Book summary “Onward”: summary

Introduction

You face the immense challenge of guiding an enterprise through a severe economic downturn while it suffers from self-induced wounds caused by overexpansion. Rapid growth and a relentless pursuit of short-term financial metrics can strip a beloved brand of its soul, alienating core customers and frontline workers alike.

Howard Schultz addresses this crisis in Onward, detailing how he returned as chief executive officer of Starbucks to halt destructive expansion, reawaken the foundational emotional connection with customers, and execute a comprehensive rescue agenda. The book explains how to make agonizing decisions, such as closing hundreds of stores, cutting structural costs, and retraining employees without losing the human values at the center of your business.

You will discover how to transform a struggling organization through structured operational changes, digital innovation, and disciplined global expansion. The following questions are answered within this book:

• How do you diagnose deep operational flaws hidden beneath rapid revenue growth?
• What steps restore passion and accountability among frontline workers during a crisis?
• How do you cut costs aggressively while preserving the core values of your brand?

1. The Crisis of Growth and the Leaked Memo

During a business trip to Milan in 1983, Howard Schultz observed baristas creating theater, engaging customers, and fostering a sense of community over espresso. He envisioned bringing this romance and the third place concept to the United States.

Starbucks positioned itself as the third place, a social yet personal environment between home and work where people can connect.

By recognizing that home is the first place and work is the second place, Starbucks created an environment that serves as a community hub where diverse groups of people can read, converse, work, and find human connection. Visitors to coffee shops include business people, parents with strollers, students, couples, and people sitting in front of laptops building businesses or writing books.

The Third Place

Hypergrowth and a focus on efficiency caused Starbucks to lose its soul, prompting Howard Schultz to write a leaked internal memo warning of brand commoditization. In February 2007, Schultz wrote a confidential memo to leadership arguing that tall automated espresso machines blocked customer interaction and removed theater, bagged coffee storage killed the coffee aroma, and streamlined store designs made shops look sterile. Schultz wrote a memo titled The Commoditization of the Starbucks Experience from his kitchen table on Valentine's Day 2007, which subsequently leaked and caused a public furor.

The Commoditization Memo

When Schultz's memo was posted on a gossip website, it quickly spread to mainstream media and caused a whirlwind of speculation. While painful and a breach of trust, it eliminated taboo topics and allowed partners to openly discuss the myopic push for rapid growth at the expense of the core experience. The memo first appeared on the blog Starbucks Gossip in February 2007 and was subsequently picked up by The Wall Street Journal, The New York Times, and other major outlets. In 2007, Starbucks had a market capitalization of approximately 24 billion dollars, down from 250 million dollars when it went public in 1992, and served 45 million weekly visitors.

The Leak and Public Scrutiny

Modern technology and social media mean that nothing remains confidential, requiring companies to establish an active, interactive online presence. The leak taught Starbucks that the company lacked the tools to participate in online debates. Apple introduced its first iPhone a week after the memo was written, Google bought YouTube for 1.2 billion dollars in November 2006, and Facebook opened its network to anyone over age 13 five months earlier.

2. A Return to Leadership and Strategic Pillars

When returning to lead a struggling company, a leader must focus on the future and take shared responsibility rather than casting blame.

Howard Schultz made two core commitments upon returning: to link heritage with innovation rather than merely dwelling on history, and to avoid pointing fingers at past mistakes while sharing responsibility for the crisis and instilling confidence. On January 7, 2008, Schultz unlocked Starbucks' very first store in Pike Place Market to reflect and set these personal commitments before starting his first day back as CEO.

Returning Founder Commitments

Faced with plunging store sales and declining performance, Schultz secretly prepared his return as CEO. He enlisted outside crisis communications experts at Kekst and Company on Madison Avenue, guided by lead director Mike Ullman, and confided in trusted insiders like Chet Kuchinad and Wanda Herndon to orchestrate the public announcement and management shakeup. Schultz also traveled to Manhattan to meet with Jim Fingeroth on the 19th floor, and consulted with Michael Dell in Hawaii regarding his own return as CEO.

Three Strategic Pillars

A comprehensive turnaround requires immediate operational stabilization, emotional reattachment with customers, and foundational structural changes.

Schultz established a near-term navigational blueprint consisting of three pillars to confront a burning platform where US stores generated 70 percent of revenues in 2007, and 800 McDonald's franchises served espresso-based beverages at the time of the announcement:

• Improve current US retail business and slow the pace of new store openings.
• Reignite the emotional attachment with customers centered on store experience and values.
• Make long-term changes to business foundations by reexamining organizational structure and supply chain.

