This research examines the business case of Apple, Inc. and the actions performed by its leader Steve Jobs to implement changes and maintain growth. The components of the Jobs’ change management strategy, its benefits and risks are considered in detail in the following sections. The research concludes with the evaluation of the implications of the Jobs’ approach for the Apple’s current development strategy.
Background: the Need for Change
In 1997, Apple appeared to face the whole range of the “deadly business sins” that predict the coming downfall of the business (Drucker 2013). It offered a large number of high-priced products with a high production cost. The company took a small niche in the market, as Apple computers were losing the competition and yielding to less expensive products from IBM. Moreover, in the last decade, Apple failed to identify opportunities and expand the business. Despite the “efforts of three different CBOs” (Heracleous & Papachroni 2013) to reverse the trend, the organization’s performance was degrading. When Steve Jobs returned to the company after a twelve-year break, he faced the need for radical changes.
Main Change Challenges
The need for a proper change management strategy is not limited to the crisis cases like the Apple’s position in the end of 1990-s. Apparently, any modern organization faces a constant pressure from the external environment driven by changes in technology, evolution of consumer preferences, and competition, among others. The pressure is multiplied by the increasing pace of changes, high level of uncertainty and considerable number of unique unpredictable events. In order to tackle the changes and survive in this volatile and uncertain world, the organizations need to consider change management as the continuous process but not as a short-term project.
The change challenges were triggered not only by the external environment but are generated inside the organization. Talking about the basic goal of the organizational change efforts, it is “almost always the same: to cope with a more challenging market environment by changing fundamentally how business is conducted” (Champy & Nohria 1996). It is therefore twofold and comprises both the external and internal environment of the organization. In particular, the ability to respond to the market in a financially effective way is related to the wide range of internal factors. Thus, among these factors are the organizational culture and human capital, the portfolio of products, expertise and technologies owned by the company, its ability to improve the supply and distribution chain as well as its marketing strategy. In 1997, Apple had to work with many of these issues, and the following section presents the overview of the Jobs’ role in this process.
The Components of Jobs’ Change Strategy
Overview of the Leader’s Impact
Apple’s growth in performance during Jobs’ reign is closely related to his efforts to encourage groundbreaking innovations in all parts of the organization. The capabilities of most successful leaders were examined by Dyer, Gregersen, and Christensen in their fundamental research. Based both on the qualitative and quantitative analysis, they developed a concept of “growth and innovation premium” (Dyer, Gregersen & Christensen 2011). With regard to the concept, it describes “a proportion of a company’s market value that cannot be accounted for from cash flows of its current products or businesses in its current markets” (ibidem, p. 6). Thus, it is no more possible to win the competition and gain sustainable growth by being dependent on the past performance or copying the new products after they were already launched. Hereby, this makes the ability to identify opportunities that do not yet exist in the market more important.
The Jobs’ ability to change was measured by the innovation premium of Apple in different periods. In the initial period of Jobs’ tenure before 1985, the innovation premium was as high as 37% and dropped dramatically to 30% in the next twelve years when Jobs left. After his return, “it took a few years to get back on track, but between 2005 and 2009, Apple’s innovation premium jumped to 52 percent” (Dyer, Gregersen & Christensen 2011).
Jobs seemed to become a perfect “change agent” for Apple, combining the capabilities of big strategic vision and operational control as well as being both a charismatic visionary and a “transactional” operational leader (Johnson, Scholes & Whittington 2009). Although the Apple’s success is largely dependent on Jobs’ unique personality, several generic components of the strategy enabled the company to reach its current performance. In the following sections, the change strategy taken by Jobs will be examined in more detail by analyzing its different components.
The Approach to Handle Changes
When Jobs returned to the company for the second time in 1997, he first of all started by diagnosing the situation to identify the problem. Thus, he discovered the main issues in the product line and identified key priorities for its development. In his change strategy, Jobs was heavily dependent on the inherent corporate values. In a broad sense, the “Apple ecosystem” was integrating not only hardware, software, and content but also comprised the unique organizational culture which spread to the market. The customers were enthusiastic about the company’s message to the same level as the employees. As a result, this served to create the most devoted team and the most loyal and committed “fan club” of customers (Heracleous & Papachroni 2013).
