marketing case study and need a sample draft to help me learn.
-Read Case Study #2 from HBR Course Pack: Steve Jobs: Leader Strategist. Prepare a 5-page written summary of the case, addressing key questions on the subject matter listed below.
Case Study Questions to be addressed in your written summaries:
1) Why was Apple so successful in the initial years of the PC industry? Why was Jobs stripped of his operating responsibilities in 1985?
2) Which experience do you think had the most impact on the leader Jobs would become—his time at NeXT or his time at Pixar? Why?
3) When Jobs’ returned to Apple in 1996, the company was nearly bankrupt. Why?
4) As a leader-strategist, what did Jobs’ get right this time around?
5) What was Steve Jobs’ career path after this case study?
Requirements: 5 page
9-715-454 REV: DECEMBER 12, 2018 Professors Cynthia A. Montgomery and David B. Yoffie prepared this case. This case derives from earlier cases, including “Apple, Inc. in 2012,” HBS No. 712-490, by Professor David B. Yoffie and Research Associate Penelope Rossano; “Apple Inc., 2008,” HBS No. 708-480, by Professor David B. Yoffie and Research Associate Michael Slind; “Apple Computer, 2006,” HBS No. 706-496 by Professor David B. Yoffie and Research Associate Michael Slind; and “Apple Inc., 2010,” HBS No. 710-467 by Professor David B. Yoffie and Research Associate Renee Kim. This case was developed from published sources. Funding for the development of this case was provided by Harvard Business School and not by the company. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2015, 2018 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. CYNTHIA A. MONTGOMERY DAVID B. YOFFIE Steve Jobs: Leader Strategist In 2009, Fortune magazine published one of its many cover stories on Steve Jobs, this time naming him the CEO of the decade. Explaining why it chose to bestow this honor on Jobs, Stephanie Mehta argued that “[n]o business figure has crushed it the way Jobs has these past 10 years. Even as the rest of business boomed and then crashed, he resuscitated Apple, which, many forget, was in horrific shape at the dawn of the decade, and simultaneously radically reinvented the music, movie, and telecommunications industries.”1 (See Exhibits 1a through 1c for financial information and net and unit sales, Exhibit 2 for Apple’s share price, and Exhibits 3a and 3b for market share data.) In the same issue of Fortune, luminaries from a host of industries gave their views on Jobs’s many outstanding contributions:2 There’s no other company in technology that’s started with a strong core business and developed another very strong one. The rest of us are lucky, or good, [if we’re] right once. — Andy Grove, former Chairman and CEO of Intel Whatever anyone says about Apple, if it wasn’t for Steve Jobs there would be no legitimate music online. Everybody was lost. The record labels were frozen. When he came up with iTunes he gave us a [legal] way to get the license ready to go online. — Jimmy Iovine, Founder and Chairman, Interscope Records When I first saw the iPhone . . . I was blown away. . . . He’d found a way to squeeze the Mac OS X operating system into a hand-held device. That’s when the lightbulb went off for me—this device was going to change the industry forever. — Ralph de la Vega, President and CEO, AT&T Mobility When Steve Jobs died on October 5, 2011, to many he was more than a well-respected business leader; he was an icon on the way to becoming a legend. But Jobs wasn’t always at the top of his game. After his early successes at Apple Computer, his efforts to bring revolutionary new products to market met with customer resistance. Stripped of an operating position, Jobs left Apple in 1985 and went on to found an entrepreneurial venture, NeXT, where he experienced dramatic personal and commercial failure before selling the business to Apple in 1996. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 2 While away from Apple, Jobs was also involved with a computer animation company, later renamed Pixar, where he largely played the role of producer and venture capitalist, funding successive rounds of investment, forging long-term contracts with third parties, taking the company public, and paving the way for the company’s eventual sale to Disney. Jobs’s success at Pixar went a long way to restoring his badly tarnished reputation in Silicon Valley, just as he got the chance of a lifetime: to return to Apple and, in time, to have another chance to lead the company. Is the Jobs story so fantastic, so idiosyncratic, that there is little about it that can be generalized, little that others can learn from his journey? Or, do Jobs’s victories, as well as his defeats, have important lessons for other business leaders? If so, what are they? Apple’s Earliest Years Steve Jobs and Steve Wozniak, a pair of 20-something college dropouts, founded Apple Computer on April Fool’s Day, 1976.3 Working out of a bedroom in the Jobs family home in Los Altos, California, they built a computer circuit board they named the Apple I. Within months, the duo had made 200 units and had taken on a new partner—A. C. “Mike” Markkula Jr.—who was instrumental in attracting venture capital. Markkula became the experienced businessman on the team; Wozniak, the technical genius; and Jobs, the visionary who sought “to change the world through technology.” Apple’s mission was to bring an easy-to-use computer to every man, woman, and child. In April 1978, the company launched the Apple II, a relatively simple machine that people could use straight out of the box. Its rounded plastic case (a triumph of design compared with hobbyists’ crude metal boxes), remarkable ease of use, and the availability of the first electronic spreadsheet calculator, VisiCalc, made the computer appealing to early adopters. In a significant update the next year, the computer became the first to successfully integrate a floppy disk drive, replacing the clunky and unreliable cassette drivers of the earliest machines. The Apple II set in motion a computing revolution that drove the PC industry to $1 billion in annual sales in less than three years.4 Apple quickly became the industry leader, selling more than 100,000 Apple IIs by the end of 1980. In December 1980, Apple launched a successful IPO. Mindful that competition would soon be on its heels, the company introduced the Apple III, its first computer for the business market, in the summer of 1980. The machine had little software, had not been fully tested, and was full of bugs that the technical community quickly publicized. In the design phase, Jobs had felt strongly that the computer should not have a fan; instead, the heat should be dissipated through the chassis itself. As a result, the Apple III was prone to overheating. Customers who complained were initially told to lift the front of the computers six inches in the air, drop them to the desktop, and hope that the chips would reseat themselves.5 A design overhaul fixed the problem, but the model never recovered, and the company continued to depend on the Apple II. Competition changed fundamentally in 1981 when IBM entered the market. The IBM PC, which used Microsoft’s DOS operating system (OS) and a microprocessor (also called a CPU) from Intel, was bland and gray in comparison with the graphics- and sound-enhanced Apple II. But the IBM PC was a relatively “open” system that other producers could copy. By contrast, Apple practiced horizontal and vertical integration, relied on its own proprietary designs, and refused to license its hardware to third parties. As utilitarian IBM-compatibles proliferated, Apple’s revenue continued to grow, but its market share dropped sharply, falling to 6.2% in 1982. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 3 LisaApple responded in 1983 with the introduction of the Lisa (named after Jobs’s daughter). A top-of-the-line revolutionary machine, the Lisa cost $50 million and 200 person-years to develop. At the time, PCs could work on only one program and one screen at a time, and users gave them instructions in the form of code. The Lisa sidestepped all of that and introduced the first point-and-click mouse and graphical user interface that gave users a menu of options that could be clicked, making the powerful computer simple to use. Despite its state-of-the art technology, the Lisa bombed in the market. Apple itself had written all the software, none of which was compatible with either the Apple II or IBM machines, and all the features made the computer sluggish and expensive. Bruce Tognazzini,6 then a human interface expert at Apple, later said of the Lisa: “It was a great machine. We just couldn’t sell any.” Change of leadershipFollowing disappointing corporate sales and a round of layoffs, Apple’s president resigned. Jobs, who became chairman during the reshuffling at the top, personally oversaw the recruitment of John Sculley, President of PepsiCo, who had helped Pepsi briefly surpass Coke as the nation’s top soft-drink company. When enticing Sculley to come, Jobs asked the now famous question, “Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world?” Looking back on his appointment years later, Sculley said that the Apple board thought Jobs was too young to take on the CEO’s role, and needed someone who could keep Apple “commercially successful for at least three more years” so that Jobs would have time to create and launch the Macintosh computer. Sculley also recounted that Jobs was eager to have Apple learn what Sculley had discovered at Pepsi about marketing, one of the key insights being “you don’t sell the product, you sell the experience.”7 MacintoshMarking a breakthrough in ease of use, industrial design, and technical elegance, the Mac had many of the innovative features of the Lisa, but at a lower price, and it targeted a broader market. While IBM users still relied on cumbersome DOS-prompt commands, the Mac offered “elegant and simply designed graphics, a mouse, and far more flexibility.”8 Introduced to great and expensive fanfare in 1984, the Macintosh was “propelled by a famous Super Bowl ad, pegged to the Orwellian year, that characterized the new computer as rescuing users from a drone-like existence.”9 A few weeks before the Macintosh launched, Jobs said his best contribution to the group was “not settling for anything but really good stuff. A lot of times people don’t do great things because great things really aren’t expected of them, and nobody ever really demands that they try.”10 Despite very high expectations, sales of the Mac were way below forecast. Like the Lisa, the Mac’s slow performance, lack of software, and incompatibility with IBM machines limited its sales. Apple’s net income fell 62% between 1981 and 1984, sending the company into a crisis. Jobs and Sculley had initially worked well together, but their relationship was strained after the disappointing launch of the Macintosh. To address the demand shortfall, Jobs reportedly wanted to lower the price of the Mac, keep advertising high, and de-emphasize the Apple II, which continued to be a mainstay of the company’s sales. Sculley believed the technology wasn’t yet ready to support such a strategy, and took the disagreement to the board. After gathering data from a number of key people, the board agreed with Sculley and asked Jobs to step down as leader of the Macintosh division.11 Following a short sabbatical, Jobs resigned from the firm and went on to found NeXT, Inc., taking several Apple executives with him, an action that outraged the board. