Inside Apple: How America's Most Admired--and Secretive--Company Really Works (18 page)

Cupidtino is a labor of love for its founders, yet they’re trying to make money at it. Users can send as many messages as they like, but to receive messages, they must subscribe for $4.79 a month, the cost of a twenty-ounce Venti Mocha at a Starbucks in Cupertino. So far, between 2 percent and 5 percent of users pay, said Brahmbhatt, adding that Cupidtino has turned down requests by condom manufacturers and Apple accessories makers to advertise on the site. “We don’t want to pollute the site right now,” he said. “We want to take a minimalist approach. It’s what Steve would have done.”

I
n the days and weeks after Steve Jobs resigned as CEO of Apple on August 24, 2011, there was much hand-wringing about the future of the company.

The stock price initially fell by a few percentage points. Analysts, reporters, and fanboys tried to parse what little information Jobs disclosed about his being unable to meet his “duties and expectations as Apple’s CEO.” He died six weeks later.

In his final weeks, Jobs remained as involved in Apple as his strength allowed him to be. Apple executives and board members continued to visit him at his home in Palo Alto. He went out for breakfast and watched a movie at home with his friend Bill Campbell. Little information about his health seeped out, though the website
TMZ.com
posted a photo of Jobs looking grotesquely gaunt and propped up by a nurse, causing fresh concern among the faithful.

Given all the worry, and the universal consensus that Jobs was the very essence of Apple, a curious thing happened after his resignation. Within less than a month, Apple’s stock price hit new all-time highs. The day before his death, the company unveiled a new iPhone, the iPhone 4S, which included an eight-megapixel camera, a faster processor than the iPhone 4, and Siri, the voice-activated personal assistant Jobs had queried at his last board meeting as CEO. When Siri debuted a week after Jobs died, it garnered hugely favorable reviews from critics—David Pogue of the
New York Times
and the
Wall Street Journal
’s Walt Mossberg included. Pre-orders of the new phone topped one million in a single day, surpassing the previous single day pre-order record of six hundred thousand held by its predecessor. Employees, partners, and investors alike had time to prepare for Jobs’s passing. He had been in declining health for much of 2011, attending fewer and fewer meetings on the Apple campus. The words he had written in January, when he began his final leave of absence, were prophetic and germane to those considering an Apple without Steve. He said that he had confidence that Tim Cook “and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.” The key word was
executing
, the implication being that Jobs’s loyal lieutenants were capably following through on a game plan Jobs already had crafted and approved.

Jobs had done more to ensure that his DNA remain a part of the company than he ever let on publicly. For years, he and other board members had insisted that Apple had a succession plan in place without disclosing what it was. The plan included the obvious manpower issues—who
would succeed Jobs as CEO—and also some other measures to make sure that Apple’s core values would be passed down to successive generations of leaders.

On the same August day that Jobs relinquished his position as CEO, the board swiftly named Tim Cook the next CEO. Despite rumors that the board had authorized recruiters to shop for another replacement for Jobs, the board never seriously considered naming anyone other than Cook to the position. It was Jobs’s board, of course, and he chose Cook, his able sidekick, to take his place.

Jobs thought about far more than who would be the next CEO, however. In the same way that he obsessed on Apple products, he spent years preparing for ways to make sure his vision continues. Starting in 2008, as his health waned and he prepared for a liver transplant, Jobs created a management-training program, but one that was as different from programs that Hewlett-Packard and General Electric had offered as the iPad was from other tablets. Jobs already had some experience with in-house management training. Pixar University offers courses in drawing, painting, sculpting, and filmmaking, as well as leadership. Jobs was thinking beyond vocational skills. He wanted to record, codify, and teach Apple’s business history so that its future leaders would have a reference to ensure they thought different. With little fanfare, he created Apple University.

