Look at the design of a lot of consumer products — they're really complicated surfaces. We tried to make something much more holistic and simple. When you first start off trying to solve a problem, the first solutions you come up with are very complex, and most people stop there. But if you keep going, and live with the problem and peel more layers of the onion off, you can often times arrive at some very elegant and simple solutions. Most people just don't put in the time or energy to get there. We believe that customers are smart, and want objects which are well thought through.— Steve Jobs, On the design of the iPod
as quoted in Newsweek (2006-10-14)
Sometimes, paying management some ridiculous amount in compensation to take over a sinking ship does not work. Once in a while, though, it works spectacularly well.
Some people also criticize the fact that some C-level executives make hundread times an average person's salary. Well, I hope the following example of Steve Jobs at Apple shows why people like me feel it is justifiable.
This is a story of the best of capitalism. We aren't talking about the case of someone making a billion for shareholders, while earning himself or herself a hundread million, just because commodity prices rose. Nope, it ain't that. This also isn't the story of someone gambling the house's money and earning himself a few hundread million just because the bet worked out (don't ask what happens if it blew up.) Nope, it's not quite that. What we have here is someone who, along with fellow employees, rescued a firm that may well have ended up like the dodo bird and created new, revolutionary, products in the process.
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I remember, about a decade ago, when Apple paid a fortune to Steve Jobs just so that he could come back and take over management duties. I believe I was in university at that time and I was more into the tech industry so I was thinking to myself that this is one huge gamble. Admittedly Apple fell off a cliff at that time and was just a bit player—sort of like how Sun Microsystems or AOL are now.
It appeared to be a huge gamble to me because Apple was paying what seemed like a fortune just to have Steve Jobs. It's hard to measure the true compensation because most of the wealth transfer was in the purchase of NeXT, which was mainly owned by Steve Jobs. My wild guess is that Apple paid several hundread million more than what NeXT was worth to get Jobs (such schemes are common in the corporate world. Recall how Citigroup paid Vikrim Pandit a fortune to buy out his hedge fund in order to get him to come and work for them.) Steve Jobs received a boatload of Apple shares and although Apple shares were out of favour and possibly on its way towards corporate death, and Jobs was only paid a salary of $1, it was still a large compensation package.
In the end, the gamble paid off in a big way. It worked so well that even bullish Apple shareholders in early 2000's probably wouldn't have dreamed of how it turned out.
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My interest in life is not to climb the corporate ladder. This means I don't really follow stories about management. I generally skip articles talking about the best CEOs or the worst ones. So it is a bit bizarre for me to be writing an entry about the best business leader of the decade. I have to admit that I don't really follow executive behaviour closely. However, I decided to write something after reading a Fortune article.
A few weeks ago, Fortune magazine selected Steve Jobs as the CEO of the decade. I thought a bit about different leaders that came to mind, across differing industries, and I think it's hard to argue against that call. I'm not a fan of Apple and don't really own any of their products so this isn't a fanboy selection. In fact, the more I think about it, the more I realize how broad his impact has been. Not only did he have a bit impact in computing and music delivery, he also played a key role in revolutionizing computer animated films.
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When Apple was rumoured to enter the smartphone market, I didn't quite get it. I neither follow the industry nor Apple but I knew a bit about the industry. I didn't think they would make it. After all, the mobile phone market consisted of highly competitive products with very short lifespans with a lot of power held by the giant telecoms. How was Apple supposed to break into the market yet alone survive with no prior history (although the development of Newton provided crucial engineering and marketing experience)?
I also didn't understand why Apple was spending a fortune on the iPhone, while pushing their Leopard OS to the background. Now, in hindsight, it all makes sense to me. What I didn't realize what how much the iPhone was a defensive move as much as an offensive attack. The more I think about it, the more I realize that Apple's iPod could easily have been surplanted by a mobile phone with similar capabilities. I dno't know if we are quite there but it wouldn't surprise me if, within a few years, mobile phones replace stand-alone music players like the iPod.
In the end, it was a spectacular introduction by Apple. The product was revolutionary and the build quality even appeared to surpass many of the smartphones with long history in the market. Perhaps the most subtle, yet significant, impact was on smartphone pricing. Apple introduced the iPhone at $499 for the cheaper version which radically altered the pricing structure in the industry. All of a sudden, many of the existing smartphones, as well as high-end (non-smartphone) mobile phones, looked really expensive compared to their capabilities. Steve Jobs isn't a techie but more of a businessman. You can tell this by how well he and his marketing team prices products.
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I think Steve Jobs deserves the title of the Business Leader of the Decade - 2000 to 2009 for the following key reasons:
- Rescued Apple from declining into oblivion and turned it into one of the leading consumer technology companies in the world. Apple appears wildly overvalued right now but, nevertheless, he has somehow managed end up with a market cap of $190 billion right now.
- Apple looked to have completely lost its position in the desktop PC and notebook markets but Steve Jobs somehow resurrected the products. This is much harder than it seems because it's hard to get software and hardware developers to support an operating system if it keeps losing market share. The over-priced NeXT acquisition was somehow put to use in the new Mac OS for the desktops and notebooks.
- Totally revolutionized animated films with his involvement in Pixar. Most of the credit should go to the creative players but Pixar wouldn't be what it was without Jobs' involvement. A lot of the key events happened in the prior decade but Pixar was still influential in the 2000's.
- Completely altered the music industry with the introduction of the iPod and stole the portable music player crown from Sony. Quite frankly, the iPod wasn't as revolutionary as it seems. The idea was nothing new—even a dumb guy like me was waiting for devices like that to materialize—but the execution by Apple was flawless. Can't give better marks for marketing. iPod became cool and the rest was history. The popularization of the iTunes story perhaps put an end to the music CD business. People still buy CDs (I mostly buy CDs) but young people don't.
- Revolutionized mobile phones with the introduction of the iPhone. Introduced capacitive touch mobile phones and altered the mobile phone power structure. Few would have expected the phone manufacturers to dictate so many terms to a carrier but Apple somehow shifted the balaned to the phone manufacturers.
I hope one day, you or I, end up half as influential...
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I'll finish off by linking to some interesting information...
Here is a nice timeline of the events from Fortune.
The main Fortune story awarding Steve Jobs the CEO of the Decade title can be found here.
Steve Jobs' Stanford Commencement Speech from 2005:
I didn't know Steve Jobs had a tough childhood (listen to the speech above to see what I mean.) It's good to see him succeed against tough odds.
I also like how he points out that seemingly irrelevant things can help you later in life. He mentions the example of him taking caligraphy classes, which seemed like the most useless thing, yet it ended up having a huge impact on the computer industry. The font design he learned from his caligraphy class influenced Mac's font system, including its inclusion of proportional fonts. People, especially parents of kids, who trash the arts and other seemingly useless fields should keep that in mind (yes, I'm a defender of the arts and other fields that many on the Right consider as useless to society :) ).
Tags: corporate strategy