Apple: Life after Steve Jobs?
By Owain Smolovic Jones
New Zealand Leadership Institute, University of Auckland Business School
Beginnings
Apple is one of the world’s iconic companies, its brand, reputation and easy-to-use yet stylish
products. Last year it generated almost $26bn of profit and $108bn of revenue worldwide, placing it
at number 17 on the Fortune 500.
Yet it hasn’t all been plain sailing for Apple. The company’s beginnings are well known. Started as a
project by Steve Jobs and Steve Wozniak, first in Jobs’ bedroom and then, as they progressed in his
parents’ garage in the early 1970s, they eventually launched their first computer, Apple I, in 1976
and captured widespread acclaim with its mission of bringing a simplicity of design and use to a
nascent home computer market. But trouble was brewing, as IBM started to pose an increasing
challenge to Apple. By 1981 Apple’s slow processor speed and the fact that its software often did not
work across other computer platforms led meant that IBM had significantly encroached on Apple’s
early dominance, with Apple’s net income dropping 62 per cent between 1981 and 1984. Steve Jobs
was sacked in 1985.
As Jobs himself has recounted, this was a humiliating and humbling period for him. He almost left
Silicon Valley to pursue an alternative career path. Yet in a wonderful display of resilience, he stuck it
out, eventually forming NeXT computer (later bought by Apple) and Pixar (Jobs later made around
$4bn in Disney shares when the companies merged!). This was typical of a man, who, after all, had
dropped out of college before starting Apple!
Life after Jobs I
But back to Apple … The company actually did pretty well post-Jobs. It managed to carve out a niche
for itself in desktop publishing and educational software and by 1990 was the most profitable
computer company in the world. Further trouble lurked around the corner, however, in the 1990s.
as the price of PCs dropped, Macs seemed comparatively expensive and not value for money. Its
CEO John Sculley was sacked in 1993 and replaced by Michael Sindler. At this point Apple tried to
compete in price, releasing more basic products which the company hoped could compete with PCs.
It didn’t work. The company suffered losses of $69m in the first quarter of 1996. In the mean time
the company had sacked Sindler and had appointed Gilbert Amelio. Under his leadership the
company lost $1.6bn. Yes, that’s right: $1.6bn! This led to claims that Apple was only 90 days away
from bankruptcy. It was desperate.
Which might explain why the board approached Steve Jobs – the man forced out of his own
company by the board back in 1985. Jobs had already started to rekindle relations with Apple,
following the sale of his NeXT project. Yet no-one could be prepared for how Jobs would approach
the future strategy of the company. It was a return to basics – but also a leap into the unknown. The
ethos of elegant simplicity would be revisited for all its products – and yet the reach of the company
would expand beyond its core of home computers.
The return of Jobs
Although widely regarded as an inspirational figure, Steve Jobs was also known for his dark side. A
compulsive workaholic, Jobs demanded the highest of standards from those who worked for him. He
was known for his controlling organizational philosophy. For example, staff members would possess
individual-specific security access cards, enabling them to enter certain parts of the building, but not
others, depending on their level of security clearance – reminiscent of the intelligence services.
Unknowingly, employees were often given simulated tasks in their first months with the company –
until they had proven that they could be trusted. Even minor infringements of confidentiality were
dealt with harshly. In an industry known for its litigiousness, Jobs was the most active of them all,
tirelessly chasing competitors through the courts if he felt that Apple’s intellectual property had
been infringed upon. In production, Jobs was well known for chasing efficiencies, and managed to
reduce the cost of production of a single iPhone unit from around $220 to $188 between iPhone 1
and 2. This backfired when the employment practices of one of Apple’s partners in China, Foxconn,
was exposed as infringing the rights of workers, according to Chinese employment law. The issue
drew public attention following a series of deaths and suicides of Foxconn workers.
Moreover, although Jobs is known as someone who made his fortune in high-tech industries, it was
reliance on good, old-fashioned high street marketing which sealed Apple’s position as a giant in its
markets. Apple made the strategic decision to sell and promote its products through a series of highstreet stores, as well as online, with the company investing in 300 stores in 13 countries. The theory
was that the value-added of Apple lay in the functionality, as well as the style of its products. If Apple
managed to get customers inside the doors of its stores, they would be able to get their hands on
Apple products and would be more likely to buy add-ons to existing Apple products. In addition, it
was felt that the success of the iPhone could be leveraged in order to tempt consumers to buy other,
more expensive Apple products, such as its high-end home computers and laptops. The strategy
seemed to work, as Apple believed that by 2011, more than half of its new Mac sales were to new
customers, who had been won over through cross-marketing of products. Existing iPod and iPhone
customers who valued their products, would wander into an Apple store and become equally
entranced by the computers.
