Bravo, Mr. Schultz.
Instead of delivering a detailed and long list of his planned turn-around initiatives, Howard Schultz, the returning CEO and Chariman of Startbucks surprised most financial analysts by announcing that the company would provide less, not more, information about its initiatives and short term results during what he acknowledged would be “a difficult” turnaround period. Mr. Schultz also announced that Starbucks would discontinue providing same store sales figures to the street and would no longer offer earnings guidance.
In adopting this strategy towards the financial community, an approach that is widely considered to be risky to his longevity as CEO, Mr. Schultz acknowledges the competing imperatives between running a business with a long term brand-building point of view and those suggested when attempting to satisfy Wall Street’s acknowledged short term appetite. The financial community thrives on minute-to-minute predictions, quarter to quarter results and it is not uncommon for an analyst who may never have sipped a cup of coffee in a European café to offer quick solutions for Starbucks’ problems.
Recognizing the difficulties of having the financial community hovering over his shoulders during the turnaround, Schultz seems to have opted to pull a curtain around his company, focus his attention on what needs fixing in the business and address those difficulties. He wants a little privacy and the opportunity that this would give him to implement his plans. This is smart. He wants and needs the flexibility to intelligently experiment with new approaches, to examine the company’s core strategies,to right the company’s course to achieve those strategies, and possibly to make a few mistakes along the way.
Schultz also seems prepared to take advantage of the company’s movement into the international markets. While reducing Starbucks’ exposure to the domestic, US, market and closing underperforming assets, Schultz wisely looks toward the international markets to maintain his growth momentum. If successful, Starbucks will be stronger in both the US and abroad.
While it is by no means certain that Schultz will succeed, shareholders who remain patient will at least have the opportunity to experience whether Schultz' vision, executed without detours to accommodate short term financial community exigencies, is as correct as it was when he originally built the company. And whether or not he is able to turn the company around, Starbucks will have been given the opportunity to understand whether its core brand strategy, its central theme that there is a market for a unique and luxury coffee experience, has can provide the foundation for a successful business.