In Apple’s change strategy, Jobs’ role was crucial, as he performed the revolutionary “executive reinvention” (Champy & Nohria 1996) based on his brilliant vision of the market. With his insistent efforts to implement this vision, he effectively spread the reinvention throughout the organization.
The core part of the changes initiated by Jobs was the deep organizational transformation. In fact, he launched the “Think Different” advertising campaign to promote the spirit of rebellion, disruptive innovations, and entrepreneurship. It worked to reestablish the corporate values of “innovation as everyone’s job” and (Dyer, Gregersen & Christensen 2011, p. 217). Moreover, Jobs “revitalized the Apple’s innovation capability” and established a new “start-up mentality” by encouraging his employees to learn and constantly practice “out of the box” thinking (Heracleous & Papachroni 2013).
It is worth mentioning that Jobs managed to make the whole organization successful. What is more, he transformed Apple into an employment brand with a strong sense of superiority. He “worked hard to recruit people usually regarded as the best in their fields”, and consequently the most talented people “wanted to work for Apple so finding them became easy” (Sanders 2012). The innovational spirit was combined with the strong emphasis on discipline, diligence, and perfectionism. The people were inspired to build large plans and work hard.
Product and Brand Strategy
The first action taken by Jobs was related to the audit of the Apple product line. He chose about 30% of the numerous products offered by Apple, which were the “gems” based on their market potential (Heracleous & Papachroni 2013). Moreover, he added a number of new initiatives and encouraged innovative projects throughout all the company’s activities.
The Jobs’ unique intuition with regard to product design, combined with the relentless effort at excellence, served to fulfill the most radical transformation of the market. Apple created the new demand instead of focusing on the current market issues. Ironically, IBM failed to address this threat the same as Apple failed before to discover any opportunities to beat IBM’s PC offer. The Apple’s course on developing proprietary technologies and controlling all products served to strengthen the advantage of the company over the competitors.
The concept of creativity and innovation in opening new markets was elaborated in the contemporary “Blue Ocean Strategy”. Hereby, instead of trying to “outperform the rivals to grab a greater share of existing demand”, Apple looked for the opportunities in the “untapped market space”, which offered high growth prospective (Kim & Mauborgne 2005). In fact, Jobs created the revolutionary products which were not anticipated by customers and competitors. Moreover, he altered the offering and promoted the Apple brand by ignoring the current products offered by competitors and creating the new needs in the market. At the same time, Apple isolated and attacked the companies who counterfeited Apple’s products with cheap substitutes. In ten years, Apple grew its brand value by tenths of percent per annum, increasing the market capitalization from $2 billion in 1997 to $483 billion in 2015. The current management puts even more ambitious plans to continue implementing the Jobs’ vision of Apple becoming the central point of consumers’ lives.
Development Strategy and Strategic Alliances
Apple continues to increase its investment in proprietary technologies and internal R&D. At the same time, Jobs broke many industry stereotypes and sourced the company’s innovations by observing, questioning and adapting ideas from many different spheres. For instance, there is evidence that “Apple was the only computer manufacturer to allocate real resources to pursue a music business, a phone business, and a digital camera business” (Dyer, Gregersen & Christensen 2011). In fact, this approach has now become almost universally accepted by the largest technological companies, including Google, Microsoft, Samsung, and Amazon. The difference pursued by Jobs, which proved to be critical, was that the changes and innovations were diffused across the whole organization.
Despite the primary focus on proprietary technologies, Jobs did not overlook the importance of key partnerships. In particular, Apple made a critical decision to offer compatibility with Windows in iTunes and, later, in the iCloud storage offering. Apparently, this allowed the company to target the broader customer base and strengthen the Apple’s market positions. Similarly, Apple forged a strategic partnership with Microsoft and Intel. The innovative approach to handle the largest record studios implemented in the iTunes and iStore created a unique business model, increased the barriers to the competition, and enhanced customer loyalty.
