Apple: the Fruit of Knowledge

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Apple: The Fruit of Knowledge

Summer D. Leifer

Master Major Comprehensive Project

CAPS600 – Graduate Project

June 22, 2013

Professor Randall Doll
Southwestern College Professional Studies

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Apple

Abstract

Apple presents an excellent management and leadership case study as it has evolved from a small, entrepreneurial company to a global economic powerhouse. Apple’s leadership and management styles have fluctuated over the past four decades as it has struggled to create and maintain a distinct culture and product in a rapidly evolving technological market. Many of its successes are a result of its ability to maintain a balance between innovative creativity with practical business and marketing approaches. Conversely, many of its greatest challenges and struggles have been a result of the inability to maintain an appropriate tension between creative chaos and formalized structure. Furthermore, Apple faces the challenge of maintaining its persona as an independent, free-thinking company while also holding the dominant position in its market. The leadership and management lessons presented upon examination of Apple’s history and current operations, strengths and challenges provide worthwhile lessons to contemporary leaders and managers.

Apple: The Fruit of Knowledge

From a small company operating in a garage to a multi-national technology behemoth, Apple’s evolution provides rich lessons in management and leadership. During the last four decades, Apple had a wide range of leaders and managers with markedly different styles. Their approaches met with varying degrees of success as internal and external factors changed. Furthermore, it is important to note these individuals had distinct strengths and weaknesses and, as the context of Apple’s vision and operations changed, their individual effectiveness fluctuated. Current and future Apple leaders are facing new challenges as contextual factors such as intellectual property right laws, cyber security and technology change. Regardless of changing leadership and management styles, the foundation of Apple—perfect product design and experience—the force behind Apple’s creation, continues to underpin the company.

Apple’s CEO Leadership & Management Style, 1977 - 1985

Apple’s inception was the result of collaboration between Steve Jobs and Steve Wozniak. Jobs and Wozniak were brilliant innovators; however, they did not have a background in business management. Their growing business required stronger management and leadership and, upon the advice of Mark Markkula, an Apple investor and its third employee, Wozniak and Jobs hired the first Apple Chief Executive Officer (CEO), Michael Scott in 1977 (Yarrow, 2011). With a strong background in business management and leadership, Scott introduced administrative organization and structure to Apple allowing Jobs and Wozniak to focus more on product design and less on human and resource management (Yarrow, 2011). Scott focused on pragmatic concerns and creating a family-type environment within Apple while Jobs focused on product perfection (Isaacson, 2011). Eventually, the differences in leadership styles proved too great and, in 1981, Markkula was asked to replace Scott as CEO (Markoff, 1997). Markkula stressed three principles: empathy, focus and impute (Isaacson, 2012). Of these three, impute (the concept that people do judge a book by its cover) became a core Apple leadership and management principle. This third principle continues to shape Apple product design and experience. In 1981, as Apple struggled to improve sales, it replaced Markkula with John Sculley, a former PepsiCo Inc. president and the mastermind behind the very successful Pepsi Challenge marketing campaign (Markoff, 1997). In a 2011 interview for the FINS website, John Sculley stated he felt his move to Apple was well-timed as it allowed him to be part of a company’s transformation while also allowing him to employ his greatest strength: bringing an underdog to victory over its competitors (Guyon, 2011). During the FINS interview, Sculley also stated he was not a great manager and preferred to take on tough projects and surround himself by other great managers and experts (Guyon, 2011). Despite Sculley’s lack of experience within the technology market and his misgivings about his management skills, his initial years with Apple were very profitable (PBS, 2013). In 1985, his reputation as a strong leader was solidified after he led the ousting of Steve Jobs from Apple.

Apple’s Leadership Strengths & Weaknesses, 1977 - 1985

In Organizational Theory and Design, Richard Daft describes the initial forces within a new organization as the entrepreneurial stage where the owner/s primarily focus on the product or service and creating a viable company (2009). Jobs and Wozniak’s drive for product perfection during this stage was appropriate. As Apple first hired Scott and then Markkula as CEOs, it transitioned from the entrepreneurial stage to what Daft defines as the collectivity state whereby Apple began to establish distinct objectives and vision (2009). During this stage, Scott took on the responsibility of bringing a pragmatic business approach to leading Apple while attempting to establish a positive work environment. Markkula began to formalize marketing and sales policies; however, he continued to be primarily focused on product development rather than company development (Isaacson, 2011). Apple remained in the collectivity stage from 1977 to 1981 and, upon the next crisis—the need for delegation—it moved into the third phase: the formalization phase (Daft, 2009). During this phase of organizational leadership, the organization establishes rules, standards, and policies. Once Sculley became CEO, Apple began its transition into this third stage of establishing a company identity and presence (Daft, 2009).

