Earlier this spring, Howard Schultz spent a morning at Harvard Business School with students in Nancy Koehn's popular class, "Power and Glory in Turbulent Times: The History of Leadership, From Henry V to Steve Jobs." Inc. sat in on the discussion. Edited  excerpts from Professor Schultz's life lessons:

What went wrong at Starbucks a few years back?

From 1987 to 2007, we were on a magical carpet ride. Everything worked out well. But growth and success covered up mistakes, creating a deep sense of entitlement and hubris. The company started to reward the wrong things--financial metrics tied to the stock  price and the albatross of comp-store sales, rather than the values that inspire our people.

What is innovation?

We had become great at milking the cow. Frappuccino is a billion-dollar brand. But a line extension creates only incrementality. Innovation is having the courage to make bets on new categories and experiences. The future of Starbucks is linked to our ability  to create game-changing innovation.

What makes a leader?

Sometimes, you're not prepared for the event but the event prepares you. I remember an assistant NBA coach telling me, "You can't teach height." The analog is you can't teach heart. I love to surround myself with people who have heart and conscience.

How much do your views factor into the social positions Starbucks stakes out?

I have a fiduciary responsibility beyond my own political views. But I do believe that the rules of engagement for a public company have changed, and there's an opportunity for businesses to demonstrate a role in society that's beyond profitability and shareholder  value. We yield on the side of making our people proud. It galvanizes our organization.

How do you look at the competitive landscape today?

I have always felt Starbucks needs to be a market maker in products, environment, store design. We control our destiny. I don't spend a lot of time on the competitive set.

How personally do you take business?

Starbucks is not in business for Howard Schultz. Howard Schultz is in business for Starbucks. The company will evolve and survive long after me, because it's built for that. But I'm not going anywhere anytime soon... I love this company so much. My emotional  state in relation to the company is beyond normalcy. It's a fanatical feeling.

What have you learned about yourself overthe past six years?

With so many competing voices, I learned to trust my own intuitive sense. There was pressure in 2008 to franchise Starbucks or to sell the company. Or to cut costs in a way that would fracture the culture. If you believe in what you stand for as an enterprise--and  you're willing to admit vulnerability--you have a chance to come out the right way.

Any life advice?

Don't settle! Embrace a dream--and keep dreaming. Don't be a bystander. Take it personally.