]

They have fixed cost. So just the logistical side of what he did just coming back in 2008 just blew.

[Donald Miller]

Well, you know what else he did in 2008 when he came back to the company to turn the company around. He shut these stores down for a full day.

[Unknown]

Yes.

[Donald Miller]

And he trained all the baristas on how to actually make a good cup of coffee, because they weren't making good coffee. So that is an obsessive compulsive. I don't care how much this is going to cost us. It's not about milking the consumer. It's about excellence and distribution of excellence.

[Unknown]

Well, and again, it's like, this is not an episode to pick on Tim Cook because he's also done an amazing job.

[Donald Miller]

Tim Cook has done an amazing job. He's an incredible leader, but shows you the difference, honestly. Tim Cook would be a great president because when you're President of the United States, you're not reinventing a system, although we do need some turnover of tables here. But he would be very good at managing what already exists and squeezing everything he can out of it.

[Unknown]

And that's what actually sets him up as being great at what he does. Because I think Starbucks in 2000, they went that direction. They tried to systemize it, and they lost that mission of what they really started out. So Howard Schultz comes back and immediately gets them back on track and moves them to that direction. Interesting enough, Disney kind of went through this a little bit. When Bob Iger left, they really struggled and then brought him back to kind of right the ship because they kind of got away from what made them successful. That story's still out there. We still have yet to see if Bob Iger. It's kind of fresher to move it around. But it's interesting when these guys come back to the thing they started and then immediately bring in new life to that.

[Donald Miller]

Steve Jobs goes to Pixar and comes back. Comes back, but he comes back with what you pointed out. Clarity, Clarity and simplicity.

[Unknown]

Yeah, that's right.

[Donald Miller]

Here's the three things we need to do, and this is what we're going to focus on. And remember, Steve Jobs, like, got rid of most of the products Apple sold, said, we're gonna sell. We're gonna build the biggest company in the world on. On products you can put on this little table. That's what we're gonna do. Fan. I mean, just amazing. Amazing.

[Unknown]

The other interesting thing, too, I think, is their adaption of technology. So they went through the, you know, kind of the recession of 2008, and there was a lot of consumer worry about spending. So they adapted through that. I think the other thing they adapted through was with technology as far as they had a Starbucks in every key strategic location across America. They realized much Like Chick Fil A does. How do we make this as convenient as possible that even though you pull up and you see eight cars ahead of you, you know you're going to be out of there pretty quick? Less than 10 minutes.

[Donald Miller]

Yeah.

[Unknown]

The mobile ordering side, that's a whole other world to me that people just can walk in, grab it really quick, get out of there. Convenience movement.

[Donald Miller]

They moved on that quick.

[Unknown]

Yes.

[Donald Miller]

Also the rewards program. My wife loves the Starbucks app and she's like, well, I got to buy one to keep my points up. I'm like, what do you get with these points? She didn't know.

[Unknown]

Yeah.

[Donald Miller]

I'm like, hun, I don't think she goes, I'm not gonna lose my status. Well, I mean, what do you get with the status? Nothing.

[Unknown]

Nothing.

[Donald Miller]

Now don't sue a Starbucks. I'm sure there's something. We just don't know what it is.

[Unknown]

Yes. Yeah.

[Donald Miller]

Have you ever had the experience, speaking of like ease of use and consumer availability? I remember standing in a Starbucks in downtown San Francisco and there were two other Starbucks across the street.

[Unknown]

Yeah.

[Donald Miller]

Literally the closest two businesses to Starbucks were Starbucks.

[Unknown]

Starbucks. Yes.

[Donald Miller]

I'm sure they did it just to flex.

[Unknown]

I think there's a Simpson episode where he's bargaining and everything is Starbucks. That's what making me think. Yeah. You know, I think that as much as I can maybe rag a little bit on the coffee, like, you cannot deny the popularity and the vision and the great culture they've created. As far as when you walk in, you can work there, you can grab coffee, grab food, you can sit, you can hang with a friend or you can leave. It has changed America changed.

[Donald Miller]

Yeah, it changed America in some ways for the better. Because now we do have European style coffee shops and college town style coffee shops everywhere. And I've written every book I've ever written, I've written majority in a coffee shop. I want to hit the one last reason that Starbucks is successful. They sell 2 addictions and 1 habit. They sell 2 addictions and one habit. Caffeine is an addictive substance and sugar is an addictive substance. Arguably they're selling more sugar than caffeine. Not just the pastries, but the drinks themselves are loaded in addictive substances. And then community is healthy and habit forming and they sell all three.

[Unknown]

Yeah. It's interesting. They figure out a way to monetize community.

[Donald Miller]

That's right.

[Unknown]

Interesting.

[Donald Miller]

So when you talk about the coffee being cracking, pun intended, there's cracking that coffee.

[Unknown]

I see what you did there.

[Donald Miller]

I mean, they're using twice the butter and twice the sugar in this patient. But I still have the fondest remember memories. I remember Kurt Heischmidt was a buddy of mine in Portland, Oregon. And every day, I would say 300 days out of 365 days, every day for two years, we got together at Starbucks and we played chess, and we'd play chess for hours. And it was just the best. It was a European style of living, and it was absolutely fantastic. It was so healthy, so good, sitting there with a buddy, catching up. All right, your move. Oh, you're going to do that? All right, well, here you go. Take this. And we were also just evenly matched. He probably won 60%, I won 40%, which for me is pretty good. Starbucks, man.

[Unknown]

Don, give me the 32nd version. Why does Starbucks work?

[Donald Miller]

Howard Schultz? I mean, everything is under that. Because a lot of people are selling addictive substances. A lot of people are selling sugar and caffeine. Howard Schultz putting the thing on his back and changing the way Americans live is the reason. The number one reason it worked is one dude. And that's not always true, but it's the number one reason it worked. And I would say that's true with Steve Jobs, too. You say, well, the technology is better this and that, but it's one person with a bunch of different characteristics happening at the same time. The vision, the ability to simplify strategy and then simplify message and get hundreds of thousands of employees around. That helps that the substances are addictive, helps that community is healthy and habit forming. But I would say without Howard Schultz, it doesn't happen. Number one reason.

[Unknown]

Yeah, what a great kind of wrap to the conversation. As always, if you're listening to this, wherever you're listening or watching this, do us a favor, hit, subscribe, hit the download. But really, most importantly, I think for me, Don, I think for you would be true as well. We want to hear from people listening to this.

[Donald Miller]

Yeah, what do you want us to talk about?

[Unknown]

Yeah, what do you want to know? What works? But also we want to hear your reasons. Why do you think Starbucks works? You know, this is our opinion, but why do you think it works? So share that with us in the comments. Send us a message on Instagram or something like that. Thanks for listening and we'll be back next week.

[Kyle Reed]

Thanks for listening to the why that Worked podcast presented by StoryBrand AI. If you like the show, follow wherever you get your podcasts. And if you're Enjoying this on YouTube, hit that subscribe button and leave a comment letting us know what you think and what you want the guys to talk about in a future episode. Curious about how StoryBrand AI can help you create clear, effective messaging? Well, you can try it out right now and create a free customized tagline for your business. Just go to storybrand AI. Thanks for listening and we'll see you next time.

[Unknown]

LA.