The Apple effect: How Steve Jobs & Co. won over the world
UPDATE: Steve Jobs passed on Wednesday. In this cover story, first published last month, Alan Webber explores what made Steve Jobs (and Apple) exceptional. Apple knew what consumers didn't want and understood the power of being itself. A look at what the company can teach corporate America.
AP Photo/John Kehe illustration
Santa Fe, N.M.
The one and only time I met Steve Jobs was back in 1991. I was managing editor of the Harvard Business Review (HBR), and I'd made the trip from Boston to Silicon Valley to see for myself what was going on. I'd just wrapped up a presentation in one of the classrooms at Stanford University in Palo Alto, Calif., when Mr. Jobs materialized and started a conversation.
"That was a great article," he told me. "One of the best things I've ever read. It's absolutely right. It's not computers. It's computing."
He was talking about an article that we'd just published in the July 1991 issue of HBR, a piece written by Andy Rappaport and Shmuel Halevi called "The Computerless Computer Company." It was a provocative piece that came at a time when the United States was nervously watching Japanese companies win more than 40 percent of the American market for laptops, assert leadership in the production of memory chips, and rival US companies in the production of supercomputers.
Don't worry, the piece argued. The future isn't in computers. It's in computing. "Defining how computers are used, not how they are manufactured, will create real value – and thus market power, employment, and wealth – in the decades ahead," the authors wrote. "A computer company is the primary source of computing for its customers."
The future, in other words, is a verb, not a noun.
That insight, it seems to me, is at the heart of Apple today.
The computer is a thing, but what people want is not a thing, but to do things.
Armed with that strategic insight, Jobs has turned Apple into the most admired company in the world, according to Fortune magazine, for four years running. He has made it the world's favorite entertainment hub, listening hub, reading hub, watching hub, you-name-it hub.
At the core of Apple's strategy is the insight that apps are the future – because apps are verbs turned into code.
Sure, it's important to have the hardware to give those apps a home. And in true Jobs fashion, the hardware should be incredible, the devices perfect! They should come from a design sensibility that recognizes that design itself is a verb – an experience. Look and feel, touch and sound, the user experience is baked into the DNA of Apple – and that experience is treated obsessively in the way Apple does business.
Or that's how it seems to me, looking back across 20 years of business and economic history from that one encounter on the Stanford campus. More recently, Apple has topped the news for three unrelated but fascinating reasons.
First, Apple, which despite its 45,000 employees still seems to many observers to be some kind of upstart operation, briefly topped ExxonMobil as the most valuable company in the world – an achievement almost shocking enough to make the famous "1984" Super Bowl ad look more like a prophecy than a commercial.
Second, with the US economy mired in an unrelenting recession and the US government unable to resolve its debt-ceiling woes, the suggestion was floated that Apple, with its huge cash reserves of $76 billion, was actually in a position to bail out the federal government.
And third, there came the announcement from Jobs that he was stepping down (or more accurately, stepping up) from his job as chief executive officer to be chairman of the board. Jobs's announcement, more than the other two events, triggered questions, speculation, and an outpouring of concern for both Jobs and Apple.
Just how serious is Jobs's ill health? What are the implications for Apple of his decision to remove himself from day-to-day operations? How strong are Tim Cook and the rest of the team? Can they keep coming up with the incredible string of magic devices and experiences that Jobs has produced since his return to the company in 1997?
Good questions, all of them.
But there may be another question, even more relevant: As Jobs leaves his CEO post, marking a milestone in the long, strange trip that has always been the Apple journey, what can the rest of American business learn? If we were to use this transition at Apple as a chance to reflect, are there management lessons, lessons of philosophy and practice, that US (and other) companies can benefit from?
After all, in the 20 years since Jobs lauded that HBR article, the US economy and large US companies have come full circle. Back then, as Mr. Rappaport and Mr. Halevi reported, we were worried about the challenge from Japan. Today, it's China looming as an economic rival that dominates the headlines. In 1991, manufacturing jobs were moving overseas and the concern was the hollowing out of American industry. Today, with 9.2 percent unemployment, much of it due to losses in the US manufacturing base, those concerns have become a reality.
We have an economy that seems locked into recession, companies that make huge profits without producing goods or services that amaze and astound customers, and workers who, if they are fortunate enough to have jobs, report overwhelmingly that they hate them (unlike the Apple story, where people love their jobs and customers express their admiration for their other Jobs – Steve).