Creating a management-training program seemed at odds with Jobs’s “stay hungry, stay foolish” persona—a counterculture persona he had cultivated since reading
The Whole Earth Catalog
. He had long denigrated the value of an MBA. He abhorred the concepts that gave business school professors their jollies, market research chief among them. He generally didn’t like MBAs, either.
They had their place, but the people who mattered at an organization like Apple harbored passions [oreliver for science or art or music, not business. (Forgive Tim Cook, the night school striver who rounded out his credentials while at IBM, his MBA. He’s as exceptional in his way as Jobs, the Reed College dropout, was in his.) Pooh-poohing MBAs, though, becomes a problem once a company finds itself one of the largest in the world. It needs structure at that point. It needs leadership. It needs people who think about the business world.

In 2008, Jobs hired Joel Podolny, then the dean of the Yale School of Management, to create Apple University. Podolny, an economic sociologist whose area of expertise is leadership and organizations, was not a typical tweedy academic. He had taught at Stanford and Harvard, but he exhibited very Jobs-like behavior when he became the head of Yale’s graduate business school in 2005 at the ripe old age of thirty-nine. Podolny had been a controversial dean during his time in New Haven. He revamped the school’s curriculum away from single-topic courses like marketing in favor of topics with wider scopes, like “the employee” and “creativity and innovation.” In keeping with Apple’s penchant for secrecy and no-profile, Podolny went into a kind of Witness Protection Program when he arrived in Cupertino—especially among his old friends on the Stanford faculty. “He has become, how shall I put it, super clammed up about Apple,” said Hayagreeva “Huggy” Rao, a Stanford business professor, who, like others among the Stanford faculty, said he didn’t see much of Podolny. Initially hired to create Apple University, Podolny later was promoted to vice president of human resources, despite never having run an HR department.

Jobs himself had long ignored the HR function at Apple, choosing to focus primarily on recruiting, which he considered critical. He was attuned to the fact, however, that Apple was missing out by shunning general management and avoiding leaders with traditional business backgrounds. “We don’t hire a lot of MBAs, but we believe in teaching and learning,” he once said. “We do want to create our own MBA, but in our image. We’ve got more interesting cases than anyone.”

Podolny hired a handful of additional professors such as Harvard’s Richard Tedlow, and they began writing cases about Apple. Tedlow, who is sixty-four, is the preeminent US academic business historian and is best known for chronicling the lives and careers of the most successful American entrepreneurs of modern times, including George Eastman, Henry Ford, and Thomas Watson. He took a leave of absence from Harvard, where he was the MBA Class of 1949 Professor of Business Administration, to consult at Apple. Then, in 2011—and without so much as a press release—he retired from Harvard after twenty-three years to take up a full-time position at Apple. “He told me he’s doing what he did here but that he’s doing it for internal Apple executives,” said Richard Vietor, a Harvard colleague.

Examples of the case studies being taught at Apple University include the story of how Apple crafted its retail strategy from scratch and Apple’s approach to commissioning factories in China. Wherever possible the cases shine a light on mishaps, the thinking being that a company has the most to learn from its mistakes. Apple executives teach the cases, with guidance from the professors.

In his own book
Giants of Enterprise
, Tedlow makes
trenchant observations about the challenges great companies face:

There is no other field of human activity—including entertainment, s [ert="2ports, high fashion, or politics—which is so riddled by fads as business. Every day there is a newspaper headline, every week there is a magazine story, and perhaps with the Internet we will soon be saying every hour there is yet another “guru” that touts a new hero of business or a new method of solving problems which date back not merely ten years but far longer. At the least, the study of business history can prompt an executive to ask of each new “solution” to problems that can never be solved but only managed: How really lasting is this approach, this idea, this company?

Drawing comparisons among the visionaries he researched, Tedlow observes that the men who created these great enterprises suffered from “the derangement of power.” He notes, “It is very common among the very powerful and very destructive. Norwegians have, in fact, a word for this syndrome. It is
stormannsgalskap
, which can be translated as ‘great men’s madness.’ ” If any company could fairly be described as being influenced by a leader with
stormannsgalskap
, it was Apple.