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 4 The Sculley Years, 1985–1993 Jobs’s departure left John Sculley alone at the helm. Sculley cleaned up the problems with the Mac, winning intensely devoted fans, and pushed the Mac into new markets, most notably education and desktop publishing. In education, Apple in time grabbed more than half the market, and the firm’s worldwide market share recovered and stabilized at around 8%. By 1990, Apple had $1 billion in cash and was the most profitable PC company in the world. Apple offered its customers a complete desktop solution, including hardware, software, and peripherals that allowed them to simply “plug and play.” The company typically designed its products from scratch, using unique chips, disk drives, and monitors. Yet IBM-compatibles narrowed the gap in ease of use in 1990 when Microsoft released Windows 3.0. Still, as one analyst noted, “the majority of IBM and compatible users ‘put up’ with their machines, but Apple’s customers ‘love’ their Macs.”12 Macintosh’s loyal customers allowed Apple to sell its products at a premium price. Top-of-the-line Macs went for as much as $10,000, and gross profit hovered around an enviable 50%. However, as IBM-compatible computers became the de facto standard in the industry and clones became rampant, prices in the industry dropped precipitously. By comparison, Macs appeared overpriced. “We were increasingly viewed as the “BMW of the computer industry,” said Sculley. “Our Macintoshes were almost exclusively high-end, premium-priced computers that would continue to have limited success in penetrating the corporate marketplace. Without lower prices, we would be stuck selling to our installed base.”13 As the volume leader, IBM-compatibles were attracting the vast majority of new applications. Moreover, Apple’s cost structure was high: the company devoted 9% of sales to research and development, compared with 5% at Compaq, and only 1% at many other IBM-clone manufacturers. After taking on the Chief Technology Officer title in 1990, Sculley tried to move Apple into the mainstream by becoming a low-cost producer of computers with mass-market appeal. For instance, the Mac Classic, a $999 computer, was designed to compete head-to-head with low-priced IBM clones. Sculley also worked on a joint venture with Apple’s foremost rival, IBM, to create a new PC operating system, and another joint venture with Novell and Intel to rework the Mac OS to run on Intel chips. He also invested $100 million14 in the development of the Newton—the first product in a category he termed “personal digital assistants.” Nevertheless, Apple’s gross margin dropped to 34%, 14 points below the company’s 10-year average. In June 1993, Sculley was replaced by Michael Spindler, the company’s president. The Spindler and Amelio Years, 1993–1997 Spindler killed the plan to put the Mac OS on Intel chips and announced that Apple would license a handful of companies to make Mac clones. He tried to slash costs, which included cutting 16% of Apple’s workforce, and pushed for international growth. Despite these efforts, Apple lost momentum: a 1995 Computerworld survey found that none of the Windows users would consider buying a Mac, while more than half the Apple users expected to buy an Intel-based PC.15 At the end of 1995, Apple and IBM parted ways on their joint venture. After spending more than $500 million, neither side wanted to switch to a new technology.16 Following a $69 million loss in the first fiscal quarter of 1996, the company appointed another new CEO, Apple board member Gilbert Amelio.17 For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 5 Amelio proclaimed that Apple would return to its premium-price differentiation strategy. Yet Macintosh sales fell amid Apple’s failure to produce a new operating system that would keep it ahead of Microsoft’s Windows 95. Despite more job cuts and restructuring efforts, Apple lost $1.6 billion on Amelio’s watch and its worldwide market share tumbled to around 3% (see Exhibit 3a). NeXT, Inc. When Jobs left Apple in 1985, he was an angry and disappointed young man. “I feel like somebody punched me in the stomach and knocked all my wind out,” he said. “I know I’ve got at least one more great computer in me. And Apple is not going to give me a chance to do that.”18 Later, Jobs would look back philosophically on this time, claiming that “getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.” 19 At NeXT, Jobs was determined to build a great computer. Freed of the constraints he faced under Sculley and a board of directors that no longer supported him, Jobs was now in complete control, guided by his own vision and standards. In the Second Coming of Steve Jobs, Alan Deutschman gave this characterization of Jobs’s aspirations: “It wasn’t enough for the new machine to be distinguished by one particular breakthrough. For the software he was taking an entirely new approach, starting from scratch, trying to create the most elegant lines of software code ever written. The industrial design had to be like no computer ever created. It had to be as gorgeous and sleek as Steve’s black Porsche. Even the factory had to be beautiful, and it had to be as fully automated as any factory in the world.”20 Well before the first computer was built, Jobs paid distinguished graphic designer Paul Read $100,000 to create a brand identity for the company. Despite great expectations, and the intent to build a computer that was “five years ahead of its time,” NeXT’s first computer, a gorgeous cube design, was introduced well behind schedule in 1988. Targeted for the educational market, where personal computers costing $1,500 were commonplace, the NeXT machine was designed to address the more complex computing needs of science students. The computer was initially offered at a base price of $6,500 for the academic market, and later for $9,999 at retail. A second computer, NeXTstation, targeted at the business community, was introduced in 1990. Judged to be too expensive to be personal computers, and too underpowered to be workstations,21 neither computer ever caught hold in the market. About 50,000 units were shipped in total. In early 1993, as cash dwindled, Jobs announced that the company would exit the hardware business and focus on licensing its NeXTStep software, “a variant of the powerful UNIX operating system that could work with many processors and more effectively handle sound and graphics.”22 As NeXT’s prospects plummeted, Jobs’s own star fell dramatically. In April 1991, an article in Forbes took Jobs to task: “The discouraging results at NeXT, Inc. show that Steve Jobs, whatever his greatness as a visionary, is not much of a manager.”23 Fortune went further, saying “Sometimes it’s hard to tell whether Steve Jobs is a snake-oil salesman or a bona fide visionary.”24 Four of Jobs’s five cofounders left, layoffs began, and an auction was held for the contents of the NeXT factory: 715 lots of goods—including Herman Miller chairs, trash cans, paper shredders, and surplus NeXT cubes.25 As Deutschman later quipped: “Steve’s dream was being liquidated.”26 For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 6 Pixar When Jobs left Apple, he reportedly sold all of his stock but one share so that he would continue to get the company’s annual report. He invested most of the proceeds not in NeXT (where his own investment was just $12 million) but in a fledgling computer animation firm he later renamed Pixar. Jobs bought a significant share of the company for $5 million plus another $5 million in working capital, and invested an additional $50 million over time. Spun off from Lucasfilm in 1986, Pixar was originally a high-end computer hardware firm whose primary product was a $135,000 computer graphics system that reduced the cost of animating a film. Jobs initially was more interested in the technology than in the possibility of making movies, and prioritized licensing deals and hardware sales. However, Hollywood studios and corporate graphics departments were slow to fully appreciate the technology’s potential, and sales were disappointing. Pixar was soon in dire financial straits. A battle ensued about the “soul of the company,”27 with Jobs and one of the company’s cofounders, Alvy Ray Smith, reportedly inches apart, screaming at each other at a board meeting. In the process, Jobs made fun of his opponent’s Southern accent. “He was street-fighting. It was ugly,” said Smith, who left the company within the year, and later reported that Jobs thereafter wrote him out of Pixar’s history. “It’s all true—the good and the bad,” Smith reflected. “Even if we don’t like each other, he financed us when nobody else would.” 28 Fast Company later reported that “[t]he strategy pivot” at Pixar “came from the talent.”29 In 1990, animator John Lasseter, who had previously worked at Disney, and Ed Catmull, who, with Smith, had cofounded the company, suggested to Jobs that they could make a business out of creating computer-animated TV commercials. Perhaps one day, they said, “they could even make, and sell, cartoons!”30 After initial resistance, Jobs bought into the idea. It was a seismic shift for Pixar. Jobs initiated widespread layoffs. He spared the engineering and animation talent but sold the company’s hardware division, including all proprietary hardware technology and imaging software, to Viacom Systems. “I got everyone together,” Jobs said, and told them, “At our heart, we really are a content company. Let’s transition out of everything else. Let’s go for it.”31 Catmull and Lasseter guided much of Pixar’s day-to-day business. Jobs initially attempted to get involved in the company’s creative process, but the staff repeatedly resisted. In time, he agreed to stay out of the story meetings and leave the creative side of the house to Pixar’s leadership. In contrast to Jobs’s management style, which Fortune magazine characterized as “brilliant and charming but explosive and abusive,”32 Catmull and Lasseter created a warm and open culture at Pixar built around a shared passion for animation. Jobs’s most significant contributions to Pixar were often financial in nature—keeping the struggling business afloat; hiring a talented CFO; interceding on its behalf with key constituents, including Disney; and structuring contracts and deals that proved vital to the company. Pam Kerwin, an executive at Pixar, said that “Steve was an icon at Apple, but he’s a banker at Pixar. It was our technology and John [Lasseter’s] creative vision, and Steve didn’t have a hands-on role.”33 Another turning point for Pixar came in 1991 when Jobs negotiated a $26 million, three-movie marketing and distribution deal with Jeffrey Katzenberg of Disney. Retrospectively, Jobs realized that Katzenberg had low-balled him by misrepresenting the costs of a typical Disney animated film. It spurred Jobs and Pixar CFO Lawrence Levy on to “learn everything they could about the dynamics and economics of the animation business.”34 For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 7 “Basically,” Jobs later said, films are made by “bands of gypsies” getting together. Afterward, “they disband. The