Howard Schultz, and a Lesson in Leadership

It was a rare performance by one of America’s great corporate communicators. On Wednesday, Starbucks CEO Howard Schultz faced a room of more than a thousand anxious shareholders in a display of accountability that we haven’t seen from the failed bankers and insurance tycoons of our nation. In a nearly two-hour performance on the stage […]

It was a rare performance by one of America’s great corporate communicators.

On Wednesday, Starbucks CEO Howard Schultz faced a room of more than a thousand anxious shareholders in a display of accountability that we haven’t seen from the failed bankers and insurance tycoons of our nation.

In a nearly two-hour performance on the stage of McCaw Hall in Seattle, the Starbucks leader faced down the fears of his investors, large and small, and talked about turning his company around in a time of economic distress.

To see him was to believe him. And to believe that America might still have a chance.

In the face of a corporate culture currently paralyzed by fear, Schultz brought his innate optimism and unique sense of social purpose – which he has brilliantly used as a marketing tool – to his audience.

His cause on Wednesday was nothing less than his belief that Starbucks would survive this economic test, regain its authority in the coffee arena, stem the sliding share price of his company and become once again one of the most relevant brands on the consumer and cultural landscape.

But it might well have been a political speech, for Schultz didn’t talk much about profit margins or operating expenditures or layoffs, all of which have been very much on the agenda.

He talked instead about values, about why the company would stick to its core mission even now, and not cut health benefits for its employees, or diminish the quality of the experience of his customers.

He started by showing a film of a meeting last year with 10,000 Starbucks employees in New Orleans, in which they volunteered and rebuilt homes for victims of Hurricane Katrina, while reaffirming the direction of the company. They wrote their own manifestos for improvement on a “commitment wall” and cheered as if they were having a religious experience.

He showed video from town hall meetings they’ve held at Starbucks around the country, some of which he has attended, and an ad that ran ahead of the election offering free coffee to those who told baristas that they’d voted.

He offered meaningfulness, and that resonated.

When Schultz talked about saving $500 million from the company’s operating budget, the auditorium was silent.

But when he showed video of Starbucks’ initiative with campaign Red with U2’s Bono, in which portion of purchases going toward aid for Africa, the room erupted in cheers.

Schultz knows that people will pay more for a product that brings them a sense of meaning. Starbucks coffee – which he insists is not a $4 habit, an impression he promises to rebut in a coming marketing campaign – is worth the price because the customer is buying not merely a jolt of caffeine that you can get at McDonald’s or Dunkin’ Donuts, but the company’s core values.

These include what he called “coffee authority,” (a fantastic term, you have to admit), but also a sense of connection with customers, being sensitive to their worries in a time of economic dislocation.

Schultz grasped long before most of us that consumers now seek meaning in the way they spend their time and their money. If he is right, and we have entered a permanent, new era of frugality, then his message has to be about those values rather than product value.

And he introduced the company’s major gamble on innovation — what he claims is the quality of a brewed cup of Starbucks in an instant coffee, called Via. (Like everything else at Starbucks, this product has a ‘story’ – researched by a university immunologist Schultz hired 15 years ago, who died of cancer, but his research lives on in the coffee. Etc.)

Via is a game-changing opportunity for the company, a chance to reverse the company’s latest fortunes and leave Schultz a legacy of triumph . He identified this market as a $17 billion prize around the world, mainly not in the United States.

Schultz recognized that the media that built him up for so many years has now abandoned him. Starbucks isn’t cool anymore. And he has a response to that too. “We don’t want to be cool,” he said. “We want to be relevant.”

Starbucks is “love,” very simply, he said. And what was more — he meant it.

Full disclosure:  Howard Schultz is a co-founder, but not an active partner, in Maveron, one of the investors in TheWrap.