Secrets of Success

‘Never think about money, never work for money. Always think about the product, always work for the product’.

Nicolas Hayek, the founder of ‘swatch’, gave that answer, when asked about his secret of success in 1992. On that day in the swiss alps, ‘swatch’ celebrated the sale of 100 million watches.

The company was founded only 9 years ago.

The spirit of Hayek impressed me and over time, I examined the history of hundreds of corporations.

Each story is different, but there is a fill rouge – when you start a business, you don’t need a lot of money or the perfect strategy yet, but dedication and a customer-service mentality are crucial. And you have to see and grab the chance, when an opportunity offers itself.

I’d like to share with you the remarkably similar story of McDonalds and Starbucks to underscore my point.

Ray Kroc was a salesman for milkshake-machines. In 1954, he had a hard time selling his products because of cheaper competitors.
But he noticed one client, a small barbecue restaurant-chain operated by two brothers in California, who ordered 5 of his multi-mixers.
Kroc could have been just happy with the sale and go on, instead he thought, these guys must have a good business to place such an order. After visiting the two brothers, Maurice and Richard McDonald, Kroc partnered with them.

The year, Kroc met the brothers in California and started to shape the future of McDonald’s, the future boss of Starbucks was just born in New York – and Howard Schultz was born into poverty. When his father, a truck driver, broke an ankle and had no health insurance, the family was left with no income.
Thanks to his football-skills, Schultz got a scholarship and after graduation landed a job at Xerox. He left 1978 to join Hammarplast, a house wares business.

It was at Hammarplast in 1980, when Schultz had his ‘Kroc-moment’. He noticed, his firm was selling more coffee-makers to a small coffee shop in Seattle than to the big department-store ‘Macy’s’ in New York. And the sales went up: each month, each quarter.

The small coffee-shop was ‘Starbucks Coffee, Tea and Spice’, and sold at that time only coffee-equipment or roasted coffee beans but didn’t brew coffee. Schultz wanted to meet the owners of that remarkable business, almost 4000 km away from New York.

In 1981, when Schultz flew to Seattle, McDonald’s already operated more than 6500 restaurants. Ray Kroc had bought the company from the McDonald brothers and transformed their local business model into a global system. The rapid expansion was based on a franchise-system were not McDonald’s, but local entrepreneurs, operate the restaurants and paid a fee to McDonald’s.

Now, many restaurant-chains use the franchise-system – and to produce a hamburger-sandwich, you don’t need to be a genius.
The secret of McDonald’s success was Krocs dedication to standardization and an outstanding customer-service approach.

Kroc demanded, that every burger would taste the same in every restaurant. He set strict rules for franchisees on how the food was to be made, portion sizes, cooking methods and packaging.

Kroc didn’t want the quick buck and rejected easy cost-cutting measures like using soybean filler in the hamburgers.

Strict rules also were applied to customer service standards. Money would be paid back to clients whose orders were not correct served, or to customers who had to wait more than 5 minutes for their food.
(if this latest standard would be taken serious at McDonald’s in Piata Romana, I had every third meal for free)

But back to business and back to Seattle.

Howard Schultz not only visited Starbucks, he stayed there as new marketing director. Starbucks still sold not single brewed coffee, when Schultz went to Italy for an exhibition in 1983.
When he walked through the streets of Milan and detected a caffe-bar on each corner, he noticed a difference between Milan and Seattle: The italian bars not only offered excellent espresso, they also served as meeting places or public squares; they were a big part of Italy’s societal glue, and there were 200’000 caffe-bars in this country.

Schultz returned to Seattle, dedicated to implement this italian style and flavor at Starbucks.

If you ever had the misfortune to drink that colored water called coffee in the US before Starbucks came to town, you knew, this plan could work.

Well, it took a while and Schultz suffered setbacks, he even left Starbucks to open his first caffe bar in 1986. He called it ‘Il Giornale’ after a newspaper from Milan, he saw people reading in the bars. 2 years later he rejoined Starbucks and for the next decades, he would open 2 stores a day on average and Starbucks would become the largest coffee house company in the world.

There is, however, one goal, Howard Schultz didn’t achieved yet. During his expansion around the globe, he always stressed, that the final proof in terms of coffee-quality and the ambition to serve as a meeting point for the community, would be a successful Starbucks in Italy. To this day at the end of February 2016, Starbucks has not opened a single store in bella Italia. Update: first Starbucks to finally open in Milano in early 2017 in partnership with Percassi, a renowned Italian company with a proven track record of operating highly-successful major brand partnerships across Italy.

Swatch, McDonalds, Starbucks: Three concepts, three entrepreneurs, three secrets of success: the product, the customer or the quality.
And, make no mistake, the business is no picknick – to succeed, these guys had to make tough – sometimes ruthless – decisions.
And money? It was not the prime focus all the time – but it came anyway. Each founder became a billionaire.

When thinking about how to open a business, maybe the focus on product, customer and quality is your secret of success too. Especially in Romania, where these values are heavy underdeveloped.

Just like Howard Schultz who brougth quality-coffee to the US so local coffee-drinkers finally could get rid of the terrible ‘regular’ and stormed into Starbucks.

——
If you want to buy shares of McDonald’s, Starbucks (or any other company) you have different kind of orders to choose from. We explore the art of ordering a stock via bank or broker in the next chapter: http://www.theleader.ro/nasty_surprises/