problem with that is we want to build a company, not just make a single movie.”35 To thrive as a firm, Jobs believed that Pixar had to develop an organization with a repeatable model that would enable it to produce one hit after another. While leveraging what he could from his prior business experience, Jobs described the relationship between Hollywood and Silicon Valley as “two ships passing in the night. They are not trading passengers. They speak a different jargon; they have grown up with completely different business models for how to grow a business, for how to attract and retain employees, for everything. . . . When you’re in Silicon Valley, you don’t have to explain Silicon Valley to anyone else because everybody’s here and understands it. And the same is evidently true of Hollywood—neither side can explain themselves to the other very well at all.”36 Jobs was increasingly becoming that integrator. In November 1995, Toy Story, Pixar’s first full-length feature film, was released. Jobs reportedly wanted to market the film as the first fully computerized movie, but Joe Roth, head of Walt Disney studios, and others protested: “I said we’re going to sell it as a great story, and let people be wowed by the tech,” Roth told Business Week. “And you know what? He said O.K.”37 Reflecting its dual roots, Toy Story had two premieres—one in Los Angeles for the Hollywood crowd, and another the following night in San Francisco that was attended by Silicon Valley celebrities, including Larry Ellison of Oracle and Andy Grove of Intel. The film went on to become the highest-grossing film of the year and in time grossed over $350 million worldwide. Based on Toy Story’s strong pre-release reviews and Disney’s decision to make the movie its 1995 holiday feature, Jobs pushed to take Pixar public. He scheduled the company’s initial public offering for November 28, 1995, exactly one week after Toy Story’s release. The stock opened at $47/share, more than double its offering price, and closed the day at $39, with the small animation studio valued at nearly $1.5 billion. That was the day that Jobs, who owned nearly 30 million shares, became a billionaire.38 As investors learned more about the contract with Disney, and how little Pixar would make from the deal, the company’s stock price plunged. Jobs went back to Disney and renegotiated Pixar’s forward-going contract. True to the original deal, Toy Story would get just 12.5% of the estimated $400 million profits it was expected to generate, but under a new 10-year, 5-film contract, Disney and Pixar would split profits 50/50. During this period, a journalist asked Jobs whether Pixar had a strategy for distributing its content on the web. Jobs replied that “[w]e look at the internet and it looks very exciting to us, but we don’t see how to make any money from it. We haven’t seen any business models emerge where we can put content on the [i]nternet and end up being rewarded for that. And since our talented people always have opportunities to work on things where we do get financially rewarded, we’re not about to take them off that and put them on the Internet until we see a business model that makes sense.”39 Following a string of box office hits, including Finding Nemo, The Incredibles, and WALL-E, and Academy, Golden Globe, and Grammy awards, The Walt Disney Company bought Pixar in 2006 for $7.4 billion. The transaction made Jobs the largest shareholder in Disney and earned him a seat on the board. John Lasseter was named Creative Director of both Pixar’s and Disney’s animated movies, and Ed Catmull became the Business Head of both studios. “What made the deal really irresistible to Disney,” Newsweek later reported, was “the chance to lock up animation’s hottest superstar: Pixar’s Oscar-winning John Lasseter.”40 Fortune magazine gave For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 8 a somewhat different interpretation, describing Pixar as an extremely well-run company: “It’s a movie factory, with the same people working side by side on film after film, rather than an umbrella organization that essentially funds what are effectively ad hoc production ventures. Pixar invents most of the technology it uses, and it developed a distinctive methodology for creating new characters and bringing them to life. Disney’s [new CEO Bob] Iger knew that Catmull and Lasseter had built a genuinely new kind of studio and that Pixar could teach Disney about making movies in the 21st century.”41 Reflecting on his Pixar experience, Jobs said: “My model of management is the Beatles. . . . Each of the key people . . . kept the others from going off in the directions of their bad tendencies. . . . It was the chemistry of a small group of people, and that was greater than the sum of the parts. . . . That’s the chemistry between Ed [Catmull] and John [Lasseter] and myself. . . . We talk about things a lot.”42 Saving Apple The Early Years In the late 1990s, following years of disappointments in R&D, Apple CEO Gil Amelio was struggling to replace the firm’s aging operating system that by then was under assault by Windows 95. In a Disney-like ending for NeXT, Amelio reached out to Steve Jobs and, on December 20, 1996, bought the ailing company for $429 million in cash and 1.5 million shares of Apple stock. The cash went to NeXT’s initial investors and the Apple stock went to Jobs, who then rejoined Apple as a consultant. In time, parts of Apple’s OS X and iOS operating systems would be built on technology developed at NeXT.43 Apple’s stock hit a 12-year low in the second quarter of 1997 that was reportedly influenced by a single sale of 1.5 million shares by an anonymous party who was later discovered to be Jobs. “Yes, I sold the shares,” Jobs later admitted. “I pretty much had given up hope that the Apple board was going to do anything.”44 In a boardroom coup that followed, Jobs convinced the directors to oust Amelio. Less than a week later, Amelio submitted his resignation. Jobs became interim CEO soon thereafter. Once again in control, Jobs moved quickly to reshape Apple. Business Week gave this account: “His first moments back at the helm certainly seemed like ‘Old Steve.’ Minutes after Amelio gave his goodbye to the executive staff, Jobs—clad in shorts and scruffy as a beach bum—walked in and swiveled in his chair at the head of the board table. Rhetorically, he asked the group why Apple was in such poor shape. Before anyone could answer, he roared: ‘The products suck! There’s no sex in them anymore!’”45 At the time, Apple sold a wide variety of computers and peripherals, including more than 12 different versions of the Macintosh. “This is crazy,” Jobs later told the team. Drawing a two-by-two matrix on the whiteboard—with “Consumer” and “Pro” for columns, “Desktop” and “Portable” for rows—Jobs outlined what they had to do: focus on four great products, one for each quadrant. All the other products would be canceled.46 While previous CEOs aimed to broaden Apple’s product lines, Jobs believed in focus. For many years to come, Apple would have one of the narrowest product lines of any company of comparable size in the industry. But the going was not easy. At one point, insiders believed that Apple was within 90 days of bankruptcy as it fought to reestablish itself as a relevant player in the market. In August 1997, Jobs For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 9 told Time magazine, “Apple has some tremendous assets, but I believe without some attention, the company could, could, could—I’m searching for the right word—could, could die.” Jobs reached out to Bill Gates at Microsoft (whose firm was in the midst of a Justice Department investigation for possible anticompetitive practices) and secured a much-needed investment of $150 million cash and an undisclosed amount (believed to be $100 million) to settle patent infringement claims. Importantly, Microsoft agreed to continue making Mac versions of its Microsoft Office and Internet Explore products for five years, and Apple agreed to bundle Internet Explorer with the Mac OS as the default browser.47 When Jobs made the announcement at a Macworld Expo, with a picture of Bill Gates on the screen, those in the audience booed. Jobs chided them, saying, “Apple has to move beyond the point of view that for Apple to win, Microsoft has to lose.”48 Jobs soon halted the Macintosh licensing program and refused to license the latest Mac OS. At the time, nearly 99% of customers who had bought clones were existing Mac users, cannibalizing Apple’s profits.49 Other restructuring efforts involved hiring Taiwanese contract assemblers to manufacture Mac products and revamping Apple’s distribution system from smaller outlets to national chains. Tim Cook, hired by Jobs in 1998 after a career in operations at Compaq, IBM, and Intelligent Electronics, was credited with closing Apple’s factories and streamlining the supply chain. The company also pared down its inventory significantly and increased its spending on R&D. (See Exhibit 4 for PC manufacturers’ key operating measures.) Jobs himself worked on reinvigorating innovation. He weighed in heavily on product decisions, pushing ruthlessly for simple, elegant product designs. “In most people’s vocabularies,” Jobs would later say, “design means veneer. It’s interior decorating. It’s the fabric of the curtains and the sofa. But, to me, nothing could be further from the meaning of design. Design is the fundamental soul of a human-made creation that ends up expressing itself in successive outer layers of the product or service.”50 Apple’s Lead Designer, Jonathan Ive, would become Jobs’s soul mate in this quest for simplicity, driving to reduce unnecessary complexity in product after product. How Jobs pushed for great products was often not pretty. Alongside his unflinching commitment to excellence and the utter belief he radiated that the people at Apple could and would change the world, Jobs behaved in ways that were both cruel and petulant—berating employees and suppliers, screaming obscenities, firing people publicly, even belittling everything someone had accomplished in his life. Asked why he thought Jobs was so rude, Ive said, “He has this very childish ability to get really worked up about something, and it doesn’t stay with him at all. But, there are other times . . . when he’s very frustrated, and his way to achieve catharsis is to hurt somebody. And I think he feels he has a liberty and license to do that. The normal rules of social engagement, he feels, don’t apply to him. Because of how very sensitive he is, he knows exactly how to efficiently and effectively hurt someone. And he does do that.”51 Apple’s new culture was characterized by extreme secrecy, including a “closed door policy” in which key cards accessed only certain areas and dummy positions were created for new hires until they could be trusted. Everyone knew that violation of Apple’s culture of confidentiality was immediate grounds for termination.52 The iMac—the company’s first real coup after Jobs’s return–was introduced in August 1998. The $1,299 all-in-one computer featured colorful, translucent cases with a distinctive eggshell design. Ive recounted that the early brainstorming sessions focused not on chip speed or market share, but on soft, emotional questions such as, “How do we want people to feel about it?” and “What