The Implications of the International Strategy
Apple took full advantage of the “trend towards global nationalization, seeking world’s standards of efficiency and productivity” (Doole & Lowe 2005). It formed a number of alliances and efficiently allocated its production facilities. For cost considerations, all Apple products are manufactured in China, with thousands of own employees and “over 700,000 assembly workers” at the Foxconn contracting factory (Goldman 2012). With its abundant cash flows and large capital expenditures aimed at fostering innovations, Apple has a solid base to grow internationally by acquiring small innovative businesses and integrating new technological developments.
As the global marketplace becomes more and more interconnected, the Apple’s brand positioning and marketing strategy served to target its segment of customers in all markets across cultures. Despite the high price, Apple gained significant popularity in the emerging markets. Apparently, these countries will remain a key battlefield in the near future, since “Mature markets like the US aren't the drivers of future revenue. Instead, it's cheap devices in China and India that handset manufacturers are focused on” (Tibken 2014).
A charismatic leader and a creative genius Steve Jobs performed a revolutionary transformation of the current digital world. In fact, he was a central source of power in the Apple ecosystem, since he created and nurtured its unique corporate culture. The whole organizational structure was controlled by Jobs, and he was involved in all processes. Undoubtedly, his intuition and vision was critical for the company’s growth. However, the Apple’s extraordinary dependence on the Jobs who often played against all the rules was risky; thus, “Almost anyone who adopts the Steve Jobs approach to leadership will fail” (Finkelstein 2013). Being relentless and conflicting, “almost manic, in his pursuit of quality and excellence” (Sanders 2012), Steve Jobs did not waste much time on explanations. It is worth noting that he was brilliant in diagnostics and action, joining them in the constant turbulent move for perfection. However, he missed the important function of communications, the third component of the “enquiry and action” framework (Beech & MacIntosh 2012). Thus, the atmosphere of secrecy and the “start-up” spirit did not encourage any additional communication between the teams. Although Jobs was good at hiring and inspiring talents, he kept the pressure very high and limited the feedback so that only the most enthusiastic devotees were able to stay for long. The cultural transformation inside the organization created by Jobs and Apple’s sustainable innovation premium was at major risk after his death. The same issue related to the risks of maintaining the proprietary system.
Conclusion: the Change Management Process after Steve Jobs
Despite the controversy around Apple’s future after Steve Jobs era, the current CEO seems to fulfill his promise and maintain the “Apple DNA” (Kane 2014). More importantly, he managed to take the best from the Jobs’ management culture and at the same time adjust the strategic course to make the company more stable. Being pragmatic, taking as a basis numbers and being keen on operational excellence, he continued to practice the perfectionist approach and harsh communication style associated with Jobs. Therefore, like the years before, Apple focuses on customer experience and unique product performance, as opposed to the market share. Tim Cook is “a seasoned businessman … organized, prepared and more realistic about the burdens of running a company of Apple's size” (Kane 2014). In addition, the CEO introduced more transparency and openness in the relations with his staff and stakeholders, strengthening the alliances inside the organization and with partners. Moreover, he launched corporate charity programs and joined the Fair Labor Association, “an industry-financed third-party monitoring group” (Lashinsky 2012). The company continued to hire talents from the best companies in the world. After a long pause, in 2014, Apple announced its next disruptive innovation, namely the Apple Pay mobile payments platform. Together with Apple Watch, CNN called this event “one of the most ambitious product launches” in the history of the company (Best Global Brands 2014).
Since 2012, the company continues to gain market value, being the first company by market capitalization and the fifth by profit (Forbes 2015). It attained the first ranks in the 2014 and 2013 Interbrand global brands list (ibidem) and kept improving its position to reach the #5 rank in the 2014 Fortune 500 list (Fortune 500 2015). Despite the serious competition in the smartphone market, Apple generates large revenues and cash flows. Although the company will arguably never present the same level of disruptive innovations as in 2000-s, the new management has proven that Apple has considerable potential to further develop as a more balanced company.