Starbucks was in trouble. Nearly 20% of the new stores opened during its aggressive expansion were closing. Customers were pulling back. Construction costs were spiraling. Founder Howard Schultz was scrambling to steady the company. There was only one way out: refocus on the customer and rebuild the Starbucks turnaround strategy from the ground up.
In Onward: How Starbucks Fought for Its Life without Losing Its Soul, Schultz lays out the Starbucks turnaround strategy that saved the company. Starbucks had stumbled before. It drifted into unrelated businesses like selling CDs, stopped listening to its own “music” by neglecting the customer, and made growth its north star. Together, those decisions weakened the company. How did Schultz find a way out?
Start with why it strayed, and how it found its way back.
“Trouble results when the speed of growth exceeds the speed of nurturing human resources. To use the analogy of growth rings in a tree, when unusually rapid growth caused the rings to grow abnormally thick, the tree trunk weakens and is easily broken.” – Akio Toyoda
Drifting Into Unrelated Businesses
Drifting from your core business is a dangerous game. Just ask Howard Schultz. At one point, Starbucks stopped pushing itself to run a better business. It wasn’t innovating in ways that created a durable advantage.
Instead of perfecting coffee, Starbucks ventured into entertainment, selling CDs, and aggressively expanding its food offerings. The company pushed products far beyond what it did best: serving a great cup of coffee.
One Starbucks partner put it plainly: it was like running a race without knowing why. Schultz knew the company was in trouble. The company had lost its way.
Venturing outside your core dilutes your mission. For Starbucks, the mission was human connection over coffee. Schultz believed growth should never come at the expense of the coffee experience. To him, growth wasn’t a strategy. It was a tactic. Growth drove poor decisions: expanding too fast and neglecting the customer.
Schultz wanted Starbucks to stay focused on its mission. To be the “third place” between home and work. His goal was not to sell fast-food coffee. A grab-and-go model threatened that purpose.
When sales lagged, Schultz told leadership to stop making excuses and return to basics. He wanted everyone focused on the in-store experience. The anchor was high-quality coffee.
Hubris played a role. At times, the company felt too big to fail. That mindset accelerated the drift. The way out was a single-merchant mindset. Operate every store like a local coffee shop.
The lesson: Create a durable advantage. Don’t expand too quickly. Remember why you’re running your race. Nothing matters more than the customer. Focus on fundamentals.
When You Stop Hearing Your Own Music
The “music” was a metaphor. Starbucks had lost its way. Success masked operational mistakes. Hubris crept in. The third place faded.
Growth became the primary operating principle. It diverted attention from revenue discipline and cost control.
Construction costs rose. Equipment spending ballooned. Meanwhile, customers were spending less.
Rising costs plus sinking sales created a broken economic model.
Starbucks was closing stores. The path back was simple, not easy: one cup at a time.
The lesson: Keep the customer first. Guard against hubris. Control costs. Sell the best product you can.
Overly Aggressive Growth
One statistic haunted Howard Schultz: nearly 20% of new stores opened during the aggressive growth period were closing.
The assumption had been simple: show up and win. But success defined only by growth is fragile. Opening 40,000 stores no longer impressed him. Those numbers didn’t matter.
What mattered was intrinsic: One cup. One customer. One partner. One experience at a time.
Human connection and coffee quality would bring Starbucks back. Growth at all costs had led to closures.
The turnaround began with reclaiming the third place. Starbucks was in the people business.
Remove scale and ubiquity from the vocabulary. Focus instead on the quality of each transaction.
Jim Sinegal of Costco talks about caring for customers. Schultz agreed, but it starts with employees. Take care of partners, and they take care of customers.
Technology drove sales. It also risked eroding the experience. Mobile ordering increased volume but reduced interaction. Schultz wanted more human contact in every transaction. Relationships build loyalty.
The lesson: Question growth for growth’s sake. Growth alone is not success. Deliver the best experience possible. Avoid becoming transactional. Human connection builds loyalty.
Sustainable Growth With Soul
Starbucks drifted into unrelated businesses, forgot the customer, and chased growth too quickly. Schultz returned to basics. They exited distractions, recommitted to the customer, and grew deliberately. The Starbucks turnaround strategy is simple: focus on strengths, keep the customer at the center, and pursue sustainable growth.