Apple’s CEO Leadership & Management Style, 1985 - 1996

Following Steve Jobs departure in 1985, Sculley continued to serve as the CEO of Apple, Inc. Initially, Sculley was very successful and increased annual sales from $800 million to $8 billion over the course of a decade (Bloomberg Businessweek, 2011). However, after a series of bad business and marketing decisions, he resigned his position in 1993 and was quickly replaced with Michael Spindler (PBS, 2013). Spindler made some wise decisions initially but soon lost control of the company as a result of his erratic and unpredictable behavior (Hormby, 2006). Following disastrous sales and a failed attempt to sell Apple to Sun, Spindler was asked by the board of directors to resign in 1996 (Hormby, 2006). Following Spindler’s resignation, Apple appointed Gil Amelio as the new CEO in January 1996 (Carroll, 2011). Similar to Spindler’s early moves, Amelio reorganized Apple and drove Apple’s purchase of Jobs’ company, NeXt, in December, 1996. The acquisition terms of NeXt brought Steve Jobs back to Apple as an advisor (Carroll, 2011). Although Amelio’s time as Apple’s CEO was approximately 500 days, he is credited with initiating the turnaround from a declining company to a profitable company.

Apple’s Leadership Strengths & Weaknesses, 1985 - 1996

During a 2010 interview with Leander Kahney for Cult of Mac, John Sculley asserted that he should never have been selected as CEO of Apple (Kahney, 2010). Initially, his role as Apple CEO was to boost the ailing Apple II sales to facilitate development and marketing of the next big thing, the Mac (Sculley, 2011). Unfortunately, initial Mac sales far underperformed as the Mac still lacked processing power and the Apple board of directors chose to remove Jobs as vice-president of Apple Macintosh Division while retaining his title of Chairman of the Board (Guyon, 2011). A few months later, Jobs left Apple to start his own company: NeXt. Following an initial profitable period, it began to suffer setbacks as a result of bad timing, slower innovation, and Sculley’s decisions to market Apple to the same customer base as its competitors. When Spindler was selected to replace Sculley as CEO, his decision to flatten the Apple hierarchy and infrastructure was wise. However, due to Spindler’s weak leadership style, the company suffered disastrous sales and financial loss (Hormby, 2006). After Spindler’s resignation following a failed attempt to sell Apple to Sun, the new CEO, Gil Amelio, tackled Apple’s structure and led the company to buy Jobs’ company, NeXt, ultimately bringing Jobs back to Apple as an advisor. Apple’s greatest leadership weakness during this time period related to its lack of a clear, cohesive company vision and focus and its inability to bring its innovative ideas into reality.

Apple’s CEO Leadership & Management Style, 1997 - 2011

In a Trojan horse move, Steve Jobs maneuvered from his position as an advisor to replace Amelio as Apple’s interim CEO (Edwards, 2012). During this time, Jobs reduced the Apple product line by 70%, laid off more than 3,000 employees, replaced several key Apple leaders with individuals he personally trusted, clamped down on all information coming out of Apple, trimmed Apple’s advertising agencies to one, and made peace with Apple’s sworn enemy, Microsoft (Edwards, 2012 & Stone, 2011). The CEO leadership and management style during this time period was focused on tight company control, product innovation and marketing. While Jobs has been described by some as a transformational leader, I would argue he lacked one important aspect of transformational leaders: individualized consideration (Bass, 2006). Although Jobs demonstrated transformational component behaviors, his underlying intent was often self-serving and he sought to be idolized through manipulation and intimidation. In a Leadership Quarterly journal article, Ethics, Character and Authentic Transformational Leadership Behavior, Bernard Bass and Paul Steidlmeier assert pseudo-transformational leaders “seek power and position even at the expense of their followers’ achievements” (1999). Critics have repeatedly asserted Jobs personally took credit for the design work and innovation of his employees, such as Johnathan Ives, to further his own legacy as a genius. Jobs intentionally distorted reality to suit his personal vision and self interests (Isaacson, 2011). Furthermore, Jobs was convinced the perfect product would lure consumers into buying things they had not even known they wanted—and he was proven right (Isaacson, 2011). Regardless of the judgment one has of Jobs’ leadership style, it was effective and he successfully established Apple as a global powerhouse.