part of our minds should it occupy?”53 The iMac supported “plug-and-play” peripherals, such as printers, that were designed for Windows-based machines for the first time. Thanks to the iMac, Apple’s sales For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 10 outpaced the industry’s average for the first time in years. In its 1998 fiscal year, Apple posted a $309 million profit on nearly $6 billion in revenue, following the previous year’s $1 billion loss. Another priority for Jobs was to break away from Apple’s tired, tarnished image. He wanted Apple to be a cultural force. Through multimillion-dollar marketing campaigns such as the successful “Think Different” ads and catchy slogans (“The ultimate all-in-one design,” “It just works”), Apple promoted itself as a hip alternative to other computer brands. Apple ads were placed in fashion magazines and the popular press, venturing out from general computer publications. The goal was to differentiate the Macintosh amid intense competition in the PC industry. Competitive Landscape: The Personal Computer Industry While Apple pioneered the first usable “personal” computing devices, it was IBM that brought PCs into the mainstream in the 1980s. By the 1990s, the industry had become fiercely competitive, with look-alike products and rampant price competition. A standard known as “Wintel” (the Windows operating system combined with an Intel processor) came to dominate the industry. Thousands of manufacturers—ranging from Dell Computer to no-name clone makers—built PCs around different generations of these components, and, in time, these two suppliers of critical, differentiated components captured the lion’s share of profits in the PC industry. (See Exhibit 5.) Increasingly, growth in the industry was driven by lower prices and expanding capabilities. Despite PCs that were faster, with more memory and storage, average selling prices declined by a compound annual rate of 8%–10% per year from the early 1990s through 2005.54 The rate of decline in prices lessened between 2006 and 2011 to a compound annual rate of 2%.55 By 2011, the average PC manufacturers’ net profit margin, excluding Apple, was 5%.56 The standardization of components led PC makers to cut spending on R&D to between 1% and 3% of revenue57 New PC products emerged as well. Laptop computers started to gain traction in the late 1980s. Three decades later, portable PCs represented about 60% of worldwide PC shipments.58 The growth in demand for laptops was linked to lower prices: the price for a portable PC was $746 in 2011,59 down 25% in only three years.60 Growth in the industry continued to boom through the early 2000s, propelled by Internet demand and emerging markets such as China. Alternative technologiesSince the early 2000s, consumer electronics products, ranging from cellphones to TV set-top boxes to game consoles, started to encroach on functionality that was once the sole purview of the PC. For example, advanced game devices like Sony PlayStation 3 allowed consumers to watch DVDs, surf the web, and play games directly online in addition to playing traditional video games. At the same time, smartphones increasingly functioned as handheld computers, allowing users to do email, visit websites, and manage their online lives. While several industry insiders worried about the impact of digital devices on the PC industry, Jobs viewed all of these devices as part of an integrated strategy to deliver breakthrough user experiences. The Macintosh and Apple’s “Digital Hub” Strategy In 2001, marking Apple’s 25th anniversary, Jobs presented his vision for the Macintosh as a “digital hub.” He believed the Mac could have a real advantage for consumers who were becoming entrenched in a digital lifestyle, using portable music players, digital cameras and camcorders, and mobile phones. The Mac, he told an eager Macworld audience, would become the preferred “hub” to For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 11 control, integrate, and add value to these devices. Jobs viewed Apple’s control of both hardware and software, one of the few remaining in the PC industry, as a unique strength in this regard. Apple subsequently revamped its product line to offer machines that could deliver a cutting-edge, tightly integrated user experience. Although the company remained committed to the education market, its new PC products focused on home consumers’ lifestyles. Changing the MacintoshTo accomplish Job’s vision, Apple made four important changes: (1) A new operating system, introduced in 2001, was the first fully overhauled platform the company released since 1984. (2) A large investment to shift to Intel chips enabled Apple to build laptops that were both faster and less power-hungry.61 With “Intel Inside,” the Mac could also natively run Microsoft Windows along with Windows applications. This capability potentially offset a long-standing disadvantage to choosing a Mac—the relative lack of Macintosh software. (3) Introduction of a new suite of proprietary applications. Building programs such as the iLife suite (iPhoto, iTunes, iWeb) required Apple to assume significant development costs.62 (4) A new distribution strategy: The first Apple store opened in McLean, Virginia, in 2001. The Apple retail experience gave many consumers their first exposure to the new Macintosh product line. Ten years later, the retail division—with more than 300 stores in 13 countries—accounted for 13% of Apple’s total revenue.63 In 2012, the U.S. Apple stores’ sales per square foot were $6,050, more than twice those of any other U.S. retailer.64 Moving Beyond the Macintosh Apple’s shift toward a digital hub strategy was buttressed by the debut of the iPod in 2001, followed by the iPhone in 2007, then the iPad in 2010. While the prospects for the Macintosh business had improved, it was the iPod that set Apple on its path to explosive growth. The iPod was one of many portable digital music players based on the MP3 standard. While early MP3 players were clunky and stored only 20 or 30 songs, the first iPod stored up to 1,000 songs and fit neatly “in your pocket.” Thanks to its sleek design, simple user interface, and large storage, it soon became “an icon of the Digital Age.”65 Veteran tech journalist Steven Levy described its retail price—$399—as “princely,” but “a bargain compared to its value.”66 Over the next several years, Apple delivered one new innovative iPod design after another. In its development, Jobs emphasized the importance of simplicity. To make the iPod really easy to use, and “this took a lot of arguing on my part,” he said, “we needed to limit what the device itself would do. Instead we put functionality in iTunes on the computer. . . . So by owning the iTunes software and the iPod device, that allowed us to make the computer and the device work together, and it allowed us to put the complexity in the right place.”67 The historical economics of the iPod were stellar by industry standards. The iPod nano, for example, had gross margins of around 40% in 2007.68 Its biggest cost component was flash memory, which could account for more than half of the bill of materials. Recognizing the importance of flash memory, Apple invested in several memory producers in order to secure output at the best prices; in doing so, it became one of the largest purchasers of flash memory in the world. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 12 Apple’s approach to developing and marketing the iPod was more open than its strategy for the Macintosh. Introduced initially only for Macs, by 2002 the iPod could sync with Windows as well. Apple also built an ecosystem with the iPod accessory market that ranged from fashionable cases to docking stations. For every $3 spent on an iPod, consumers spent another $1 on iPod add-on products.69 While iPods were available in all price segments, iPod average selling prices generally ran $50 to $100 higher than the competition.70 In 2012, the firm continued to hold more than 70% of the U.S. MP3 market.71 At the hardware level, most MP3 players were roughly comparable to iPod models, yet two additional features differentiated Apple’s iPods: its iTunes desktop software, which synchronized iPods with computers, and its iTunes Music Store, which opened in April 2003. iTunesThe iTunes store was the first legal site that allowed music downloads on a pay-per-song basis. Visitors could pay $0.99 per song for a title offered by all five major record labels and by thousands of independent music labels. The downloaded songs could be played on the user’s computer, burned onto a CD, or transferred to an iPod. Within three days of launching the service, users had downloaded 1 million copies of free iTunes software and had paid for 1 million songs.72 Customers loved the vast music selections and ease of use, transforming the iTunes store into the number-one music store in the world.73 By October 2011, it had sold 16 billion songs and featured the world’s largest music catalog.74 Offerings expanded to include audiobooks, podcasts, books, movies, and TV shows. The launch of the iTunes store had a galvanic impact on iPod sales. In the quarter before the release of iTunes, Apple sold only 78,000 iPods. After the iTunes launch, iPod sales shot up to 304,000 units in one quarter and exploded thereafter.75 The direct impact of iTunes on Apple’s profitability was far less impressive. Songs were priced at $0.69, $0.99, or $1.29 per download. Some content and many apps were free. On average, roughly 70% of the money Apple collected per download went to the music label that owned it, and about 20% went toward the cost of credit card processing. That left Apple with about 10% of revenue per download, from which Apple had to pay for its website, along with other direct and indirect costs.76 In essence, Jobs had created a razor-and-blade business, only in reverse: the variable element (songs) served as a loss leader for a profit-driving durable good.77 Competition soon emerged. Online music stores such as Amazon.com, Napster, and Walmart.com offered individual song downloads at competitive or discounted prices to iTunes. Some had subscription plans that allowed unlimited listening, starting at $5 per month. Internet radio sites, such as Pandora, offered free streaming music. Spotify allowed users to create their own playlists, share them, and stream free music like a virtual MP3 player. In some markets, music labels made more money from Spotify than iTunes.78 By April 2012, most streaming music operators offered unlimited music streaming for $9.99 per month. Beyond competition, Apple also worried about future demand for iPods. The company had two responses to these threats: In 2009, it bought Lala.com, a music streaming service. And, in June 2007, it introduced the iPhone. Jobs later noted, “If you don’t cannibalize yourself, someone else will.”79 The iPhoneAt the January 2007 Macworld, Jobs introduced the iPhone, saying, “Every once in a while a revolutionary product comes along that changes everything. Today, we’re introducing three revolutionary products of this class. The first one is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. And the third is a breakthrough Internet communications device. . . . These are not three separate devices, this is one device, and we are calling it iPhone.”80 Hailed as Time magazine’s “Invention of the Year,” the iPhone represented Apple’s bid to “reinvent the phone.”81 Two and a half years of development efforts had been devoted to the phone, guarded For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 13 under intense secrecy, even among the company’s own employees. The estimated development cost was around $150 million. Entry into mobile phones might have been a risky move for Apple. At the time, the industry was dominated by Nokia, Motorola, and Samsung, with roughly 60% market share. In addition, products typically had short product life cycles (averaging six to nine months) and sophisticated technology, including radio technology, where Apple had little experience. In distribution, the top two carriers in the U.S.