Starbucks evaluated and decided to close underperforming locations for the first time in its history while preserving employee health care and coffee quality as sacred cows. This Transformation Agenda helped establish a reservoir of trust.

Espresso Excellence Training

To improve retail performance and customer experience, a company must massively invest in frontline employee training and product standards.

Recognizing that turnover and lack of proper training had led to inconsistent service, Schultz committed to retraining thousands of baristas and temporarily shutting down operations to focus entirely on craft. Starbucks announced it would close all US stores on a single day for an in-store education and training event:

• Retrain 135,000 baristas in espresso beverage preparation.
• Close all US stores on a single day for an in-store education and training event on February 26.

3. Elevating the Core and Fixing Operations

A company must eliminate destructive short-term metrics like same-store sales, remove products that conflict with the brand identity, and enforce rigorous operational execution.

Eliminating Same-Store Sales

Schultz stopped reporting same-store sales because the compulsive focus on maintaining a long streak of positive comps drove poor business decisions, such as selling non-core merchandise like stuffed animals just for incremental gross margins, which drifted the company away from its coffee foundation.

Schultz was appalled to find wide-eyed cuddly toys for sale in a Starbucks store simply because a manager defended them as great for incremental sales and high gross margins. The business had previously achieved nearly 200 straight months of positive comps and 16 years of 5 percent or better comps prior to the decline. Those metrics dropped to 1 percent same-store sales growth in the first quarter of fiscal 2008, the worst performance since going public in 1992.

The Breakfast Sandwich Conflict

While warm breakfast sandwiches drove sales and profit, heating them in ovens caused cheese to melt and release a pungent, burnt smell that overpowered the rich coffee aroma and ruined the Italian espresso bar romance. This created deep internal friction between pursuing customer data versus protecting brand essence.

Schultz argued with Michelle Gass and Jim Donald over removing the breakfast sandwiches, while an internal aroma task force experimented with ovens, cleaning procedures, and ventilation systems to eliminate the offending smells.

Get In the Mud

Schultz realized that Starbucks had grown so large that leaders focused on macro metrics like global store counts while ignoring local operational flaws, necessitating a return to foundational, detail-oriented execution.

Schultz placed a poster of dirt-smudged hands with the caption "The world belongs to the few people who are not afraid to get their hands dirty" on the Starbucks boardroom wall. He had received 5,600 e-mails directly from partners in his first month back as CEO while managing a nearly 10 billion dollar valuation of the company at the time.

Schultz discovered the Clover brewer in an independent coffeehouse and realized its vacuum-pot technology preserved coffee's tasting oils while offering the theatrical customization previously reserved only for espresso drinks, prompting him to acquire the Coffee Equipment Company.

Schultz visited an independent coffee shop in New York City and paid $6 for a cup of brewed coffee made by the Clover machine, which tasted as rich and sparkling as a French press. Engineer Zander Nosler was 32 years old when he quit his job to invent the Clover. The Coffee Equipment Company had sold 150 Clovers by 2007, all handmade, and had 11 employees at the time of acquisition.

After consumer taste tests showed preference for smoother, more consistent brewed coffee, master blenders used proprietary roasting technology and rigorous testing curves to create a blend that was approachable yet maintained the company's bold roasting philosophy. Andrew Linnemann and his team developed Consistent Brew 19 after testing nearly 30 recipes, eventually launching it as Pike Place Roast.

• Grind beans fresh in stores instead of delivering pre-ground coffee in sealed bags.
• Enforce a maximum hold time of thirty minutes for brewed coffee.
• Offer Pike Place Roast daily as the primary brewed coffee alongside a rotating bolder alternative.

Starbucks used 3 percent of the world's highest-quality arabica beans for these products. Raw green coffee beans arrived in 154-pound burlap bags.

4. The Transformation Agenda and Seven Big Moves

Aligning an enterprise during a crisis requires an unscripted global leadership summit and a structured one-page roadmap anchored by seven big moves.

Global Leadership Summit

On March 4, 2008, Starbucks gathered 200 of its most senior leaders from around the world without a prior agenda. This historic summit confronted past mediocrity and internalized a newly evolved strategic plan. Just a week prior, 7,000 US stores had closed for espresso training.

Leaders broke into groups to visit retail shops like Pike Place Market and Beecher's Handmade Cheese. They evaluated customer experiences from the consumer perspective.