The iPhone was a classic example of both the visionary and the controlling Jobs. The iPod had been a
revolution in the home electronics market (note, that in 2012 Apple has 70 per cent of the US
market in legal MP3s), changing the way we thought of private music consumption in an even more
dramatic way than had previously been achieved by Sony’s Walkman. Yet Jobs was not satisfied and
was concerned with the possibility that Apple may stagnate. This meant leading change – not when
the company was in trouble, far from it. But at a time when the company was doing incredibly well.
“If you don’t cannibalize yourself, someone else will,” was Jobs’ famous justification for butchering
his own iPod market with the introduction of the iPhone.
The mobile phone industry was known for operators exercising tight control over contracts with
phone manufacturers. Yet Jobs broke the mould. When the iPhone was launched in 2007 he
negotiated a series of exclusive contracts with a single operator in each country – with O2 in the UK
and AT&T in the US. In an unprecedented deal, AT&T agreed to passing control of distribution,
pricing and branding to Apple. As Apple switched to a multiple provider model, it leveraged its
market success by negotiating a series of equally lucrative deals.
Although Jobs was famed for his tight control of the business, it is also worth noting that he would
delegate significant power – at least when he trusted the employees. Of course Steve Wozniak
played a major role in the success of Apple. Commentators have suggested that the now CEO Tim
Cook led the huge growth in volume of Apple products. Ron Johnson was a retail expert who led
Apple’s high street strategy. Most importantly, perhaps Jobs handed full control of the design
process (iPod, iPhone and iPad) to Jonathan Ives. It might take a lot to earn the trust of Jobs, but
once there, his colleagues would be allowed considerable freedom.
Life after Jobs II
Life, for Apple, post Steve Jobs must continue, of course. As we explored last week, the company’s
mission statement could be interpreted in one of two ways:
“Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and
professional software. Apple leads the digital music revolution with its iPods and iTunes online store.
Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining
the future of mobile media and computing devices with iPad.”
On the one hand, one could interpret the statement as a sign that Apple is stagnating, lacks a longterm vision in its post-Jobs reality – that it is unable to see past its current product range. This could
be viewed as risky, as it would suggest that Apple is banking on a future of gradual, incremental
change rooted in existing technology. On the other hand, one could interpret the statement as
incredibly clever. Perhaps Apple is, as in the Jobs era, keeping its cards close to its chest. Why should
it give the game away in a publicly available mission statement? Rumours continue that Apple, for
example, is set to shock the world of television manufacturing and consumption, with the launch of
a product which will change the way we interact with and think of televisions. Who knows? What is
public knowledge is that the company has endorsed Jobs’ successor Tim Cook wholeheartedly,
awarding him 1m shares in the company. While Jobs preferred to keep tight control of dividend payouts, instead re-investing much of Apple’s profit back into the company, March this year saw a payout of $2.65 per share – although Cook did not take his payout.
Some questions to consider ahead of class:
Having read this case, would you characterize Steve Jobs as a manager or a leader? Why?
Would you have enjoyed working for Steve Jobs? Why?
Looking to the future, what kind of leadership do you think Apple should consider – participative,
democratic leadership, or, autocratic leadership?
Looking back over this week’s reading in Bovee and Thill (2011), can you spot examples of planning,
organizing and controlling in this case? How could each be important to Apple in the future? Can you
think of more specific ways in which these modes of management could be applied to Apple?
Who should be responsible, within Apple, for delivering these important aspects of management?
This case was prepared drawing on material from:
‘After iPhone 5: can Tim Cook make Apple his own?’ LA Times article, dated September 11, 2012.
Accessed at: http://articles.latimes.com/2012/sep/11/business/la-fi-tim-cook-20120911
Banks, A. ‘iPhone 5 proves Apple is still innovating – in its own way.’ BBC News website, dated 12
September, 2012. Accessed at: http://www.bbc.co.uk/news/technology-19578015
HBS case
Jobs, S. Speech at the 2005 Stanford University commencement ceremony, accessed at:
http://www.youtube.com/watch?v=UF8uR6Z6KLc
Rushe, D. ‘Apple manufacturer Foxconn improves on Chinese workers' hours and safety.’ Guardian
newspaper, dated August 21, 2012. Accessed at:
http://www.guardian.co.uk/technology/2012/aug/21/apple-manufacturer-foxconn-improves-safety
The CNN Fortune 500 website: http://money.cnn.com/magazines/fortune/fortune500/