—Verizon Wireless and AT&T—collectively controlled more than 60% of the market and their networks were “locked,” e.g., an AT&T phone would only work on AT&T’s network. Smartphones were first introduced in 1993, and initially targeted the enterprise market. The devices brought together multiple functions in the palm of one’s hand, serving as a mobile phone, Internet browser, email, and work device. Their high prices and limited distribution put them out of the reach of most consumers. The iPhone changed the rules in the industry and created a mass consumer market for smartphones. The iPhone’s entire system ran on a specially adapted version of Apple’s OS X platform called iOS. Its revolutionary 3.5-inch touch-screen interface placed commands at the touch of users’ fingertips without a physical keyboard. Above all, users found the iPhone intuitive to use. The first model was priced at $499 for an 8GB model. At that time, handsets that cost more than $300 accounted for only 5% of sales.82 Over the next few years, Apple released an upgraded iPhone every 12 to 15 months and greatly expanded distribution. With the release of the 4s in October 2011, Apple introduced Siri, a voice-activated technology that Apple bought in 2010. With Siri, the user could dictate texts, schedule appointments, ask questions, and send emails using voice commands.83 With each new generation of product, Apple dropped the price of prior generations. Unit volumes exploded (see Exhibit 1b). As a result, Apple vied with Samsung for the largest market share in smartphones.84 In the third quarter of 2011, analysts estimated that Apple generated more than 50% of the cellphone industry’s total profits, with less than 4% unit market share,85 and that the firm commanded a wholesale average selling price of $659 from its iPhones,86 while competitors’ prices on roughly similar hardware ranged between $250 and $350. (See Exhibit 6 for financials of Apple’s competitors.) Falling component costs and design improvements helped to reduce the iPhone’s cost structure, although the company’s drive to keep its costs down was often controversial. Apple had become one of the largest customers of Foxconn in China. After several suicides of Foxconn workers, Apple commissioned a study by the Fair Labor Association,87 which discovered “serious and pressing” violations of that association’s code of conduct as well as Chinese labor law. Apple promised quick action to bring the company’s subcontractors into compliance. Four years after its launch, the iPhone accounted for 44% of Apple’s total revenue.88 In countries such as China, the iPhone was just taking off in 2012: even without subsidies, Chinese consumers were willing to buy iPhones for prices approaching $1,000 USD. App StoreA key driver behind the iPhone sensation was the launch of the Apple App Store in 2008. Software applications for Personal Digital Assistants and smartphones had been around for years. But Apple’s App Store was the first outlet that made it easy to distribute, access, and download applications directly onto the mobile phone. Many apps were free; even paid apps usually started at $0.99. The App Store was introduced as part of iTunes, which already had a huge following. Software developers also welcomed the App Store because Apple made it easier to reach consumers. Apple reserved the right to approve all applications and kept a 30% cut of the developer’s app sales. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 14 The popularity of the App Store was stunning. In the first 18 months, 4 billion applications had been downloaded worldwide.89 By May 2012, more than 585,000 applications were available in categories ranging from games to business productivity programs (see Exhibit 7 for an overview of the number of apps per app store). Walt Mossberg of the Wall Street Journal claimed that “the App Store is what makes your device worth the price.”90 In FY 2011, Apple generated $6.3 billion in revenues from the sale of music, books, and applications.91 Apple’s smartphone competitors fell into two large categories: horizontal and vertical. Manufacturers such as Samsung Electronics, HTC, LG Electronics, and Motorola followed a horizontal approach, where they licensed their OS and built their own hardware.92 iPhone’s greatest competition in 2012 came from Android, an open and free platform developed by Google. A consortium of 84 handset makers, chips makers, and operators, known as the Open Handset Alliance, backed the platform. As more manufacturers entered the market, innovation on the Android platform exploded. Leading-edge phones from Samsung, HTC, and others had larger, brighter screens than the iPhone; some had better cameras, improved audio, and so on. Not surprisingly, developers saw a potentially large market that might rival Apple. The combination of such factors powered the Android platform to become the most popular smartphone OS in 2011. (See Exhibit 8 for worldwide smartphone sales by operating system.) The patent warsIntense competition in the smartphone industries led to numerous lawsuits on design and intellectual property.93 Literally, everyone in the industry sued everyone. Jobs, though, was the most aggressive CEO in pursuing legal redress: “From the earliest days at Apple, I realized that we thrived when we created intellectual property. . . . If protection of intellectual property begins to disappear, creative companies will disappear or never get started. But there’s a simpler reason: It’s wrong to steal. It hurts other people. And it hurts your own character.”94 In 2010, Apple initiated litigations against Android devices, first against HTC and then Samsung. With the iPhone on a roll, Jobs saw another opportunity to make a bold move to redefine computing with the launch of the iPad. “Some people say, ‘Give the customers what they want,’” said Jobs, “but that’s not my approach. Our job is to figure out what they’re going to want before they do.”95 That was what he did with the iPad. The iPadApple’s release of the iPad on March 2, 2010, defined a new device category that Jobs described as “even more intuitive and easier to use than a PC, and where the software and the hardware and the applications need to be intertwined in an even more seamless way than they are on a PC.”96 Before the iPad, tablet sales accounted for a trivial share of the PC market. When the iPad launched, market demand was uncertain, at best. But doubters were quickly silenced, as sales of the new device took off. More than 450,000 iPads were sold during its first week on the market. Jobs commented, “It feels great to have the iPad launched into the world—it’s going to be a game changer.”97 In February 2012, Tim Cook announced that 55 million iPads had been sold, surpassing even the most bullish analyst estimates.98 In less than two years, Apple had built another $35 billion business. The iPad was originally priced from $499 to $829 and was sold in the U.S. by Apple retail stores, carriers, and other retail stores (Best Buy, Target, Staples). The tablet featured a 9.7-inch LED screen with a 10-hour battery life for reading books, watching movies, and some business productivity applications. Consumers could choose to connect to the Internet by paying for access to a carrier’s network or rely exclusively on Wi-Fi networks. Most tablet owners opted for the latter.99 Perhaps the biggest debate about the iPad was its usage model. Market research indicated that tablet owners viewed it primarily as a device to consume content rather than produce it.100 The most For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 15 popular activities included checking email, playing games, watching full-length videos, and shopping online. The iPad could run, with some limitations, almost all iPhone apps, and at the time of launch, software developers released over 1,000 applications specifically developed for the iPad. By March 2012, the App Store had more than 200,000 native iPad apps.101 Over time, iPad consumers became more creative in finding uses for the iPad for everything from writing music to producing videos, restaurant menus, sales tools, and even car owner manuals. Apple’s pricing and manufacturing for the iPad were also slightly different from earlier products. The entry retail price of $499 for an iPad was lower than the wholesale price of an iPhone. Despite the low price, Apple earned an estimated 25% gross margin on the entry model. By using its own CPU, giving the channel a lower margin, and leveraging its scale in purchasing, Apple had lower costs than most competitors that could only make 15% gross margin at the same retail price.102 Apple also had at least a one-year lead. While some competitors, such as Microsoft, had not even gotten started in 2012, Apple was on its third-generation product. Yet despite Apple’s formidable lead, at least 20 major manufacturers of mobile devices, PCs, and eReaders launched tablets by 2011. (See Exhibit 9 for worldwide tablet shipments.) Android-based tablets were rushed to the market in late 2010, giving Apple at least three potential serious competitors in this space: (1) manufacturers using Google’s version of Android; (2) Amazon, which used an open source version of Android; and (3) forthcoming Microsoft-based tablets. By the end of 2013, vendors using some version of Android collectively held a 61.9% market share.103 Using Google’s version, Samsung alone sold an estimated 37.4 million tablets in 2013, a 19.1 market share, compared with Apple’s leading 36% share. 104 Samsung nine-inch tablets were very similar to the iPad in design and price, but Android lacked the applications and ease of use of an iPad. In 2012, Samsung bet heavily on the Samsung Note, a five-inch combination tablet and phone. Amazon, by contrast, had a different model: it developed a distinctive user interface and sold its seven-inch tablet, the Kindle Fire, for $199 in 2011. The company’s product costs at the time were estimated to be slightly more than $200.105 Whereas Apple sought to make money on hardware, Amazon hoped to make money on software, applications, and content. Despite mixed reviews, Amazon grabbed a 14% market share in Q4 2011. The greatest competitive uncertainty was Microsoft’s entry with Windows 8, expected in the second half of 2012. Microsoft also hedged its bets by taking a $300 million, 17% stake in Barnes & Noble’s eReader, the Nook. iCloudOne of Jobs’s last acts as CEO was to prepare Apple for the launch of iCloud in October 2011. Apple was “the first to have the insight about your computer becoming a digital hub,” he said, [which] “worked brilliantly. But over the next few years, the hub is going to move from your computer into the cloud. So it’s the same digital hub strategy, but the hub’s in a different place.”106 iCloud allowed users to synchronize seamlessly across multiple Apple devices by storing data, pictures, music, and so on, in one location on the Internet. Five GB of free cloud storage on iCloud was free for Mac, iPhone, iPad, and iPod Touch users, and consumers could pay for additional storage.107 To support iCloud, Apple invested in a huge data center in North Carolina at an estimated cost of $500 million.108 Notably, iCloud worked only with Apple products. Following Apple’s lead, OS competitors such as Google and Microsoft offered their own cloud storage services, while product competitors such as HTC and Samsung struck deals with Dropbox. Although less elegant than iCloud, Dropbox was a cross-platform cloud storage solution that offered HTC and Samsung customers much more storage for free. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 16 The occasional disappointmentsWhile almost everything Jobs touched in the first decade of the 21st century turned to gold, his record was not unblemished. Apple had two notable products that failed to live up to expectations. One was the Mac Mini. As Apple’s entry-level desktop, the $599 price tag did not include a keyboard or a mouse. Consumers could buy a Windows desktop with more functions and faster performance at a lower price. The other disappointment was Apple TV. Introduced in 2007, the set-top box was Apple’s attempt to bring digital video content directly into consumers’ living rooms. Users could stream movies and TV shows over the Internet to a TV set and/or connect other Apple devices to the TV over a Wi-Fi connection. However, Apple TV sales were paltry compared to Apple’s other products. Before he died, Jobs claimed to have cracked the code for a next-generation television that Apple watchers expected to ship in 2013 or 2014. The Legacy of Steve Jobs When Walter Isaacson asked Jobs what he thought was his most important creation, he expected Jobs would point to a product such as the iPad or the Macintosh. Instead, Jobs said it was Apple, the company: “Making an enduring company,” he told Isaacson, “was both far harder and more important than making a great product.” 109 Few, if any, could disagree that Apple’s evolution from a failing PC manufacturer to a mobile device company had been a spectacular success. Most of the credit went to Jobs, the man who had “changed the rules” for the company and the industry, again and again. Andrea Jung, Apple board member and former CEO of Avon, observed: “All of us like to think that we’re as focused on the consumer and the end-user experience as Steve is—that maniacal passion for the best phone, the best MP3 player, the best PC, the best retail experience. He does it in a very black-and-white way, while the rest of the world gets caught up in gray.”110 Of course, Jobs did not work alone. Steve Wozniak, with whom Jobs founded Apple Computer, was a key influence in his life and business, even when no longer formally employed. The ramping up of Apple’s volume growth and management of its supply chain was brilliantly orchestrated by Tim Cook. Jonathan Ive, knighted by Queen Elizabeth II in 2012, was the lead designer behind Apple’s products, including the iMac, MacBook Air, iPod, iPod Touch, iPhone, and the iPad. Many more employees contributed to the unique success of the company and the culture behind it. In the six months following Jobs’s death, only a small number of key employees left the company. The most notable was Ron Johnson, the architect behind Apple’s retail store strategy, who departed to become the CEO of JC Penney. Apple had a different approach to human resource management than many large companies. Rather than developing well-rounded general managers, Jobs reportedly focused on developing the best people in a given function and pushing them to the limits of what they could achieve. The result, said Bloomberg Businessweek, was a team “studded with star role players” who operated in a “system that still resembles a startup. There are no separate lines of business and no business unit chiefs with responsibility for their own balance sheets.”111 Jobs himself kept the personalities in check, broke ties, and oversaw weekly strategy sessions with his 10-member executive team. “Some outsiders,” the journalists noted, “fear that Jobs alone can stir this mix of talent.”112 For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 17 Apple Inc. in the Next Decade? On August 24, 2011, Tim Cook replaced Jobs as CEO of Apple. In his first two years at the helm, Cook had shown that he would run Apple somewhat differently. Jobs, for example, had strongly opposed paying dividends and buying back stock, but Cook announced that he would do both in March 2012.113 He replaced two members of the senior executive team—Retail Chief John Browett, whom he had hired, and Mobile Software Head Scott Forstall, who was associated with the widely criticized launch of Apple maps and who, reportedly, was having trouble collaborating with Jonathan Ive, whose role would be expanded. Apple’s stock performed significantly above expectations in Cook’s first half-year. In August 2012, the company’s market capitalization reached $619 billion, making it the most valuable company in the history of the world. Apple’s stock adjusted downward in 2013, underperforming Google and the Nasdaq Index. (See Exhibit 10.) Of greater concern, industry observers were beginning to wonder aloud if Apple had lost its edge. In July 2013, Adam Lashinsky lamented: “It’s been three years since the release of the iPad, the company’s last breakthrough product. The latest version of its mobile software reminds design critics more of the edgier features of Google’s Android or Microsoft’s Windows Phone than anything associated with Apple’s penchant for leapfrogging-the-competition boldness. Apple’s management is defensive, its people are less committed, and it competitors are resurgent.”114 Would the iPhone continue its march to dominate smartphones in the face of growing competition? Would Apple’s newest creation, the iPad, continue to dominate the tablet market, or would competitors steal share and drive down profits? And, underneath it all, the bigger question: would Apple be the player that would continue to introduce “the next great thing”? For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 -18- Exhibit 1aApple Inc., Selected Financial Information, 1991–2013 (in millions of dollars, except for number of employees and stock-related data) 1991 1996 1998 2000 2002 2004 2006 2008 2010 2011 2012 2013 Total Revenue 6,309 9,833 5,941 7,983 5,742 8,279 19,315 37,491 65,225 108,249 156,508 170,910 Cost Of Goods Sold 3,314 8,865 4,462 5,817 4,139 6,022 13,717 24,294 39,541 64,431 87,846 106,606 R & D Exp. 583 604 303 380 446 491 712 1,109 1,782 2,429 3,381 4,475 Selling General & Admin Exp. 1,740 1,568 908 1,256 1,109 1,430 2,433 3,761 5,517 7,599 10,040 10,830 Operating Income 671 -1,204 268 530 48 336 2,453 8,327 18,385 33,790 55,241 48,999 Net Income 310 -816 309 786 65 266 1,989 6,119 14,013 25,922 41,733 37,037 Total Cash & ST Investments 893 1,745 2,300 4,027 4,337 5,464 10,110 22,111 25,620 25,952 29,129 40,590 Accounts Receivable 907 1,496 955 953 565 774 1,252 2,422 5,510 5,369 10,930 13,102 Inventory 672 662 78 33 45 101 270 509 1,051 776 791 1,764 Net Property, Plant & Equipment 448 598 348 419 621 707 1,281 2,455 4,768 7,777 15,452 16,597 Total Assets 3,494 5,364 4,289 6,803 6,298 8,050 17,205 36,171 75,183 116,371 176,064 207,000 Total Liabilities 1,727 3,306 2,647 2,696 2,203 2,974 7,221 13,874 27,392 39,756 57,854 83,451 Total Common Equity 1,767 2,058 1,492 4,031 4,095 5,076 9,984 22,297 47,791 76,615 118,210 123,549 Cash Dividends Paid 57 14 – – – – – – – – – – Full Time Employees NA 10,896 6,658 8,568 10,211 11,695 17,787 32,000 46,600 60,400 72,800 80,300 International Sales/Sales 45% 52% 42% 46% 45% 51% 51% 56% 62% 65% 63% 63% Gross Margin % 47% 10% 25% 27% 28% 27% 29% 35% 39% 40% 44% 38% R&D/Sales 9% 6% 5% 5% 8% 6% 4% 3% 3% 2% 2% 3% SG&A/Sales 28% 16% 15% 16% 19% 17% 13% 10% 8% 7% 6% 6% Return on Sales 5% -8% 5% 10% 1% 3% 10% 16% 21% 24% 27% 22% Return on Assets % 13% -13% 4% 6% 0% 3% 11% 17% 19% 22% 24% 16% Return on Equity % 19% -33% 22% 22% 2% 6% 23% 33% 35% 42% 43% 31% Stock Price Low (calendar year) $10.28 $4.22 $3.28 $7.00 $6.80 $10.64 $50.67 $80.49 $192.05 $315.32 $405.00 $390.53 Stock Price High (calendar year) $18.19 $8.75 $10.75 $36.05 $13.06 $34.22 $84.84 $198.08 $325.47 $405.00 $702.10 $570.09 P/E Ratio at calendar year-end 21.9 NM 19.5 6.8 79.6 91.3 37.4 15.9 21.3 14.6 12.1 14.1 Market Value at period end 6,075 2,770 5,387 4,849 5,096 25,201 72,901 91,827 281,963 372,321 559,129 472,269 Source: Capital IQ, Thomson Datastream, accessed 3/12/14. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 -19- Exhibit 1bApple’s Net Sales by Product Category, 2002–2013 (in millions of dollars) 2002 2004 2006 2008 2009 2010 2011 2012 2013 Total Mac/iMac net salesa 4,534 4,923 7,375 14,354 14,354 17,479 21,783 23,221 21,483 iPada NA NA NA NA NA 4,958 19,168 30,945 31,980 iPoda 143 1,306 7,676 9,153 8,091 8,274 7,453 5,615 4,411 iPhonea NA NA NA 6,742 13,033 25,179 45,998 78,692 91,279 Peripherals and other hardware 527 951 1,100 1,694 1,475 1,814 4,474 5,145 5,706 iTunes, software, service, accessories, and other net salesb 538 1,099 3,164 5,548 6,411 7,521 13,847 18,035 21,757 Source: Form 10-K via Capital IQ, accessed 2/19/14. a Includes deferrals and amortization of related non-software services and software upgrade rights. b Includes revenue from sales on the iTunes Store, the App Store, the Mac App Store, and the iBooks Store, and revenue from sales of AppleCare, licensing and other services. Includes sales of hardware peripherals and Apple-branded and third-party accessories for iPhone, iPad, Mac and iPod. Exhibit 1cApple’s Unit Sales by Product Category, 2004–2013 (in thousands of units) 2004 2005 2006 2008 2009 2010 2011 2012 2013 Total Macintosh unit salesa 3,290 4,534 5,303 9,715 10,396 13,662 16,735 18,158 16,341 iPads NA NA NA NA NA 7,458 32,394 58,310 71,033 iPods 4,416 22,497 39,409 54,828 54,132 50,312 42,620 35,165 26,379 iPhones NA NA NA 11,627 20,731 39,989 72,293 125,046 150,257 Source: Apple’s financial statements; casewriter calculations. a Includes iMac, Mac Mini, Mac Pro, Xserve, MacBook, MacBook Air, and MacBook Pro product lines. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 20 Exhibit 2Apple’s Share Price (1980–2010) vs. S&P 500 Index Source: Created by casewriter using data from Thomson Reuters Datastream, accessed May 2012. Note: December 31, 1980 = 100. Exhibit 3aApple’s Worldwide PC Market Share, 1980–2009 Source: Adapted from InfoCorp., International Data Corp., Gartner Dataquest, and Merrill Lynch data. 020004000600080001000012000140001600012-31-1980 = 100AppleS&P5000%2%4%6%8%10%12%14%16%18%1980198319861989199219951998200120042007For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 21 Exhibit 3bPC Manufacturers: Worldwide Market Shares, 2004–2013 PC Worldwide Market Share (units) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 HPa 14.1% 14.1% 15.5% 17.7% 18.2% 18.8% 17.5% 16.6% 16.1% 16.1% Dell 16.1% 16.6% 15.7% 13.9% 14.1% 11.9% 11.8% 11.7% 10.7% 11.6% Lenovob 2.0% 7.1% 7.2% 7.6% 7.5% 7.9% 9.5% 11.9% 14.9% 16.4% Acer 3.5% 4.8% 6.0% 8.2% 11.5% 12.7% 12.7% 10.8% 10.2% 8.2% Toshiba 3.2% 3.4% 4.0% 4.1% 4.6% 4.9% 5.3% 5.2% 4.8% 4.4% ASUS 0.5% 0.7% 1.2% 1.7% 3.6% 4.2% 5.3% 5.7% 6.9% 6.3% Apple 1.9% 2.2% 2.4% 2.9% 3.4% 3.5% 4.1% 4.9% 4.9% 5.3% Samsung 0.7% 0.8% 0.8% 1.0% 1.2% 2.1% 3.2% 3.9% 4.4% 4.1% Fujitsu 3.8% 3.8% 3.5% 3.2% 2.6% 1.7% 1.5% 1.5% 1.7% 1.6% Sony 1.6% 1.5% 1.6% 1.8% 2.0% 1.8% 2.3% 2.3% 2.1% 1.9% Top 10 47.4% 55.0% 57.9% 62.2% 68.8% 69.6% 73.1% 74.4% 76.6% 76.0% Source: JP Morgan analysts report, Apple Inc., p. 10, 2/12/14. a Hewlett-Packard acquired Compaq in mid-2002. The 2002 market share figure for HP incorporates Compaq sales for the first part of that year. b Lenovo acquired IBM’s PC business in mid-2005. The 2005 market share figure for Lenovo incorporates IBM sales for the first part of that year. Exhibit 4PC Manufacturers’ Key Operating Measures, 1997–2013 1997 2000 2003 2006 2009 2010 2011 2012 2013 Gross Margin (%) Apple 19.3% 27.1% 27.5% 29.0% 40.1% 39.4% 40.5% 43.9% 37.6% Dell 21.5% 20.7% 17.9% 17.7% 18.2% 18.0% 18.6% 22.3% 21.5% Hewlett Packard 30.9% 28.3% 25.6% 24.3% 23.6% 24.1% 23.6% 23.5% 23.3% R&D/Sales (%) Apple 6.8% 4.8% 7.6% 3.7% 3.1% 2.7% 2.2% 2.2% 2.6% Dell 1.6% 1.5% 1.3% 0.8% 1.1% 1.2% 1.1% 1.4% 1.9% Hewlett Packard 6.2% 5.4% 5.0% 3.9% 2.5% 2.3% 2.6% 2.8% 2.8% Source: Capital IQ, accessed 2/21/14. Note: All information is on a fiscal-year basis. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 22 Exhibit 5PC Industry Profit Pool, 1990–2001 (vendors and suppliers) Source: Bear Stearns Equity Research, “Computer Hardware,” July 2002, p. 7. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 23 Exhibit 6Apple’s Competitors: Selected Financial Information, 2005–2013 (in millions of dollars) 2005 2007 2009 2011 2013 Microsoft Total revenues 39,788 51,122 58,437 69,943 77,849 Cost of sales 6,031 10,693 12,155 15,577 20,249 R&D 6,097 7,121 9,010 9,043 10,411 SG&A 10,789 14,359 16,579 18,162 20,425 Net income 12,254 14,065 14,569 23,150 21,863 Total assets 70,815 63,171 77,888 108,704 142,431 Total liabilities 22,700 32,074 38,330 51,621 63,487 Total shareholders’ equity 48,115 31,097 39,558 57,083 78,944 Gross margin 84.8% 79.1% 79.2% 77.7% 74.0% R&D/sales 15.3% 13.9% 15.4% 12.9% 13.4% SG&A/sales 27.1% 28.1% 28.4% 26.0% 26.2% Return on sales 30.8% 27.5% 24.9% 33.1% 28.1% Market capitalization 288,922 271,515 212,163 232,183 265,309 Intel Total revenues 38,826 38,334 35,127 53,999 52,708 Cost of sales 15,637 18,430 15,566 20,242 21,187 R&D 5,145 5,755 5,653 8,350 10,611 SG&A 5,688 5,401 5,234 7,670 8,088 Net income 8,664 6,976 4,369 12,942 9,620 Total assets 48,314 55,651 53,095 71,119 92,358 Total liabilities 12,132 12,889 11,391 25,208 34,102 Total shareholders’ equity 36,182 42,762 41,704 45,911 58,256 Gross margin 59.7% 51.9% 55.7% 62.5% 59.8% R&D/sales 13.3% 15.0% 16.1% 15.5% 20.1% SG&A/sales 14.6% 14.1% 14.9% 14.2% 15.3% Return on sales 22.3% 18.2% 12.4% 24.0% 18.3% Market capitalization 147,954 120,242 67,189 121,504 104,645 Hewlett-Packard Total revenues 86,696 104,286 114,552 127,245 112,298 Cost of sales 66,224 78,394 87,163 96,895 85,793 R&D 3,490 3,611 2,819 3,254 3,135 SG&A 11,184 12,430 11,648 13,577 13,267 Net income 2,398 7,264 7,660 7,074 5,113 Total assets 77,317 88,699 114,799 129,517 105,676 Total liabilities 40,141 50,173 74,035 90,513 78,020 Total shareholders’ equity 37,176 38,526 40,764 39,004 27,656 Gross margin 23.4% 24.6% 23.6% 23.6% 23.3% R&D/sales 4.0% 3.5% 2.5% 2.6% 2.8% SG&A/sales 12.9% 11.9% 10.2% 10.7% 11.8% Return on sales 2.8% 7.0% 6.7% 5.6% 4.6% Market capitalization 81,639 131,319 119,532 52,416 53,579 For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 24 2005 2007 2009 2011 2013 Dell Total revenues 49,121 57,420 61,101 61,494 56,940 Cost of sales 40,103 47,904 49,998 50,041 44,687 R&D 460 498 665 661 1,072 SG&A 4,352 5,948 6,966 7,302 8,102 Net income 3,018 2,583 2,478 2,635 2,372 Total assets 23,215 25,635 26,500 38,599 47,540 Total liabilities 16,717 21,307 22,229 30,833 36,839 Total shareholders’ equity 6,498 4,328 4,271 7,766 10,701 Gross margin 18.4% 16.6% 18.2% 18.6% 21.5% R&D/sales 8.9% 10.4% 11.4% 11.9% 14.2% SG&A/sales 0.9% 0.9% 1.1% 1.1% 1.9% Return on sales 6.1% 4.5% 4.1% 4.3% 4.2% Market capitalization 99,919 66,629 20,193 28,029 24,897 Nokia Total revenues 40,501 74,560 58,737 50,223 17,502 Cost of sales 26,308 48,879 39,728 35,466 10,141 R&D 4,513 7,550 8,426 7,254 3,586 SG&A 4,229 7,665 7,113 6,306 2,301 Net income 4,283 10,521 1,277 (1,512) (847) Total assets 26,596 54,906 51,219 47,035 34,691 Total liabilities 11,772 29,587 30,081 28,956 25,520 Total shareholders’ equity 14,824 25,319 21,138 18,079 9,172 Gross margin 35.0% 34.4% 32.4% 29.4% 42.1% R&D/sales 11.1% 10.1% 14.3% 14.4% 20.5% SG&A/sales 10.4% 10.3% 12.1% 12.6% 13.1% Return on sales 10.6% 14.1% 2.2% (3.0%) (4.8%) Market capitalization 72,448 85,931 33,958 31,214 13,562 Samsung Total revenues 79,831 105,260 116,931 142,157 216,624 Cost of sales 54,705 75,740 81,138 96,619 130,435 R&D – – 6,336 8,577 – SG&A 17,626 19,932 20,039 22,907 51,350 Net income 7,564 7,929 8,210 11,530 28,862 Total assets 73,725 99,776 96,221 134,230 202,780 Total liabilities 32,529 39,967 33,567 46,943 60,679 Total shareholders’ equity 41,195 59,809 62,654 87,287 142,101 Gross margin 31.5% 28.0% 30.6% 32.0% 39.8% R&D/sales – – 5.4% 6.0% – SG&A/sales 22.1% 18.9% 17.1% 16.1% 23.7% Return on sales 9.5% 7.5% 7.0% 8.1% 13.3% Market capitalization 68,488 77,274 37,363 105,919 173,011 Source: Capital IQ, accessed 2/25/14. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 25 Exhibit 7Number of Apps Available in Leading App Stores as of July 2013 values Google Play 1,000,000 Apple App Store 900,000 Windows Phone Store 160,000 BlackBerry World 120,000 Source: Statista, accessed 2/21/14. Exhibit 8Smartphone Operating Systems: Global Market Share, 2006–2012 Global market share held by smartphone operating systems from 2006 to 2013 Share of sales to end users (in %) Operating System 2006 2007 2008 2009 2010 2011 2012 2013 Symbian 62.4% 63.5% 52.4% 46.9% 37.6% 18.7% 4.2% NA RIM 6.9% 9.6% 16.6% 19.9% 16.0% 10.9% 5.1% 3.2% Microsoft 9.8% 12.0% 11.8% 8.7% 4.2% 1.9% 2.5% 3.2% iOS NA 2.7% 8.2% 14.4% 15.7% 18.9% 19.1% 15.6% Linux 17.6% 9.6% 7.6% NA NA NA NA NA Android NA NA 0.5% 3.9% 22.7% 46.7% 66.2% 78.4% Other 3.3% 2.6% 2.9% 6.1% 3.8% 1.0% 0.5% NA Source: Gartner, accessed 3/14/14. a Android was introduced in 2008; data before that year were not applicable. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 26 Exhibit 9Worldwide Tablet Shipments by Operating System, 2010–2013 OS 2010a 2011a 2012b 2013b iOS Sales (millions of units) 14.8 40.5 61.5 70.4 Market share (percent) 76.1 58.9 52.8 36.0 Android Sales (millions of units) 4.6 26.4 53.3 120.9 Market share (percent) 23.6 38.4 45.8 61.9 Microsoft Sales (millions of units) NA NA 1.2 4.0 Market share (percent) NA NA 1.0 2.1 Others Sales (millions of units) NA NA .38 .04 Market share (percent) NA NA .3 <0.1 Sources: a Tom Mainelli, “Worldwide and U.S. Media Tablet 2012–2016 Forecast,” IDC Research, April 2012. http://www.idc.com, accessed May 2012. b “Gartner Says Worldwide Tablet Sales Grew 68 Percent in 2013, With Android Capturing 62 Percent of the Market,” www.gartner.com/newsroom/id/2674215, accessed April 28, 2014. Exhibit 10Apple, Google, and Nasdaq Prices, 2011–2014 Source: Capital IQ, accessed 5/1/14. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 27 Endnotes 1 Stephanie Mehta, “Why Him?,” Fortune, November 23, 2009, p. 90. 2 “All about Steve,” Fortune, November 23, 2009, pp. 123–126. 3 This discussion of Apple’s history is based largely on Jim Carlton, Apple: The Inside Story of Intrigue, Egomania, and Business Blunders (New York: Times Business/Random House, 1997); David B. Yoffie, “Apple Computer 1992,” HBS No. 792-081 (Boston: Harvard Business School Publishing, 1992); and David B. Yoffie and Yusi Wang, “Apple Computer 2002,” HBS No. 702-469 (Boston: Harvard Business School Publishing, 2002). Unless otherwise attributed, all quotations and all data cited in this section are drawn from those two cases. 4 Jim Carlton, Apple, p. 10. 5 Owen W. Linzmayer, Apple Confidential 2.0 (San Francisco: No Starch Press, 2004), pp. 41-43. 6 As quoted in Lee Butcher, Accidental Millionaire: The Rise and Fall of Steve Jobs at Apple Computer (New York: Knightsbridge, 1990), p. 174. 7 Josh Ong, “Former Apple CEO John Sculley says he never fired co-founder Steve Jobs,” Apple Insider, January 13, 2012, accessed October 1, 2013. 8 Josh Ong, “Former Apple CEO John Sculley says he never fired co-founder Steve Jobs.” 9 Cynthia Montgomery, The Strategist: Be the Leader Your Business Needs (New York: Harper Business, 2012), p. 115. 10 Steven Levy, The Perfect Thing- How the iPod Shuffles Commerce, Culture, and Coolness (New York, Simon & Schuster Paperbacks, 2006), p. 201. 11 Josh Ong, “Former Apple CEO John Sculley says he never fired co-founder Steve Jobs.” 12 David B. Yoffie, “Apple Computer 1992.” 13 David B. Yoffie and Johanna M. Hurstak,, “Reshaping Apple Computer’s Destiny 1992,” HBS. No. 9-393-011 (Boston: Harvard Business School Publishing, 1992), p. 5. 14 Dawn Kawamoto, “Riding the next technology wave,” CNET News, October 2, 2003, http://news.cnet.com/2100-7351_3-5085423.html, accessed May 4, 2015. 15 David B. Yoffie, “Apple Computer 1996,” HBS No. 796-126 (Boston: Harvard Business School Publishing, 1996). 16 Charles McCoy, “Apple, IBM Kill Kaleida Labs Venture,” Wall Street Journal, November 20, 1995. 17 Louise Kehoe, “Apple Shares Drop Sharply,” Financial Times, January 19, 1996. 18 Owen W. Linzmayer, Apple Confidential 2.0, p. 157. 19 Steve Jobs, Stanford Commencement Address, 2005. 20 Alan Deutschman, The Second Coming of Steve Jobs (New York: Broadway Books, 2000), pp. 54-55. 21 Owen W. Linzmayer, Apple Confidential 2.0, p. 210. 22 Peter Burrows, “1985-1997, The Wilderness,” Business Week, October 6, 2011, p. 33. 23 As quoted in Alan Deutschman, The Second Coming of Steve Jobs, p. 167. 24 Alan Deutschman, “Steve Jobs’ Next Big Gamble,” Fortune, February 8, 1993. 25 Alan Deutschman, The Second Coming of Steve Jobs, p. 185. 26 Alan Deutschman, The Second Coming of Steve Jobs. 27 Peter Burrows, “1985-1997, The Wilderness,” p. 31, described the strife at Pixar as a battle for the company’s soul. 28 Peter Burrows, “1985-1997, The Wilderness,” p. 31. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 28 29 Brent Schlender, “I just knew in my bones that this was going to be very important,” Fast Company, Fastcompany.com, May 2012, p. 78. 30 Brent Schlender, “I just knew in my bones that this was going to be very important.” 31 Brent Schlender, “I just knew in my bones that this was going to be very important.” 32 As quoted in Alan Deutschman, The Second Coming of Steve Jobs, p. 192. 33 As quoted in Alan Deutschman, The Second Coming of Steve Jobs, p. 223. 34 Peter Burrows and Ronald Grover, “Steve Jobs’ Magic Kingdom,” Business Week, February 6, 2006, p. 79. 35 Peter Burrows and Ronald Grover, “Steve Jobs’ Magic Kingdom,” p. 81. 36 Peter Burrows and Ronald Grover, “Steve Jobs’ Magic Kingdom,” p. 81. 37 As quoted in Peter Burrows, “1985-1997, The Wilderness,” p. 32. 