Wednesday, March 30, 2016

It is not about money . . . and charity

It is about a common purpose, a community sense. “Quote of the Day: ‘When you’re surrounded by people who share a passionate commitment around a common purpose, anything is possible,’ Howard Schultz,” 23rd Mar 2016 . . . And to Starbucks fanatics Schultz is no stranger.

If it isn’t obvious yet, the blog consistently builds on the theme “developing a sense of purpose and community.” And Starbucks can be a best-practice model. If we Pinoys are to overcome our inward-looking bias and develop an honest-to-goodness community sense, we would want to raise our global consciousness. We’re in the 21st century. Otherwise we will always retreat into our shell, into the familiar: parochialism, hierarchy, paternalism, political patronage and dynasties, crony capitalism and oligarchy.

And we know what doing the same thing over and over again comes down to? Yet the inertia of “insanity” is not easy to overcome. We may want to prescribe solutions around techniques (but as every hacker who calls himself a golfer knows, techniques and hi-tech clubs don’t make a golfer.) It is a mind game. It holds for governance and development. And why ours is a culture of impunity and not the rule of law?

The writer learned about it the hard way. Why would a Fortune 500 company trip itself despite all the techniques and resources and talents in the world at their disposal? Even a Nokia or a BlackBerry or an IBM can be undone.

In other words, while we mean well to address poverty and prescribe solutions, we must recognize that if we are restricted by old paradigms like destiny, we can’t move the needle. We haven’t made a dent on poverty, and PH remains the regional laggard – i.e., destiny is a self-fulfilling prophecy.

PH underdevelopment and poverty is not about money . . . and charity. It is about a common purpose and a community sense – or the lack of it – that is, if we are to move from a Third-World to a First-World nation. [It comes from visionary leadership; not hierarchy, not laws, not regulations, not structure.]

“Early on, Schultz set about making his mark on the company while making Starbucks' mission his own. In 1983, while traveling in Milan, Italy, he was struck by the number of coffee bars he encountered. An idea then occurred to him: Starbucks should sell not just coffeebeans but coffee drinks. ‘I saw something. Not only the romance of coffee, but ... a sense of community. And the connection that people had to coffee—the place and one another,’ Schultz recalled. ‘And after a week in Italy, I was so convinced with such unbridled enthusiasm that I couldn't wait to get back to Seattle to talk about the fact that I had seen the future.’

“Schultz's enthusiasm for opening coffee bars in Starbucks stores, however, wasn't shared by the company's creators. ‘We said, 'Oh no, that's not for us,' Siegl remembered. ‘Throughout the '70s, we served coffee in our store. We even, at one point, had a nice, big espresso machine behind the counter. But we were in the bean business.’ Nevertheless, Schultz was persistent until, finally, the owners let him establish a coffee bar in a new store that was opening in Seattle. It was an instant success, bringing in hundreds of people per day and introducing a whole new language—the language of the coffeehouse—to Seattle in 1984.

“But the success of the coffee bar demonstrated to the original founders that they didn't want to go in the direction Schultz wanted to take them. They didn't want to get big. Disappointed, Schultz left Starbucks in 1985 to open a coffee bar chain of his own, Il Giornale, which quickly garnered success.

“Two years later, with the help of investors, Schultz purchased Starbucks, merging Il Giornale with the Seattle company. Subsequently, he became CEO and chairman of Starbucks (known thereafter as the Starbucks Coffee Company).”

Memo: 29 years later, Starbucks’ market cap stands at $86.26-B with revenues close to $20-B.

“After graduating from the university with a Bachelor of Science degree in communication in 1975, Schultz found work as an appliance salesman for Hammarplast, a company that sold European coffee makers in the United States. Rising through the ranks to become director of sales, in the early 1980s, Schultz noticed that he was selling more coffee makers to a small operation in Seattle, Washington, known then as the Starbucks Coffee Tea and Spice Company, than to Macy's. ‘Every month, every quarter, these numbers were going up, even though Starbucks just had a few stores,’ Schultz later remembered. ‘And I said, 'I gotta go up to Seattle.’

“Howard Schultz still distinctly remembers the first time he walked into the original Starbucks in 1981. At that time, Starbucks had only been around for 10 years and didn't exist outside Seattle. The company's original owners, old college buddies Jerry Baldwin and Gordon Bowker and their neighbor, Zev Siegl, had founded Starbucks in 1971. The three friends also came up with the coffee company's ubiquitous mermaid logo.

