President & Chief Executive Officer Starbucks Coffee Company

• Return to Alumni Achievement Awards main page
 

Earlier Education
University of Washington, 1965
B.A., Finance, Economics, Accounting, and Statistics

Other Jobs
Touche Ross & Co., 1969-77, 1980-85
State of Washington, Office of Management and Budget, 1977-80, 1985-87
Northern Air Freight and Danzas Corporation, 1987-90

Why HBS?
"I took a year off from college to work at Boeing. There were rows of engineers sitting at desks. After about six months, I decided I'd rather manage, so I shifted my orientation from engineering to business."

Hobbies
Golf, skiing, reading

Recommended Reading
The Future of Life, by E.O. Wilson
"Wilson is lyrical in his expression of some very complex ideas concerning biodiversity and the fate of life on Earth."

Helping to lead a revolution of beans, rather than bytes, presents exciting challenges for Orin Smith. Not only has Starbucks created a "third place" for the customer between work and home, but it has also launched a number of environmental and community-oriented initiatives. "We have a great culture in this company," Smith observes. "Our partners are given the responsibility to do the right thing."

Over the past fifteen years, as technology altered the business landscape, another transformation swept the globe. This was a revolution of beans, not bytes, and it changed the way Americans drank coffee, a once-innocuous beverage that suddenly presented a tantalizing array of options such as low-fat latte and Frappuccino(r). Starbucks, the Seattle-based company that started in 1971 as a retailer of bulk coffee, tea, and spices, is largely responsible for this new state of coffee consciousness.

Today, the company operates nearly six thousand stores in 29 countries. Stormy weather on Wall Street has left the caffeinated powerhouse virtually untouched. The price of Starbucks stock has climbed steadily over the past ten years, gaining approximately 2,200 percent on the ten-year anniversary of the company's 1992 IPO. Net revenues for fiscal 2002 are forecast at an all-time high of $3.2 billion.

At the helm throughout this dizzying period of expansion have been Howard Schultz, who led a buyout of the original company in 1987, and his longtime colleague Orin Smith, a soft-spoken native of Washington State. "I don't think you can prepare yourself for the kind of growth we've experienced," says Smith. "It's important to establish the fundamentals of general management early in one's career, but sometimes there aren't any precedents to follow. You're simply trying to meet challenges on a day-to-day basis."

Beyond the creation of the modern coffeehouse concept, the heart of Starbucks' strategy, Smith notes, centers on first-mover advantage. That approach has worked well in North America and abroad, as Starbucks, through foreign partnerships, continues to build its presence in Asia, the Middle East, Europe, and now Latin America. Last year, Business Week designated Starbucks the world's fastest- growing global brand.

"We're fortunate because coffee and the coffeehouse concept have cross-cultural relevance," Smith observes, predicting that the company will have a presence in fifty countries by 2005. "Our stores provide people with the opportunity to connect with others, which is much more difficult to do in developed nations." Starbucks met that challenge by creating a "third place" for the customer between home and office, increasing the size of its stores and adding enticements such as soft chairs, fireplaces, Internet access, and the convenience of a prepaid transaction card.

Smith cites the growing role of business in society and the complexities of globalization and environmental concerns as significant developments since his days at HBS. Today's students need a broader education that considers these issues, he says, as well as one that examines the close connections between economies and governments around the world.

"It isn't sufficient that I try to maximize the company's bottom line," Smith says. "Other constituencies affect our success in the long run." Starbucks employees (partners) are at the top of that list. Recruiting and training "great" people is just the beginning; gaining their trust and commitment is equally important. "Without that support, we can't move the company forward," states Smith. That backing, he continues, is earned through a clearly communicated vision that recognizes the importance of partners and commits the company to more than economic success. "Starbucks describes itself as a values-driven company," he explains. "What's most important is that leadership has the integrity to try to live religiously by the values it expresses."

To that end, Starbucks has launched a number of environmental and community-oriented initiatives. In April 2001, The Starbucks Foundation committed to a four-year, $1 million partnership with Jumpstart, a program that pairs college-age tutors with at-risk preschoolers who need help improving their language, literacy, and social skills. Starbucks also joined forces with Conservation International in 1998 to help coffee farmers improve production quality, while minimizing the impact on some of the world's most ecologically sensitive areas. Two years later, the company began to offer "Fair Trade" coffee through an alliance with TransFair USA, a nonprofit organization that organizes coffee farmers, links them directly to coffee importers, and guarantees a premium over the prevailing price being paid on the international market.

Starbucks has been quick to respond in times of crisis, too. When terrorists attacked the World Trade Center on September 11, stores in the area offered refuge to survivors and served complimentary coffee around the clock to rescue workers at Ground Zero, St. Vincent's Hospital, and The Javits Center. "We have a great culture in this company," Smith observes. "Our partners are given the responsibility to do the right thing, and a lot of right things were done that day."

It's easy to hear the note of satisfaction and pride in Smith's voice, and while he's too modest to openly acknowledge his leadership role in Starbucks' phenomenal success, he's too honest to discount the effort it involved. "If you look at our history, the ocean looks pretty tranquil," he says. "But there's a lot of churning going on below the surface. To grow a company as rapidly as we have is unusual, particularly when you consider the fact that our average transaction is less than four dollars."

Smith (who favors Starbucks drip coffee, black) clearly savors that challenge. "If you get the kind of opportunity I've had once in a lifetime," he says simply, "you're very fortunate."