Howard Schultz has a savior complex.
For a quarter century, Schultz has either been running Starbucks or watching a hand-picked successor fail at it. He would set a strategy and, when the strategy failed, come riding to the rescue with a new strategy.
You find this savior complex everywhere. You find it in sports, you find it in politics, but you especially find it in business. Someone decides they’re essential and sabotages anyone who might prove otherwise.
A wise leader surrounds themselves with people who are smarter than they are, they nurture their underlings in hopes one can outdo them. A stupid leader sabotages those underlings, and any successor. This is what Brian Krzanich did at Intel. It still might kill the company.
In the case of Starbucks, Howard’s act was getting tiresome. What Starboard Value and Elliott Investments did, buying a huge hunk of stock, then hiring Brian Niccol from Chipotle for ridiculous money, was less about Brian than Howard.
Laxman Narasimhan was the last straw for the money guys. He was a manager, like his predecessors, when what Starbucks always needs is an entrepreneur, because the business is constantly changing.
Besides, Schultz’ latest reinvention, made during Covid, turned Starbucks from a place into a product. You can’t hold meetings or do serious work in the new stores. They’re too small and they don’t want you there. No one is standing behind the counter waiting to slowly execute the perfect cup of coffee for you. It’s practically a soda fountain.
If it is a soda fountain, there are better soda fountains. Dutch Bros offers better coffee drinks at a lower price point. Hundreds of “boba shops” offer both coffee-and-tea based drinks, with dozens of flavor options and those cute little tapioca balls you suck up with the straw. Luckin is doing serious damage to Starbucks in China. Coca-Cola now owns Costa Coffee. Literally thousands of entrepreneurs offer the comfy chairs and community that Starbucks abandoned.
The Niccol Era
Howard wanted to swoop in again, but the private equity guys shortstopped him. What Niccol’s extreme salary, and plane-based commutes, represent is a repudiation of Howard’s silly games. Niccol can now reinvent the chain for 2025, as he reinvented Chipotle after its e.coli scandal. Note that the private equity guys have already gotten their money back from the Niccol investment, thanks to a run-up in the stock.
What will Niccol do? He’ll probably start by slimming down the menu and adding upcharges on the “off-menu” drinks, to improve operations. Franchising the coffee break operations at office buildings and colleges holds promise. They’re doing some of that but could easily do more.
Niccol might also look at things Schultz failed at, like food. The pastries at Starbucks are horrible. Quieting the rush and turning down the lights might let Starbucks extend its hours, because non-drinkers need a place they can go in the evening.
In other words, there are all sorts of opportunities.
Just not with Howard at the helm.