Schultz and company leaders updated the 25-year-old mission statement to capture future ambitions. Leaders stood up one by one to read sections covering coffee, partners, customers, stores, neighborhoods, and shareholders. Schultz signed over 150 printed mission statements for attendees at the end of the summit.

Seven Big Moves

A comprehensive transformation plan must be structured around distinct, actionable strategic pillars that span from core product quality to economic sustainability.

The Transformation Agenda was anchored by an aspiration statement and seven specific big moves. This plan was distilled into a concise, one-page roadmap that was displayed on oversized cardboard boxes at the summit. At the time, Starbucks held less than 1 percent share of the global coffee market.

• Be the undisputed coffee authority.
• Engage and inspire our partners.
• Ignite the emotional attachment with our customers.
• Expand our global presence—while making each store the heart of the local neighborhood.
• Be a leader in ethical sourcing and environmental impact.
• Create innovative growth platforms worthy of our coffee.
• Deliver a sustainable economic model.

Mission and Benevolence

Schultz empowered internal sustainability leaders to revamp partnerships. Starbucks renewed its relationship with Conservation International to fight climate change in coffee-growing biodiversity hot spots, committing 7.5 million dollars over three years. The burning and clearing of forests contributed 20 percent of the world's carbon emissions.

Using hot-coffee cups containing 10 percent postconsumer recycled fiber saved 78,000 trees annually and removed 3 million pounds from the solid waste stream every year. Sandie Andersen, a Starbucks barista, got tested and successfully donated her kidney to a regular customer named Annamarie Ausnes at Virginia Mason Medical Center.

Starbucks collaborated with Thermoplan to develop the Mastrena, an espresso machine that sits four inches lower on the counter. This design allowed face-to-face interaction while preserving shot quality through advanced automation. Schultz approved the rollout of nearly 20,000 espresso machines in January 2008 after seeing the prototype, leveraging Thermoplan's Swiss manufacturing expertise founded in 1974 by Domenic and Esther Steiner.

5. Restructuring, Cost Cuts, and Supply Chain Turnaround

Facing a macroeconomic downturn, leadership must aggressively cut structural costs, shutter chronically underperforming stores, and fix deep supply chain breakdowns.

Starbucks relied on a core economic model requiring a sales-to-investment ratio of two to one during a store's first year. When economic decline and market cannibalization caused hundreds of stores to miss this ratio, leadership had to take write-offs and shutter unprofitable locations to restore health. Arthur Rubinfeld and Mike Malanga recommended to the board of directors that the company close about 200 company-operated US stores, taking an estimated $50 million write-off for the fiscal year after pulling the plug on 348 planned store openings.

Store Closures and Unit Economics

To rescue a failing business portfolio, you must make the painful financial decision to permanently shutter chronically underperforming locations. Starbucks analyzed its US store portfolio and decided to close 600 stores—three times the originally suggested number—representing 8 percent of company-owned retail and affecting 12,000 positions. Closed locations included a drive-thru in Wichita, Kansas open for barely a month alongside a store in Federal Way, Washington that had served customers for 18 years, with 14 percent of closures in California and 10 percent in Florida.

You must follow specific disciplines when executing closures:

• Calculate whether a store will provide acceptable long-term returns even after operational improvements and economic recovery.
• Provide affected partners with at least 30 days notice before a store closes.
• Transfer as many displaced partners into new roles as possible, aiming to retain up to 70 percent of field and store partners.

Black Tuesday Layoffs

When revenues recede due to operational inefficiencies, a company must cut corporate overhead and nonstore jobs to secure long-term financial survival.

On July 29, 2008—dubbed Black Tuesday—Starbucks eliminated 1,000 nonstore positions, asking 550 people to leave the company, including 180 in the Seattle area. Sean Shanahan, a manager in risk management, confronted Howard Schultz at an open forum about the emotional toll of delivering the layoff news to team members. To handle the cuts compassionately, you should follow these steps:

• Conduct separation meetings face-to-face wherever possible.
• Allow displaced employees to manage their own exits without hovering security guards.
• Provide outplacement assistance, off-site support for benefits, new email accounts, and employee assistance programs.
• Offer fair severance packages based on position and length of employment.

Supply Chain Operations

Rapid corporate expansion without proper specialist infrastructure leads to severe logistical breakdowns that fracture customer and partner trust. Starbucks Supply Chain Operations suffered from a lack of discipline and deep expertise, relying on generalists who learned on the job. In September 2008, distribution failures caused upwards of 100 stores a day in Manhattan and stores in St. Louis to run completely out of basic items, including Ethos bottled water.

