Story
The idea his employer handed back to him.
In 1981, Howard Schultz was running the U.S. operations of a Swedish kitchenware company. He noticed that one of his customers, a small Seattle coffee retailer, kept ordering an unusual number of plastic cone filters, so he flew out to see who they were. In 1982, at twenty-nine, they hired him as director of retail operations and marketing.
The next year the company sent him to Milan on a buying trip. He spent it walking into espresso bars — by his own count more than five hundred of them — watching what people did in there. He came back arguing that the company should serve drinks, not only sell beans. The owners, Jerry Baldwin and Gordon Bowker, ran a pilot and then declined. Espresso machines were expensive, almost nobody in America could service them, and Americans were not familiar with the drink. Every one of those objections was true.
He left in 1985 to build it himself. He needed $400,000. He approached 242 investors and 217 of them said no. Starbucks itself put in $150,000, and a Seattle doctor named Ron Margolis put in $100,000. He opened Il Giornale in 1986. A year later the original owners decided to concentrate on Peet's Coffee and sold him the Starbucks retail unit for $3.8 million. He took the name off the company that had turned down his idea and put it on his own.
The Code
Code 7 — Provide Undeniable Value Every Time
Code 7 of 7 · Business Brainwash
Be so good, so consistently, that the value is undeniable and the price is a formality.
Say what you mean, mean what you say. Apologize fast, kill your ego faster. Be afraid NOT to improve.
- Say what you mean. Mean what you say.
- Apologize fast. Kill the ego faster.
- Be afraid not to improve yourself and your systems.
Lessons
Four shifts that make this Code real.
Go stand in it.
He did not read a report on Italian coffee culture. He walked into hundreds of bars over a single trip and watched what customers actually did with the room.
Firsthand observation is a cheap advantage that almost nobody takes. Buy the ticket and go look.
A sound objection can still be wrong.
Baldwin and Bowker were correct that the machines were costly, hard to repair, and unfamiliar. They were wrong about whether people would show up.
Reasoning about cost can still miss behavior you have watched with your own eyes. Bring the evidence, not the opinion.
Rejection has a denominator.
The famous number is 217 no. The useful number is 242 asks and 25 yes.
Count the asks, not the bruises. A one-in-ten close rate is a working process, not a verdict on you.
Leave clean.
He walked away without a fight, and the company that declined his idea then invested $150,000 in his new one and sold him itself two years later.
The door you close politely is sometimes the one you walk back through as the owner.
Data
The number the argument was actually about.
The owners passed on cost and unfamiliarity. Schultz backed a behavior he had stood in front of for days. The revenue line between the year he bought the company and the year he took it public is what the disagreement came down to.
Wikipedia · Starbucks
Figures from the Howard Schultz and Starbucks entries on Wikipedia. By his own account Schultz visited more than 500 espresso bars in Milan. Of the 242 investors he approached for Il Giornale, 217 said no. In 1987 the original owners sold him the Starbucks retail unit for $3.8 million. Starbucks revenue was $1.3 million in 1987 and $73.5 million at the June 1992 IPO, when the company had 140 stores.
Strategy
The play: go see it yourself, then hold the conviction after the no.
His edge in that meeting was not taste, money, or connections. It was that he had stood inside five hundred of these rooms and the people he was pitching had stood inside none. His case was evidence. Theirs was inference. When the owners passed, he did not spend a year arguing with them. He went and built the proof at his own risk, on borrowed money, with most of the room telling him no.
Run the play. Take the one part of your business you only know secondhand and go stand in it — the job site, the store floor, the customer's kitchen. Then count your asks instead of your bruises. What you carry back from that room is something nobody in the meeting can argue with, and that is Code 7 of Business Brainwash: provide undeniable value every time.
His own account of the Milan trip, the rejection by his employers, and the years of raising money — read it for the sequence of decisions, not the halo.
Name the one part of your business you know only from reports. Spend a full day inside it this week and write down what people actually do, not what the report says they do.
References
Sources for this article.
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