‘When I walked in this store for the first time—I know this sounds really hokey—I knew I was home,’ Schultz later remembered. ‘I can't explain it. But I knew I was in a special place, and the product kind of spoke to me.’ At that time, he added, ‘I had never had a good cup of coffee. I met the founders of the company, and really heard for the first time the story of great coffee ... I just said, 'God, this is something I've been looking for my whole professional life.’

“Birth of the Modern Starbucks. A year after meeting with Starbucks' founders, in 1982, Howard Schultz was hired as director of retail operations and marketing for the growing coffee company, which, at the time, only sold coffee beans, not coffee drinks.” []

A couple of learnings that must not be lost to us Filipinos: (a) look ahead and into the future and (b) move up the value chain – e.g., in the case of Starbucks, from coffee beans to coffee drinks. Coffee lovers know that coffee offers an array of choices or coffee-drink experiences that would represent the value chain.

The value chain – and the higher the better – is where an enterprise must demonstrate its competitiveness and sustainability. It is where healthy margins are attained – and wealth generated.

This is the mindset that we sorely lack in Philippine industry and why we're not competitive – and continue to be confounded by unemployment and poverty. [But then again, that comes from visionary leadership.]

“Gaya-gaya puto maya.” Imitation may be the highest form of flattery – but it doesn’t hone creativity and innovation. Hierarchy doesn’t either. Oil and water don’t mix – and why the blog in earlier postings discussed “design thinking.” The evidence? (1) PH – we’re not synonymous to creativity and innovation and competitiveness; and (2) “Samsung to reform authoritarian culture to act like startup,” Manila Bulletin, AP, 24th Mar 2016.

“There is a great scope for raising the role of small enterprise in the Philippine economy. I have constantly argued that this is the key to making the country’s economic growth benefit the wider masses of Filipinos more directly, rather than rely on growth driven by large firms to ‘trickle down’ to the bottom. Indeed, why should anyone settle for a mere trickle? What we have always needed, but which has remained elusive, is growth that has much broader direct participation in both the sectoral and geographic sense.

“Small businesses are typically starved of financing, and this has been more particularly so in the Philippines, where the big banks have traditionally preferred to deal with a few large clients than a large number of small ones . . . Small firms are also ill-equipped to keep up with improving technology, as in-house research and development, which large firms routinely provide resources for, is out of reach for a small business.” [Small firms and manifold challenges, Cielito F. Habito, No Free Lunch, Philippine Daily Inquirer, 22nd Mar 2016]

How do we overcome the hurdles confronting small firms?

As some would know, the writer’s Bulgarian friends were the inspiration for this blog. 13 years ago, when he first arrived in Eastern Europe, he found a “cottage industry” operating in an old ex-communist facility. They hadn’t made a profit in 7 years. The one time they did was year-one when they started the business to supply bottle-cleaning detergents to the local brewery – through a friend they had inside the company. The following year, the brewery decided they could buy a better product elsewhere, and they were left with no business to speak of. How many MSMEs have had such a disaster experience?

To stay in business, they had to learn to produce other soap and detergent products while borrowing money collateralized by the owners’ (two brothers) very limited assets. “We have to move up to the next level,” was how they explained the dire situation to the writer. What to do? 

“We shall put together and embrace a vision that will be the company’s reason for being. A sense of purpose. We must become the best in the business and the first major milestone is to be a $100-million company. That is [then] the median size of a Western MNC subsidiary. That is what we must be if we are to compete and win against them. We shall present the game plan to several banks. In the meantime, we shall fine-tune the product portfolio that will deliver the future, including how we will do it year in, year out.” 

And the rest as they say is history. Five years ago they were recognized among the best and the fastest growing companies in the EU. Not surprisingly, Western MNCs have come wooing: “what would it take to partner with you?”

It’s not about money. It is about a sense of purpose. [But then again, it comes from visionary leadership.]

“Why independence, if the slaves of today will be the tyrants of tomorrow? And that they will be such is not to be doubted, for he who submits to tyranny loves it.” [We are ruled by Rizal’s ‘tyrants of tomorrow,’ Editorial, The Manila Times, 29th Dec 2015]

“As a major component for the education and reorientation of our people, mainstream media – their reporters, writers, photographers, columnists and editors – have an obligation to this country . . .” [Era of documented irrelevance: Mainstream media, critics and protesters, Homobono A. Adaza, The Manila Times, 25th Nov 2015]

“Development [is informed by a people’s] worldview, cognitive capacity, values, moral development, self-identity, spirituality, and leadership . . .” [Frederic Laloux, Reinventing organizations, Nelson Parker, 2014]

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