Nowhere is the importance of a place in-between laid out more clearly than in the story of Starbucks, both at its inception and later, during its reinvention in 2008. Even when I first met Howard Schultz and interviewed him for my first book, Entrepreneurs Are Made Not Born, I referred to Starbucks as a club, much like the bar on “Cheers,” where the opening song proclaimed “a place where everybody knows your name,” reminiscent of the way Starbucks taught baristas to know frequent customers’ names and even their favorite beverages. In my latest book Invent Reinvent Thrive (McGraw Hill, 2014) I explain how Howard’s clear understanding of that essence of the business (what he refers to as “the company’s soul”) enabled him to avoid the near catastrophe in 2008.
Similarly, in Invent Reinvent Thrive, I tell the stories of Jim Sinegal, founder Costco, and Maxine Clark, founder of Build-a-Bear, both of whom believed in customer entertainment and experiential events in their retail businesses, much as those mentioned in Brigid Sweeney ‘s article.
As I said in Invent Reinvent Thrive, “Jim Sinegal decided he’d better reinvent Costco, at least partially from time to time, lest his stores…become uninteresting. He decided to add new items periodically. He constantly reminded himself and his colleagues, ‘There’s no annuity [here]. You’ve got to continually add stuff that’s new and exciting. Otherwise you become boring.’” Likewise, I quote Maxine Clark in Invent Reinvent Thrive: “At the May Company, she was fortunate enough to make a presentation to Stanley Goodman, May’s chairman. He told her that ‘retailing is entertainment and the store is a stage. When the customers have fun, they spend more money.’ His words made an indelible impression on Maxine.”
Great business leaders have a knack for sharing their visions—whether related to a new venture, strategy, or product—in a way that gets investors, employees, and potential customers excited. In start-ups, especially those creating something new and unique, that skill is even more critical. I have observed that entrepreneurs fall mainly into two camps when it comes to how they share their vision: (1) Describers, or those who articulate the vision they see so clearly, using words and graphics to paint a full, rich picture for others to see and understand; and (2) Demonstrators, or those who demonstrate the value of their ideas by building models or prototypes to provide others a more tangible sense of their vision.
In this blog I’ll talk about the first group—Describers—using examples from my book, Invent, Reinvent, Thrive (McGraw-Hill, 2014).
Howard Schultz, founder of Starbucks as we know it today, is a master describer. Among the people skills that make him a remarkable salesman and leader is an exceptional ability to communicate. But early on, when he communicated his vision for a new kind of coffeehouse, he was rejected by hundreds of potential investors. Part of the problem was that Howard’s original pitch was focused mainly on the coffee. In fact, that was just a part of his vision, and arguably not even the most important part. It was as though he gave potential investors 1000 piece jigsaw-puzzle, but never showed them the box cover with the picture of the completed puzzle!
The picture on the box would have revealed his full vision: what I have referred to for decades as a “club” like the bar of the TV-show “Cheers,” a place “where everybody knows your name.” Howard rejected my word, “club,” probably because it bore elitist connotations. He now refers to it as a place to stop between work and home—a “third place” that happened to serve premium coffee. Describing the picture of the vision isn’t easy. But eventually, Howard raised the funds, partly because he got better at painting the full picture in words for investors—he was able, orally, to “show” them the puzzle-box cover—and partly because people had deep confidence in him.
In the long run, it worked of course, and by 2013, Starbucks had over 21,000 stores and revenue of $15 billion. Howard’s description had become a reality. Of course, those who didn’t see the full vision may be drinking something stronger than coffee whenever they think about how an investment of $10,000 in the Starbucks IPO would be worth 1$64 million today!
Tom Stemberg is another successful entrepreneur I interviewed for Invent Reinvent Thrive. Tom’s vision wasn’t about coffee, but ballpoint pens—and paper, and typewriter ribbon, and other office supplies. In the 1980s, he saw the need for a more accessible store that carried large quantities of the most-needed office supplies—or the staples—at more affordable prices. Tom eventually transformed that vision into Staples, the original big-box office-supply store. But first Tom had to convince others of the vision’s merit.
That wasn’t easy. The stationery industry was already seen as mature at the time, and many new entrants had failed. “Don’t do it,” people warned Tom. The CEO of United Stationers called the idea “horrible.” But Tom persisted, telling potential investors about the benefits of a large office supply store, drawing parallels to wholesale clubs like Costco and Sam’s Club, based on his extensive homework (including relentless questions about how much potential customers like law firms spent annually on office supplies and insights about how little they understood about their own expenditures and needs). Without building a single store, Tom was able to obtain financing from Bain Capital by convincing its head, Mitt Romney—later, the 2012 US presidential candidate—of his vision’s value.
The bet paid off, and Staples grew to 2000 stores and 50,000 employees worldwide, with almost $25B revenues in 2013, representing about 40% of the office-supply market, despite the presence of many competitors.
Howard Schultz and Tom Stemberg were able to get others to believe in their visions through description. (Their stories are told more completely in Invent Reinvent Thrive). Sometimes, that may not be enough. In the next blog, I’ll discuss how some entrepreneurs have succeeded by demonstrating the value of their vision to investors, customers, and others.