Howard Schultz brought in Peter Gibbons to fix SCO, establishing a streamlined three-word strategy focused on core execution. You must organize your supply chain around distinct priorities:

• Deliver great service to all internal and external customers placing orders.
• Lower operating costs.
• Develop internal talent and recruit specialists in transportation, logistics, engineering, and quality control.

6. Digital Transformation, Innovation, and Global Expansion

Enduring companies combine operational discipline with digital customer engagement, category-defining product breakthroughs like VIA, and localized international growth.

MyStarbucksIdea and Digital Networks

Inspired by Michael Dell and Marc Benioff, Howard Schultz built Project Greenstorm in 63 days to launch MyStarbucksIdea.com. The site drew 7,000 ideas in the first 24 hours, 100,000 voters after one week, and 41,000 ideas in the first two months.

You can manage large online communities effectively with specific practices:

• Enlist internal corporate partners from various departments to monitor online posts in their specific areas of expertise.
• Allow the online community to vote and give thumbs-up to suggestions so that moderators can focus on the most popular and conversational posts.

Starbucks also approached 1 million fans on Facebook and 150,000 followers on Twitter. Adam Brotman and Stephen Gillett turned in-store Wi-Fi into a virtual fourth place by offering exclusive content.

VIA Ready Brew

Don Valencia used his freeze-drying science to dehydrate coffee extract into a soluble powder, creating high-end instant coffee. Hornall Anderson designed sophisticated packaging for VIA Ready Brew to overcome negative biases against the word instant. At the New York City launch press conference, journalists unknowingly drank the coffee during a routine tasting before the reveal.

You could purchase a three-pack of VIA for 2.95 dollars or a 12-pack for 9.95 dollars.

China Expansion Strategy

International markets, especially China, represent massive opportunities for future growth. In its 10th year, Greater China had almost 700 stores serving 1.3 billion consumers.

In Shanghai, the team tested local innovations like the Peanut Mocha Frappuccino, Iced Oriental Beauty with Aloe, and Black Sesame Green Tea Frappuccino. Schultz met Helen Fei in Shenzhen, watching her rise from barista to store manager of the quarter and then district manager.

Conclusion

You can successfully navigate a severe crisis and restore financial health by returning to your core values, empowering frontline workers, and executing rigorous operational changes without sacrificing your soul.

To achieve this transformation in your own organization, you should follow these practical rules:

1. Acknowledge painful truths directly and share responsibility with your team when performance fails.
2. Reconnect every operational decision to your original core purpose and values.
3. Protect the human experience and trust of your workforce above short-term financial metrics.
4. Eliminate distractions and unprofitable product lines that dilute your brand identity.
5. Rebuild your operational foundation through rigorous execution, standardized processes, and modern supply chains.
6. Engage your customers through authentic human connection and innovative digital tools.
7. Balance aggressive cost discipline with long-term investments in people and product quality.

10 Key Ideas

1. Howard Schultz observed baristas creating theater and fostering community over espresso during a 1983 business trip to Milan, inspiring him to bring the third place concept to the United States.
2. Howard Schultz wrote a confidential memo in February 2007 warning that rapid growth and automated machines had caused Starbucks to lose its soul and commoditize the customer experience.
3. Starbucks temporarily closed all United States stores on February 26 to retrain 135,000 baristas in espresso beverage preparation and product standards.
4. Howard Schultz stopped reporting same-store sales to eliminate the compulsive focus on maintaining positive comps that had driven poor business decisions like selling non-core merchandise.
5. Howard Schultz established a navigational blueprint consisting of the Transformation Agenda and seven big moves to stabilize operations, reignite emotional attachment, and restructure the business foundation.
6. Starbucks decided to permanently close 600 underperforming stores and eliminate 1,000 nonstore positions to rescue its failing business portfolio during a severe macroeconomic downturn.
7. Peter Gibbons fixed Starbucks Supply Chain Operations by establishing a strategy focused on delivering great service, lowering operating costs, and recruiting logistics specialists.
8. Howard Schultz built Project Greenstorm to launch MyStarbucksIdea.com, a digital network that successfully engaged the online community to collect and vote on thousands of suggestions.
9. Starbucks introduced VIA Ready Brew by using freeze-drying science to create a high-end soluble coffee powder housed in sophisticated packaging designed to overcome negative biases against instant coffee.
10. Starbucks maintained its reservoir of trust and commitment to human values by preserving employee health benefits during the crisis and uniting commercial success with social conscience.