14 May 2008
When Apple launched its iPhone at the end of June, the company’s CEO, Steve Jobs, was hopeful it would sell a million units by the end of the year. This turned out to be wildly wrong; in fact, Apple has already sold a million iPhones. Right now you probably won’t find one on sale anywhere: every store has sold out. Apple is now predicting sales of up to 4.5 million iPods this year, and more than 30 million by 2011.
It is another triumph for Mr Jobs, named earlier this year by Time magazine as one of the 100 most influential people on the planet, after the success of the iPod portable digital music player, which itself has sold more than 100 million units since its launch in October 2001.
But the success of the iPhone, which won’t be arriving in Europe until November at the earliest, once again raises the question: what will happen to Apple when Mr Jobs is no longer there? It got rid of him once before, in the mid-1980s, when he was sacked by the man he brought in to run the company, John Scully. Embarrassingly, 12 years later, after a series of technological flops, it had to bring him back again, by buying the company he had founded after leaving Apple.
Under the returned Mr Jobs, Apple introduced the iMac computer in 1998, which came originally in a series of vibrant shades including purple, tangerine and aqua-blue, a revolutionary departure from the ‘beige box’ look of almost every other PC. The iMac turned the company’s fortunes around, though the computers that were its original raison d’être still only have a tiny proportion of the total personal computer market. But the dominance of the iPod, easily the world’s biggest digital audio player, means that Apple, which is likely to top sales of $20bn this year, 31 years after it was founded, is one of the best known brand names on the planet. In 2001, when Apple launched the iPod, its shares stood at the equivalent of $8.41 each. By the end of 2006 they were up to $85, a rise of 900 percent. Since then Apple shares have risen another 50 percent or more.
Mr Jobs, who is paid just a $1-a-year salary as Apple’s CEO, certainly doesn’t need to work, for Apple or anybody else. In 1986, after leaving Apple to start NeXT computers, he purchased what was to become the computer-animated movie-maker Pixar for $10m from Lucasfilm, the company owned by George Lucas, maker of the Star Wars movies. It took 10 years, but Pixar eventually came out with Toy Story, the first of a series of eight (so far) blockbuster animated movies. Pixar’s films were marketed and distributed through the Walt Disney Company, a relationship that grew fractious as Mr Jobs fell out with Disney’s then CEO, Michael Eisner. Eventually Mr Eisner was pushed out, and in January 2006 Walt Disney paid $7.4bn to acquire Pixar, in an all-stock deal that made Mr Jobs Disney’s biggest shareholder. With a seven percent stake valued at the time at more than $3.5bn, Disney also gave Mr Jobs a seat on the board.
The Disney deal, although it does not involve Apple, is still typical of the way Apple, and Steve Jobs, work: produce a terrific product, find a partner, get as much out of the partnership as possible, make sure you are number one in the partnership. As Apple plans the launch of the iPod in Europe, the potential partners it is lining up to be service providers to the phone are finding out just how hard Mr Jobs and his team negotiates. Stories are circulating that Apple wants a far higher proportion of revenues generated by iPhone users accessing wireless networks than European telephone companies were expecting, and also wants to restrict the content that users can access, to Apple’s websites rather than the phone companies’. Reports are that Vodafone, for one, decided the game was not worth the candle, and declined to sign up as exclusive partner for the iPhone in the UK because of Apple’s demands.
A businessman to the core
The problem for people dealing with Mr Jobs is that he has two, perhaps three great skills. The first, which manifested itself from the start when he founded Apple in 1976 in Cupertino, California, with the computer whiz Steve Wozniak, is the ability to spot a product that will have huge consumer appeal at a stage where it is just bare bones. Mr Jobs saw the potential in the bedroom computers Mr Wozniak was building, and turned them into a business. By 1980, when he was just 25, Apple was a publicly traded company and Mr Jobs was already a multi-millionaire.
In 1984 Apple launched the Macintosh, the first commercially successful computer with a graphical user interface and a mouse. Apple did not invent either of these two concepts: but Mr Jobs saw the graphical user interface (GUI) in use at a research centre run by Xerox and recognised its potential to revolutionise personal computers well ahead of its inventors. While Apple never managed to win the sales that IBM did with its PCs, or Microsoft with its Windows operating system, it effectively forced the rest of the industry to adopt the same GUI way of working as the Apple Mac, and gained a loyalty among a core of computer users that still remains.
Steve Jobs’ other great asset, just as important as his ability to spot trends long before anyone else, is his negotiating skill. According to one Silicon Valley insider interview, by BusinessWeek magazine in the US, “When you’re on the other side of the table, it’s as though Mr Jobs is gracing you with the opportunity to do business with him. That’s his negotiating posture: We do great stuff and our greatness is going to rub off on you, so you should give usconcessions.”
There is, also, a third side to Mr Jobs’ business skills: an apparent inability to accept anything that isn’t built to, as he told Apple’s engineers in the company’s early days, “insanely great” standards – which means products that combine ease of use with attractiveness, just the sort of “great stuff” that gives Apple the upper hand when it negotiates with partners, because “great stuff” is not, sadly, available everywhere. It took Mr Jobs to be able to tell what was insanely great and what wasn’t at Apple; it was his drive for the insanely great that the company missed when he was squeezed out; and it was what he brought back on his return.
An irreplaceable asset?
Thus the question remains: could Apple survive without Steve Jobs? Just after the launch of the iPhone, Neil Sims, vice president of the technology practice at Boyden, an executive recruitment company in California, told a local news magazine: “Jobs casts a long shadow. What he brings to Apple is the encouraging of innovation, and that’s a hard thing to replicate in a CEO.”
While at 52 Jobs might seem a long way from retiring age, he has already had a nasty health scare, when he was diagnosed with pancreatic cancer three years ago, something he managed to recover from after surgery. The market certainly worries about his replaceability: when, last year, Mr Jobs was caught in a regulatory investigation about backdated stock options, Apple’s shares dropped 11 percent on fears that the CEO might have to step down.
However, observers believe Apple is able to demonstrate that it has what is called in the US, using an American football analogy, a ‘deep bench’. They point, among others, to Tim Cook, who became Apple’s chief operating officer two years ago after three years as the company’s top man in worldwide sales, whose role includes working with Mr Jobs to set Apple’s overall direction, and who ran the company for several months in 2004 while the latter recovered from his cancer surgery.
All the same, it will take big feet to fill Mr Jobs’ shoes. As one observer said: “Jobs is a culture all to himself. The challenge for a new leader [at Apple] is to maintain that culture of vision. The problem could be that, once there, a new leader could lose that vision.”