Once again, it seems, we've come to what legendary former Intel CEO Andy Grove called a "strategic inflection point": a time when a major change in the competitive environment requires a company – or an economy – to make a major adaptation to new circumstances, or risk extinction. Change or die.
So what can Apple teach us going forward – not for Apple's sake, but for ours?
"A better question might be what Apple can't teach American business," says Prof. Bob Sutton. Dr. Sutton has taught at Stanford for 28 years, grew up in the area, and even remembers as a youth delivering pizzas in Silicon Valley before it was Silicon Valley.
"The mantra of reinventing management from Peter Drucker to Gary Hamel has been to preach decentralization and transparency," Sutton says. "And then there's Apple. It's amazingly centralized and nontransparent, not from the outside and not even from the inside. In some ways, Apple has thrived because it's a contrary organization. It's centralized, but the pieces all fit together. Information does come up from the bottom and reaches the top. There's very strong punishment and reward control. It has a narrow product line, so the focus is clear and management isn't overloaded."
Another false trail that some people follow from Apple: the "cool company" concept.
"Apple's cool, but that's not exactly something others can learn how to do," he says. "And besides, there have always been cool companies, and they always flame out or cool off."
At the same time, Sutton says, so many American companies are so bad – and have deservedly earned their customers' scorn for being so bad – that Apple does provide some practical lessons.
"Do simple things well," Sutton says. "It sounds easy, but it's really hard. Get rid of dysfunctional politics. You can see how that has tormented large American companies, like the auto industry. Let outliers into your organization; welcome diversity. The fact is, Steve Jobs couldn't get hired in most American companies, much less be the CEO. He couldn't pass through the interview screens. Stay curious. Cultivate peripheral vision in your organization. Learn how to reframe your own offerings by looking both broadly and deeply across other industries. Recognize what you don't know and find others who know more than you. Build a team at the top that has real power and talent. And don't underestimate the power of strong cultural control. Find a way to create the old-fashioned unity of purpose."
I call Regis McKenna, the dean of marketing and public relations in Silicon Valley. Mr. McKenna's involvement with Apple and Jobs goes back to 1977, when Jobs hired Regis McKenna Inc. for marketing help on a referral from Intel. By 1977, McKenna had already worked with two semiconductor companies in the valley. One of the first things his firm did for Apple was to design the company's logo – the famous "rainbow" apple with a bite out of it.
"Apple may have been founded in the mid-1970s," McKenna tells me, "but the company and Steve are both children of the 1960s. Bob Dylan may have said, 'Don't trust anyone over 30,' but Steve Jobs said, 'Don't trust a computer you can't lift.' Steve has carried that identification with him, and it's part of the culture. It was the basis of the 'Think Different' ad campaign that featured the iconic figures of the 1960s. Another part of that 1960s sensibility: Apple has always gone beyond the traditional system of commercial values."
The point McKenna is making is a crucial one, because it goes to the culture – the soft stuff – that is embedded in Apple's DNA. The company is built on the proposition that the status quo is the enemy. That big and boring and dull – whether as a description of a company's products and services or as a way of working – are simply bad. Bad for innovation, bad for people, bad for customers, bad for business.
"Apple has always had a rebellious culture, even as it's grown in size and success," McKenna says. "But it has always rebelled in a way that makes it a corporate model based on style and class and design. That also makes them uniquely American, a company that reflects the style and character of this country."
The value of those values is reflected in the people who come to work at the company, what they bring with them, and what they hope to accomplish there. According to McKenna, when Jobs came back to Apple in 1997 he found a workforce that had gradually come to look like, feel like, and work like the people in typical large American companies. They had reverted to the default setting of business as usual.
"Steve immediately went after that problem," McKenna says. "It was critical; he had to fix it. He streamlined the organization, got rid of competing teams, returned Apple so people were fighting for the company instead of fighting against each other."
But the most important lesson from Apple, according to McKenna: Look at things in unconventional ways. "Whether it's product design or the overall customer experience, Apple always tries to do it differently, and do it better," he says. "Innovation allows you to get a premium from the marketplace. And no matter how good you are, you can always do it better. Apple shows the value of always striving for perfection."
