10 January 2012

The Steve Jobs Way: Seven lessons in business leadership

Having spent a couple of days of my holidays reading the Steve Jobs biography I couldn't help but reflect on the remarkable accomplishments of the man and the lessons applicable for business owners everywhere, big or small. 

This could have been a very long list, but here are the seven things that are most strongly front of mind for me (text is paraphrased and quoted from the book Steve Jobs by Walter Isaacson, (Simon & Schuster, 2011). 

1)   Focus: When Steve Jobs returned to Apple in 1997 he walked back into a company with low morale, stagnant sales and little sense of purpose. He found a business with ‘tons of products most of them crap, done by deluded teams'. In trying to work out what they were all for Jobs resorted to asking a simple question 'Which one do I tell my friends to buy?'

Jobs further simplified the issue by classifying the customer as either Consumer or Pro and the product as either Desktop or Portable. The job of the product teams at Apple was to produce four great products, one for each market sector.
This decision ensured that Apple engineers and managers suddenly became sharply focused on just four areas. The results? The Power Macintosh G3 (Pro Desktop), PowerBook G3 (Pro Portable), iMac (Consumer Desktop) and the iBook (Consumer Portable) were the four products that re-established Apple's cool (and profits).  

2)   Collaborate internally, don't compete: Apple wasn't the first to make beautiful consumer devices or sell portable music devices and Apple didn't own any music. Japanese company Sony trumped Apple at all three yet Sony couldn't even compete with, let alone beat, the iPod and iTunes.

Jobs' strategy of integration (hardware, software, devices and content sales) worked so powerfully because, unlike Sony, Jobs did not organise Apple into semiautonomous divisions: he closely controlled all of his teams and pushed them to work as one flexible and cohesive company.

Sony's various divisions, all with their own profit and loss statements, couldn't achieve the necessary synergy to compete with Apple. Sony's attempt to beat Apple (Sony Connect) was launched in May 2004 and lasted just over three years before Sony admitted defeat and axed it.
 

3)   Hire first rate talent: In Jobs' own words: ‘I realized that A players like to work with A players, they just didn't like working with C players. At Pixar it was a whole company of A players. When I got back to Apple that's what I decided to do.  

      You need to have a collaborative hiring process. When we hire someone, even if they are going to be in marketing, I will have them meet the design folks and engineers.' Jobs' stated goal was to be vigilant against what he called ‘the bozo explosion' that leads to a company being dragged down with second-rate talent. 

Jobs also knew how to make a compelling pitch to people he wanted to hire. The CEO that succeeded Jobs in 1983, John Sculley, finally decided to leave Pepsi and join Apple, when Jobs challenged him with the now-famous line ‘Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?' 

4)   Keep first rate talent: The person second most responsible for the re-birth of Apple, has been Head of Design, Jonathan (Jony) Ive. Ive, born and brought up just outside London, is likely to be rather better known now that he has a knighthood courtesy of the most recent Queen's Honours List. To quote Jobs ‘(Ive) understands what we do at our core better than anyone. If I had a spiritual partner at Apple, it's Jony. Jony and I think up most of the products together.' This year Ive celebrates his 20th year as an Apple employee. 

5)   The whole brand experience is critical: As sexy, cool and well known as the Apple products were (and became again after the return of Jobs) there was a major problem that bugged Steve Jobs: he couldn't control the point-of-sale process.

Answering questions face-to-face and selling Apple products was still in the hands of retailers and this, in Jobs' eyes, risked Apple being seen as a commodity brand like Dell or Compaq. Jobs didn't trust retailers to do a good job of this so he decided to launch Apple retail stores, Apple opened its first retail store on 19 May, 2001 to almost unanimous distain.

Business Week ran a story headlined ‘Sorry Steve, Here's Why Apple Stores Won't Work'. Retail consultant David Goldstein declared ‘I give them two years before they're turning out the lights on a very painful and expensive mistake'.
 

In July 2011, a decade after the first one opened, there were 326 Apple stores. The average revenue per store was USD$34 million and the total net sales for the 2010 fiscal year were USD$9.8 billion. 

But the stores did even more. They directly accounted for only 15% of Apple's revenue, but by creating a buzz and brand awareness they indirectly helped boost everything the company did. 

You only have to walk into any Apple store anywhere in the world to appreciate how Apple has completely redefined the retail experience. 

6)   Prepare for critical communication: Steve Jobs is just as legendary for his electrifying public presentations as he is for his business acumen. This is no accident. Jobs was obsessive about his preparation for these events because he understood how much impact, both live and through the media, he could have in ensuring his desired message was communicated to his audience.

As CEO of a very large and successful business, Jobs had many competing priorities but he knew that making sufficient time to prepare, and rehearse, a simple and compelling presentation was a key component of his role.
 

7)   Price different: Not only are Apple products designed in a way that they cannot be confused with any other brand's products, Apple prices these products at a premium. Jobs knew that consumers were prepared to pay a premium for a cool product that was easy to use and helped them do things that were important to them. 

In 2010 Apple had just 7% of the revenue in the personal computer market yet accounted for 35% of operating profit. In the first quarter of 2011 the market for Windows PC's shrank by 1% while the market for Mac's grew by 28%. 

In May 2000 Apple's market value was 1/20th that of Microsoft. In May 2010 Apple surpassed Microsoft as the world's most valuable technology company. As of the beginning of this week Apple's market capitalisation (USD$393 billion) was 69% higher than Microsoft's (USD$233 billion). 

I'll leave the last word on Jobs to his biographer, Isaacson. 

Was he smart? No, not exceptionally. Instead he was a genius. His imaginative leaps were instinctive, unexpected and at times magical. Like a pathfinder, he could absorb information, sniff the winds, and sense what lay ahead.

More than anyone else of his time, he made products that were completely innovative, combining the power of poetry and processers. With a ferocity that could make working with him as unsettling as it was inspiring, he also built the world's most creative company.

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