38 “This Day in Pixar History: Pixar IPO,” Thursday, November 29, 2012, www.thisdayinpixar.com/2012/11/this-day-in-pixar-history-pixar-ipo.html, accessed on October 8, 2013. 39 Shellie Karabell quoting her earlier interview with Jobs, Insead Knowledge, May 3 2012, https://knowledge.insead.edu/leadership-management/steve-jobs-speaking-from-the-wilderness-596. 40 Steven Levy and Katie Hafner, “Pixar’s magic kingdom,” Newsweek, March 17, 1997. 41 Brent Schlender, “The Apple of Steve’s Eye,” Fortune, February 20, 2006, pp. 26-28. 42 Brent Schlender, “I just knew in my bones that this was going to be very important,” p. 76. 43 Chris Foresman, “The legacy of NeXT lives on in OS X,” Arstechnica, December 19, 2012, http://arstechnica.com/apple/2012/12/19/the-legacy-of-next-lives-on-in-os-x/, accessed April 29, 2015. 44 Cathy Booth, “Steve’s job: Restart Apple,” Time International 150, no. 7 (August 18, 1997). 45 Peter Burrows, “1985-1997, The Wilderness,” p. 33. 46 Walter Isaacson, “The Real Leadership Lessons of Steve Jobs,” Harvard Business Review, April 2012, p. 94. 47 Owen W. Linzmayer, Apple Confidential 2.0, p. 290. 48 Owen W. Linzmayer, Apple Confidential 2.0, p. 290. 49 David Kirkpatrick, “The Second Coming of Apple,” Fortune, November 9, 1998. 50 Steve Jobs as quoted in Rob Walker, “The Guts of a New Machine,” New York Times, November 30, 2003. 51 Jonathan Ive, quoted in Dylan Love, “16 Examples of Steve Jobs Being a Huge Jerk,” Business Insider, October 25, 2011. 52 David Gebler, “Illuminating Apple’s Culture of Secrecy,” Portofolio.com, April 17, 2012, http://www. portfolio.com/companies-executives/2012/04/17/david-gebler-on-how-apple-can-shed-its-culture-of-secrecy# ixzz1u5HXYOz7, accessed May 2012. 53 Jennifer Tanaka, “No More ‘Beige Boxes,’” Newsweek, May 18, 1998, p. 48. 54 IDC (International Data Corp.) data, as cited in Graham-Hackett, “Computers: Hardware,” Standard & Poor’s Industry Surveys, December 8, 2005, p. 7. 55 Dylan Cathers, “Computers: Hardware,” Standard & Poor’s Industry Surveys, October 27, 2011, p. 15. 56 FY 2011 financial results for Acer, Dell, HP, IBM, Lenovo, Thomson One, accessed April 2012. 57 Peter Misek, Jason North, and Billy Kim, “Computer Hardware—Cutting HP and Dell Estimates: Checks Indicate PC Sales Slowing Materially,” Jefferies, March 15, 2012, p. 9; James Chiu and Kevin YH Chen, “Lenovo: Premium Valuation Justified; Initiate with OW,” Piper Jaffray, March 9, 2012, p. 13. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 29 58 Gartner Personal Computer Quarterly Statistics Worldwide Database, 2/12, cited in Mark Moskowitz, Anthony Luscri, Mike Kim, Gokul Hariharan, Alvin Kwock, John DiFucci, Sterling Auty, Tien-tsin Huang, and Harlan Sur, “Global Technology: IT Spending Pulse: 2012 Off to a Good Start in Most Tech Segments; Lifting PC and Tablet Forecasts,” JP Morgan, March 13, 2012, p. 29. 59 Rajani Singh and Linn Huang, “Worldwide and U.S. PC Client Sub Form Factor 2012–2015 Forecast,” IDC, March 2012, p. 4. 60 Rajani Singh and David Daoud, “Worldwide PC 2011–2015 Forecast Update: December 2011,” IDC, December 2011, p. 7. 61 Stephen Fenech, “Apple’s New Core: New Macs with Intel Dual Processors Revealed,” Daily Telegraph (London), January 18, 2006. 62 Brent Schlender, “How Big Can Apple Get?,” Fortune, February 21, 2005, p. 66. 63 Apple Inc., Form 10-K, October 14, 2011 (Cupertino, CA, 2011), p. 30. 64 Seth Fiegerman, “Apple Has Twice the Sales Per Square Foot of Any Other U.S, Retailer,” Mashable online, http://mashable.com/2012/11/13/apple-stores-top-sales-per-square-foot/, November 13, 2012. 65 Peter Burrows and Ronald Glover, “Steve Jobs’ Magic Kingdom,” p. 62. 66 Steven Levy, The Perfect Thing/ How the iPod Shuffles Commerce, Culture, and Coolness (New York: Simon & Schuster, 2006), p. 5. 67 Walter Isaacson, Steve Jobs (Simon & Schuster, 2015), p. 389. 68 Thomas Ricker, “iSuppli: New iPod Nano Costs Apple Less than $83 in Components,” engadget, September 19, 2007, http://www.engadget.com/2007/09/19/isuppli-new-ipod-nanos-cost-apple-just-59-and-83-in-component/, accessed March 2010. 69 Damon Darlin, “The iPod Ecosystem,” New York Times, February 3, 2006. 70 Robert Semple, Stephanie Sun, and Thompson Wu, “Apple Computer Inc.,” Credit Suisse, June 5, 2007, p. 6. 71 Jordan Golson, “Apple Report Best Quarter Ever in Q1 2012: $13.06 Billion Profit on $46.33 Billion in Revenue,” cited NDP in MacRumors.com, http://www.macrumors.com/2012/01/24/apple-reports-best-quarter-ever-in-q1-2012-13-06-billion-profit-on-46-33-billion-in-revenue, January 24, 2012, accessed April 2012. 72 Chris Taylor, “The 99¢ Solution,” Time, November 17, 2003, p. 66, via Factiva, accessed November 2007. 73 “iTunes Store Tops 10 Billion Songs Sold,” Apple Inc. press release (Cupertino, CA, February 25, 2010). 74 Donald Melanson, “Apple: 16 billion iTunes songs downloaded, 300 million iPods sold,” engadget, October 4, 2011, http://www.engadget.com/2011/10/04/apple-16-billion-itunes-songs-downloaded-300-million-ipods-sol, accessed April 2012. 75 Apple, Inc., December 21, 2001 Form 10-K405 (filed December 21, 2001); Apple, Inc., December 19, 2002 Form 10-K (filed December 19, 2002); Apple, Inc., May 13, 2003 Form 10-Q (filed May 13, 2003); “Number of iPods sold through 2002: 600,000,” Apple press release, July 2002, http://www.apple.com/pr/products/ ipodhistory/, accessed May 2012. 76 Bill Shope, Elizabeth Borbolla, and Mark Moskowitz, “Apple Computer: iPod Economics II,” JP Morgan, May 26, 2005, p. 26; Ronald Grover and Peter Burrows, “Universal Music Takes on iTunes,” BusinessWeek, October 22, 2007, p. 30, via Factiva, accessed October 2007. 77 Bill Shope et al., “Apple Computer: iPod Economics II,” p. 26; Ronald Grover and Peter Burrows, “Universal Music Takes on iTunes,” pp. 8–10. 78 Michael Arrington, “Spotify Closing New Financing at €200 Million Valuation, Music Labels Already Shareholders,” TechCrunch, August 9, 2009, http://techcrunch.com/2009/08/04/spotify-closing-new-financing-at-e200-million-valuation-music-labels-already-shareholders/, accessed April 2010. 79 Walter Isaacson, Steve Jobs, p. 408. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
715-454 Steve Jobs: Leader Strategist 30 80 Walter Isaacson, Steve Jobs, p. 474. 81 Donna Fuscaldo and Mark Boslet, “Jobs Says Apple to Rename Itself Apple Inc,” Dow Jones News Service, January 9, 2007, via Factiva, accessed March 2010. 82 Nick Wingfield and Li Yuan, “Apple’s iPhone: Is It Worth It?,” Wall Street Journal, January 10, 2007. 83 Darrell Etherington, “iPhone 4S: Siri’s international limitations,” October 14, 2011, http://gigaom.com/ apple/iphone-4s-siris-international-limitations/, accessed April 2012. 84 Ramon T. Llamas and William Stofega, “Worldwide Smartphone 2012–2016 Forecast and Analysis,” IDC, March 2012, p. 8. 85 Zach Epstein, “With just 4% of mobile market, Apple owns 52% of profits,” BGR, November 4, 2011, http://www.bgr.com/2011/11/04/with-just-4-of-mobile-market-apple-owns-52-of-profits/, accessed May 2012. 86 Apple Inc., “Q2 2012 Unaudited Summary Data,” April 24, 2012, http://images.apple.com/pr/pdf/ q2fy12datasum.pdf, accessed May 2012. 87 “Fair Labor Association Begins Inspections of Foxconn,” Apple press release, http://www.apple.com/pr/ library/2012/02/13Fair-Labor-Association-Begins-Inspections, February 13, 2012. 88 Ittai Kidron and George Iwanyc, “Apple Inc.: The Bear and Bull Case,” Oppenheimer, March 23, 2012, p.17. 89 Jason Kincaid, “Apple Has Sold 450,000 iPads, 50,000 Million iPhones to Date,” April 8, 2010, http://techcrunch.com/2010/04/08/apple-has-sold-450000-ipads-50-million-iphones-to-date/, accessed May 2012. 90 Walter S. Mossberg, “Apps that Make the iPhone Worth the Price,” Wall Street Journal, March 26, 2009. 91 Apple Inc., Apple 10-K, October 26, 2011 (Cupertino, CA, p. 30), accessed April 2012. 92 Android was officially part of the Open Handset Alliance, a consortium of more than 45 technology and mobile phone companies, including Google, HTC, Samsung, Intel, Texas Instruments, and Sprint Nextel, http://www.openhandsetalliance.com/, accessed May 2012. 93 Niley Patel, “Apple sues Samsung: a complete lawsuit analysis,” The Verge, April 19, 2011, http://www.theverge.com/2011/04/19/apple-sues-samsung-analysis/, accessed April 2012. 94 Walter Isaacson, Steve Jobs, p. 396. 95 Walter Isaacson, Steve Jobs, p. 567. 96 Walter Isaacson, Steve Jobs, p. 527. 97 “Apple Sells over 300,000 iPads First Day,” Apple Inc. press release (Cupertino, CA, April 5, 2010). 98 Horace Dediu, “Apple sold more iOS devices in 2011 than all the Macs it sold in 28 years,” quoting Apple CEO Tim Cook at the Goldman Sachs—Apple 2.0 Fortune Tech, February 16, 2012, http://www.asymco. com/2012/02/16/ios-devices-in-2011-vs-macs-sold-it-in-28-years/, accessed April 2012. 99 Tom Mainelli, “Worldwide and U.S. Media Tablet 2012–2016 Forecast,” IDC Research, April 2012, p. 12. 100 Online Publishers Association, “A Portrait of Today’s Tablet Users,” June 2011, http://onlinepubs. ehclients.com/images/pdf/MMF-OPA_–_Portait_of_Todays_Tablet_User_–_Jun2211_%28Final-Public%29, accessed December 2011. 101 Apple Inc., http://www.apple.com/ipad/, accessed April 2012. 102 A. M. (Toni) Sacconaghi Jr., Pierre Ferragu, Alberto Moel, and Stacy A. Rasgon, “Let’s Talk Tablets: A Form Factor Revolution?,” Bernstein Research, June 2011, p. 13, accessed May 2012. 103 “Gartner Says Worldwide Tablet Sales Grew 68 Percent in 2013, With Android Capturing 62 Percent of the Market,” www.gartner.com/newsroom/id/2674215, accessed April 28, 2014. 104 “Gartner Says Worldwide Tablet Sales Grew 68 Percent in 2013, With Android Capturing 62 Percent of the Market.” For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
Steve Jobs: Leader Strategist 715-454 31 105 Rosa Golijan, “Amazon’s $199 Kindle Fire costs estimated $202 to make,” Technolog, http://www. technolog.msnbc.msn.com/technology/technolog/amazons-199-kindle-fire-costs-estimated-202-make-119003#/ technology/technolog/amazons-199-kindle-fire-costs-estimated-202-make-119003, accessed May 2012. 106 Walter Isaacson, Steve Jobs, p. 533. 107 “Apple to Launch iCloud on October 12,” Apple press release, October 4, 2011, http://www.apple.com/ pr/library/2011/10/04Apple-to-Launch-iCloud-on-October-12.html, accessed April 2012. 108 Robert McMillon, “Wired Scores Exclusive Aerial Photos of Apple’s ‘Area i51,’” Wired Enterprise, April 6, 2012, http://www.wired.com/wiredenterprise/2012/04/apples-secret-data-center/, accessed May 2012. 109 Walter Isaacson, “The Real Leadership Lessons of Steve Jobs,” p. 94. 110 Andrea Jung as quoted in “All about Steve,” Fortune, November 23, 2009, p. 124. 111 Andrea Jung as quoted in “All about Steve”; Brad Stone, Peter Burrows, and Adam Satariano, “The Essence of Apple,” Bloomberg Businessweek, January 24, 2011, pp. 6-8. 112 Andrea Jung as quoted in “All about Steve”; Brad Stone, Peter Burrows, and Adam Satariano, “The Essence of Apple.” 113 “Apple: CEO Cook Sees No Reason To Split Stock,” Forbes, March 19, 2012, http://www.forbes.com/ sites/ericsavitz/2012/03/19/apple-ceo-cook-sees-no-reason-to-split-stock/, accessed May 2012. 114 Adam Lashinsky, “Apple: Game Over?,” Fortune, July 22, 2013, p. 64. For the exclusive use of m. li, 2023.This document is authorized for use only by meihui li in C-Suite Leadership: Spring, 2023 INTG1-GC-1060 Pamela Vaile-1 taught by Pamela Vaile, HE OTHER from Jan 2023 to Jun 2023.
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