Steve Jobs: The Importance of Process and Succession

Steve Jobs retired from his day-to-day activities at $AAPL yesterday, and the world has been up in arms over the future of this company. After all, the last time Steve Jobs left Apple formally, the firm seemed to have lost its way during a decade of pain for Mac fans everywhere. Regardless, this time around is clearly different, and here are some thoughts/values we can discern from the situation:

Industry Dynamics

When Steve Jobs left Apple during the dispute with John Sculley in 1985, the market was slipping beneath Apple – IBM had put a serious dent into Apple’s personal computer market share and Microsoft was already starting their ascension. Additionally, Apple couldn’t get their game plan straight, as the Lisa was a massive flop and the Macintosh was not innovating as fast as the IBM (and its clones). There were many holes in Apple’s armor at the time, and there certainly was no indication of Apple’s domination of the innovation circuit.

In 2011, the world is a bit different – Apple holds innovation firmly in its hands. Major consumer electronics (think Sony, Sansung), software (nearly all web applications), mobile (Nokia, Motorola, HTC, Samsung, RIM) and even enterprise firms hold their model up as the innovation ‘team to beat’. While there is real competition across all these sectors, its amazing how much of a lead Apple has created for itself.

  • Samsung and HTC have built strong competing phones, but still don’t have anywhere near the #s Apple does, nor the draw of their product launches
  • There has yet to be a serious tablet competitor, period.
  • Despite several exciting alternatives, Apple iTunes is still the music store to beat across the globe, and seems poised to further strengthen that position with their new iCloud and Match services.
  • Speaking about Cloud, without any real background, nor a live product yet, Apple is already considered a real alternative to the backup and cloud storage tools that have built strong reputations over the last few years.
  • Oh yeah, the Macbook has become the best and most profitable laptop on the market, surpassing Dell, HP, and all the other dominant forces on the Windows side of the world – And that Macbook Air is being copied by anyone with a hope of keeping market share.
Process
A lot will be said about Steve Jobs single handedly building these products to his own specifications, and one cannot dismiss his great design mind. However, to build a business like this, with the complex infrastructure required across functions like design, engineering, operations, marketing, and client service, one can start to realize just how great his management team truly is/was. While several of his team members have left the firm, it seems clear that they’ve instilled extremely tight controls and processes that have allowed the firm to execute to near perfection over the last decade – and I doubt that is something that will fall apart in the near term.
Succession also plays a role in this, and Steve Jobs has really groomed Tim Cook to lead this organization – additionally, he’s pretty much had a trial run for the better part of the year. Seems to be working out well. I’ve personally spent a lot of time studying succession, particularly the poor succession models that ruined Sandy Weill’s legacy at Citigroup, where there are a lot of parallels.
Steve Jobs, not unlike Sandy Weill, had a grand vision and insisted on being involved in intimate details of the business from nearly all angles. Unlike Sandy, Steve’s attention to detail and interest in building from within were a strong asset – Sandy preferred to acquire and place his top lieutenants into clean-up mode time and again, testing them with the jobs of running business units, but never the business as a whole. Both models worked for a while, and both CEOs had outsized egos around their own accomplishments and legacy.
However, unlike Sandy, Steve was willing to hand the reigns over to Tim Cook on numerous occasions, test his ability to lead, and ultimately set succession plans ahead of his departure. Sandy swept Jamie Dimon out of the business and ultimately into the waiting arms of Bank One, now JP Morgan – the result was Sandy retiring without true succession plans. As we know from the last decade, Citigroup has had year after year of poor news, as Sandy’s vision was picked apart (along with his legacy).
Lots of targets on their back
The departure of Jobs is an opportunity for Apple to prove that it deserves the role in the industry it has settled into. More specifically:
  • With new Android phones coming out on a cycle of 3-6 months (particularly with new technology, like 4G networks), can Apple sustain the once a year upgrade? Will anyone but the geeky IT guy in the elevator use a Windows Mobile phone, and should Apple care? How does Apple plan to play in the Mobile Payments space?
  • Will anyone emerge as a true competitor to the iPad? Will Apple be able to continue innovation and bring us the next big leap on this device?
  • Will iPad destroy the Macbook business, and/or will they merge at some point?
  • Will iCloud be able to beat Google, Amazon, Salesforce, and emerging competitors in the cloud space?
Lots of tough strategic questions that will likely be answered in the next 3-5 years. How Apple handles these issues will determine whether they will repeat the mistakes of their lost decade or whether they will continue to be an unstoppable force. Hopefully Tim Cook is a strong enough leader to navigate these key strategic questions without the crystal ball of Steve Jobs…
Health Update: Lost 10 pounds since my birthday, about a month ago, but more importantly, changed my behavior. That FitBit is a phenomenal device – keeps you motivated and reminds you that you’ve sat on your butt all day.

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