Apple’s Leadership Strengths & Weaknesses, 1997 - 2011

During this time period, Jobs brought a laser focus to the company’s products and culture. He streamlined Apple’s products into four quadrants: personal or business and laptop or desktop. Additionally, he redirected Apple’s resources into creating a distinctive product and niche. In 2001, Apple introduced the i-Pod and many consumers were enticed into the Apple world through its sleek design (Stone, 2011). Likewise, many top business leaders and star designers were attracted to Apple attracted by Jobs’ vision for Apple and its revitalized image as a cutting edge company (Edwards, 2012 & Stone, 2011). The biggest shadow cast over Apple during this time, was Jobs’ cancer diagnosis in 2003 of which he maintained tight secrecy. Jobs continued to be an unbeatable force of nature as he used Apple’s growing clout to strongarm the music industry into $.99 sales and AT&T into an exclusive contract (Stone, 2011). Jobs’ commitment to creating the best company and product through distilling Apple down to the essentials combined with his ability to define reality led to a distinct Apple culture.

Apple’s CEO Leadership & Management Style, 2011 - Present

Upon Jobs’ resignation as a result of his deteriorating health, Tim Cook was chosen as Apple’s new CEO (Tyrangiel, 2012). Whereas Jobs’ leadership style was often described as volatile, Cook has been described as more even tempered and transparent. Cook has turned long-standing Apple policies on their head. As CEO, Tim Cook values diversity, to include within leadership, collaboration, transparency, listening to the customer, focusing on the few things Apple does well, and admitting mistakes (Tyrangiel, 2012; Markowitz, 2012). Cook’s leadership style is aptly described as authentic transformational leadership. In addition to providing intellectual stimulation, inspirational motivation and idealized influence, he does give individualized consideration to his constituents. According to Bass and Steidlmeier, authentic transformational leaders “who may have just as much need for power as pseudo-transformational leaders, channel the need in socially constructive ways into the service of others” (1999). However, Cook has not completely changed the Apple culture or business model. During the Worldwide Developers Conference this past week, he stated,” We spend a lot of time on a few great things...until every idea we touch...enhances each life it touches” (Farber, 2013). Furthermore, Cook has retained the teamwork business model put in place by Jobs relying on teamwork and synergy (Farber, 2013).

Apple’s Leadership Strengths & Weaknesses, 2011 - Present

Cook’s commitment to transforming Apple’s public image has contradicted many of Apple’s long-standing policies. For example, he initiated a program to match employee charity gift giving, paid out shareholder dividends, delivered public apologies, and decided to bring a portion of Apple manufacturing, i-Mac, to the USA (Dilger, 2013; Macworld, 2012; Mourdoukoutas, 2012; Tung, 2013). These actions all directly oppose the stance Job took that Apple was under no obligation to publicly declare charitable donations, pay out dividends, apologize or bring final phase production to the U.S. (Isaacson, 2011). Although some investors and stakeholders feel these are risky decisions, the general public has responded well to the more open Apple atmosphere. On a critical note, some naysayers feel Tim Cook lacks the passion, vision and flexibility to continue to lead Apple into a successful future (Satell, 2013 & Kaipa, 2013). Tim Cook’s leadership has, thus far, been lucrative for Apple and he has made progress and built stronger connections with his stakeholders, customers and employees. It remains to be seen if Cook’s significant departure from some of Apple’s core principles will strengthen the company and its reputation and allow it to maintain its autonomy or lead it further down the path of market homogenization and traditionalist business practices.

Apple’s Current & Future Leadership Challenges

Apple’s current leadership challenges center on defining Apple’s culture and vision following Jobs’ departure. Tim Cook and his leadership team continue to lead a profitable and growing company. Cook and his team must choose which aspects of Apple’s culture should remain unchanged and which aspects should evolve. It remains to be seen if the changes already put in place such as transparency, stock dividends and charitable giving will realize significant success or endanger the company. Likewise, as Apple moves into the future it will increasingly face intellectual property battles, cyber security threats and emerging competition. Apple’s future leadership challenges will likely include maintaining a balance between established organizational infrastructure and an agile atmosphere of innovation. Apple’s future leaders must demonstrate an ability and willingness to employ complex strategic thinking, creative problem solving and unprecedented innovation. They will need to have a commitment to maintaining a formalized structure while balancing on the edge of chaos. -For it is on this delicate edge between structure and creative chaos where innovation often occurs.