If Tedlow has been addressing the subject of great men’s madness with his students, word hasn’t yet leaked out. Instead, he is teaching them business lessons about other companies that the Apple executives can apply to their own situations. For instance, Tedlow has lectured Apple’s PR staff on the Tylenol tampering crisis of 1982
and how the McNeil Consumer Products unit of Johnson & Johnson responded. He taught a class for executives about the fallen grocery store chain A&P as an example of what happened to a company that once dominated its field. Quipped an attendee: “We were all trying to figure out what A&P had to do with Apple.”

Apple spent years keeping academics out, so it will be interesting to see over time the effect of welcoming them in. Tedlow’s last book before joining Apple was
Denial: Why Business Leaders Fail to Look Facts in the Face—and What to Do About It
. Marketing material for the book notes that a common sign of denial is the act of “focusing on a glitzy new headquarters rather than the competition.” Apple hardly ignores the competition. Then again, the last time he spoke in public, on June 7, 2011, Jobs unveiled plans for a magnificent new Apple headquarters, which he likened to a giant spaceship.

T
he effect of Apple University on the company’s corporate culture could take years to become visible to outsiders. Some of the first perceptible differences between the Jobs and the post-Jobs eras will be seen sooner—in areas that were outside Jobs’s interest, or areas where the company’s shortcomings were directly attributable to him. Apple hardly was a perfect place under Jobs, so while his death represents a great loss, it also presents an opportunity. For example, a dirty little secret inside Apple is that Jobs was a one-man bottleneck. Steve Jobs was all too human, after all, and there was only so much he could do in the course of a day. Employees liked to say there were two kinds of projects at Apple: the ones Steve Jobs obsessed over
and all the others. In fact, Apple tends to be a one-big-thing-at-a-time company, reflecting the legendary CEO’s willingness to concentrate only on one big thing at a time.

When Jobs was CEO, a former Apple engineer described this phenomenon in predictably computer-scientist lingo: “He operates in a single-threaded manner. Other things will get put on hold.” When the first iPhone was under development, for example, the scheduled update of the operating [he manner. Osystem for the Macintosh was delayed by months because of the resources pulled to focus on the first mobile operating system.

Jobs’s refusal to spread himself too thin at Apple—a problem alleviated only somewhat when he sold Pixar to Disney in 2006 and stopped spending a day a week at the animated film company across the San Francisco Bay—was consistent with how he wanted Apple to run. Generally speaking, Apple doesn’t multitask. The lower down employees are in the ranks, the more they focus on one project. The virtues of this approach are evident in Apple’s exceptional and limited product lineup. But having a singularity of focus has downsides, too. Apple is a sprawling, multiproduct company now. There’s reason to believe that less visionary managers will be willing to keep more balls in the air—at a time when Apple already is juggling more balls.

Another little-discussed topic at Apple, given its success, is what could be called its orphan products, the features that Apple plainly doesn’t care all that much about. During Jobs’s tenure, employees knew the reason when one of their projects seemed to simmer on the back burner: Jobs wasn’t interested. An example is the inferiority of Apple’s spreadsheet program, Numbers, compared with its stellar
presentation software, Keynote. “Keynote is a wonderful application because Steve did presentations,” a departed engineer pointed out. “Numbers doesn’t ooze
Steveness
, which makes sense, because Steve didn’t do spreadsheets.” Indeed, in the context of extolling the virtues of having one person, the CFO, keep a spreadsheet for the company’s finances, Jobs once boasted: “Nobody walks around with spreadsheets anymore.” It’s a ludicrous statement, of course. Tim Cook is a master of spreadsheets, and there’s no way a legion of Apple managers working on projects from real estate to logistics to manufacturing could function without them. But the sentiment nevertheless reflected Jobs’s attitude, and in fact Numbers isn’t a real rival to Microsoft’s Excel. If Apple wanted to make a serious effort to court business users for its computers, creating a better spreadsheet program would be a step in the right direction.