It sounds to me as if Apple is the quintessential "fast company" – a concept my editorial partner Bill Taylor and I invented when we launched Fast Company magazine in 1995. The idea was that there were a set of critical attributes that could make your company "fast": dynamic leadership at the top and leaders at all levels; a great design sensibility; the ability to outthink, out-innovate, and out-implement the competition; constant curiosity and a thirst for learning. At the time, we said that a fast company was the business equivalent of a mythical beast – a corporate unicorn. There were no real fast companies, but lots of companies that had many of the attributes. Does Apple come the closest to being that mythical beast?
I put the question to Keith Yamashita, the chairman of SYPartners, a San Francisco-based consultancy that helps leaders find the true aspiration of their company and then live up to it. He remembers his introduction to the world of Apple: It was 1984, and his father, an engineer who had worked on the Apollo moon mission, was invited to a private showing of the Macintosh. Mr. Yamashita went with him, and later, when he enrolled at Stanford as a student, bought a 128k Mac, "and that thing changed my life." After graduation, he went on to work at both Apple and NeXT Computer, the company Jobs founded after being ousted from Apple in 1986. He's had a lifelong connection with Apple.
So, I ask him, is Apple the quintessential fast company? Does it try to outthink, out-innovate, out-implement the competition?
"I'm not sure Apple even thinks about the competition," Yamashita says. "They're uniquely themselves without worrying about anyone else. When I worked for Steve there was little discussion about the competition. The aim was for us to be the most extreme version of ourselves. When you adopt that approach, it causes you to think about things in a different way."
The goal, Yamashita says, is to be true to the uniqueness of the enterprise. Too many companies get caught up studying their competitors, benchmarking their rivals. The result is an incremental approach to innovation: "If they did this, we need to respond with that."
"Apple's focus is on out-executing themselves, not the competition," Yamashita says. "Most companies push themselves within the boundaries of what they think they can already achieve. American business today is 'settling.' Companies are content to take their 2 percent growth within the envelope of what they know they're already capable of doing, stealing a little market share from someone else. It's kind of sad. Apple raises the bar on its own contribution to the world step by step."
Apple's greatest strength, Yamashita says, may be its "obsessiveness." Obsessiveness about everything.
"Apple is obsessiveness to the power of 10," he says. "And you see it everywhere. It's in things that are immediately visible, like the retail stores. They spend more on tenant improvements than anyone: stone floors, not wood floors; glass tables, not plexiglass. But it's also in things you don't ordinarily see: Apple has the most symmetrically laid out motherboard in the industry. They're obsessive about the supply chain, obsessive about the design of the product, the packaging."
Yamashita tells the story of Jobs's walk-through before the opening of the first Apple Store. At the time, Apple was selling iMacs, the candy-colored computers that came in different "flavors." Jobs walked into the store where the computers were lined up flawlessly on a table, took one look at the display, then ordered the computers taken off and the table turned upside down. Then he pointed at a seam on the bottom of the table and pronounced it "unacceptable." Of course, customers would never see it. That wasn't the point. The point was it was there. The point was not to allow an imperfection. The point was not to give up on the Apple dream.
"Apple has always been on an ongoing journey to be its best self," Yamashita says. "Its marketing mission is to help Apple customers get the most out of their Apple products, to equip and enable their customers to be their best self, too. That kind of thinking has led to online tutorials, lessons at the Apple Stores, 'genius bars.' What other company would hire 12,000 experts and then not charge customers a penny to talk with them?"
The ultimate lesson from Apple?
"All the pieces have to fit together," Yamashita says. "For Apple to be its best self, it has to be about its customers also being their best selves. Apple is aspirational and iconic. But its message to its customers is, 'You are, too.' "
American business is looking for something today, as are American consumers and workers. Change is in the air – in challenges from companies and countries around the globe, in a world where business, politics, society all seem to be changing rapidly, unpredictably, simultaneously. It is a global strategic inflection point we're all struggling to adapt to.
Can Apple offer some useful ways of thinking and working differently? Ways that apply to these challenging times?
There's no formula, but there are Apple lessons: Keep innovating and evolving. Keep raising the bar on yourself and your own possibilities. Keep learning and seeking. Keep obsessing about how to be your own best self. And most important, always remember that it's better to be a verb than a noun.
• Alan M. Webber is former editorial director of the Harvard Business Review, cofounder of Fast Company magazine, and author, most recently, of "Rules of Thumb: 52 Truths for Winning at Business Without Losing Your Self."