book review

How Starbucks got its groove back

March 24, 2011: 12:41 PM ET

In his candid new book, CEO Howard Schultz tells what went on behind the scenes in Seattle, and what he learned from the company's mistakes.

By Anne Fisher, contributor

FORTUNE -- Sometimes, it's the little things that drive you crazy.

In the summer of 2007, Starbucks (SBUX) was in the middle of its worst year ever.

Starbucks CEO Howard Schultz

Having stepped aside as CEO 7 years earlier to become a Bill-Gates-like, hands-off chairman instead, founder Howard Schultz often peered wistfully through the windows of closed-door conference rooms, "feeling like an outsider looking in," he writes in his new book (with co-author Joanne Gordon), Onward.

That would probably have been tolerable if the decisions cooked up in those conference rooms weren't so disastrous. But they were. Starbucks' day-to-day store traffic was "in free fall," Schultz recalls, tumbling to levels not seen in the company's 40-year history. The coffee leviathan had spread itself too thin, opening too many stores too fast,  expanding willy-nilly into alien territory like the music business, and neglecting to build an online presence that could have given the company a way to explain some of its actions to its many critics.

Starting in February 2007 -- when Schultz wrote an infamous memo complaining about the "commoditization of Starbucks," which promptly got spattered all over the Internet -- the company's once-stellar stock began to slide, losing 42% of its value by the end of the year.

The last straw, however, was a small, irritating detail: The smell of burnt cheese. More

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