Apple Inc

The greatest turnaround in corporate history?

 
 

On 6th October 2011, it was announced that Steve Jobs, the former CEO of Apple, had passed away after a longstanding battle with cancer. Barack Obama said that “the world has lost a visionary”. Oxygen looks at how this man created one of the most successful brands and companies in the world.

Apple Inc. was recently reported to have more cash than the US Government and temporarily overtook Exxon Mobil as the most valuable company in the world.  However, this has not always been the status quo for Apple.

Who would have thought that in the mid-1990s Apple was just another computer manufacturer, struggling to come to terms with a rapidly changing market for consumer electronics? At the time, in trying to keep its Macintosh flagship computer brand going, the business was posting massive losses and haemorrhaging cash faster than you could say “Steve Jobs”.

In the end, that was what the business decided it needed to turn its fortunes around. Steve Jobs. And a makeover.

How Did Apple Lose Its Bite?

Having been founded in 1977 following the creation of the first Apple computer by Steve Wozniack and Steve Jobs, the business continued to expand through to the mid-80s with the introduction of colour graphics, laser printers and the desktop Macintosh. However, internal power politics led to Jobs being jettisoned by the board in 1986.

At this time, Apple was number 2 in the PC market behind IBM but soon fell further behind, losing market share to new rivals such as Dell. The business experienced repeated botched product launches and posted successive financial failures, culminating in a massive $708m loss in Q2 1997 alone.
It seemed that every computer company except Apple was riding the tech boom of the late 90s. Successive changes and disappointments at CEO level, coupled with a product portfolio that no longer appealed to its core consumers, had left the business rudderless after a wasted decade.

“Jobs” For The Boys

In late 1997, Jobs was brought back into the fold and in 1998 he was named interim CEO or, as he quipped at a later conference, “iCEO”. He immediately sought to clean out the Apple stable, binning a host of projects and bringing in the iMac and other design-led products. The real renaissance for the business was the understanding that, if a successful turnaround was to be achieved, it was the wider consumer electronics market that was going to provide the growth for Apple, rather than traditional PC sales.

Jobs drove through the introduction of the first iPod in 2001, followed by the iTunes store in 2003 – having realised that he would not revamp Apple by taking on his PC rivals directly, but ultimately by changing the rules of the game. The other key stipulation made to the design team was that the products also had to deliver a unique aesthetic. Simply put, they had to look good.

Away from the front line of sales and marketing, Apple had plenty of battles to fight. Copyright and patent suits, concerns over data monitoring and the succession planning issues  raised by concerned shareholders have all been prevalent in recent years.  The business has handled these with an interesting mixture of tactics: hardline denunciation of product infringement claims, cautious planning and communication regarding key executive succession and energetic responses to customer and product issues.

Shareholder concerns in Steve Jobs’ successor are possibly well founded. The statistics on the business’ performance speak for the impact that Jobs and the changes he made have had on the business. Following his return to Apple in 1997, revenue grew by 821%. Since the launch of the iTunes music store, revenue has grown by 951%. In January 2007, three decades after its foundation in a Californian garage, Apple Computer shed the second word from its name and became Apple Inc. That simple change seemed to signal the fundamental shift that had been made within the business. Indeed, “Apple Inc” was thriving to an extent that had at one time seemed far beyond the capabilities of “Apple Computer”.

Think Different

There are some key lessons to note from the  Apple turnaround. Apple rapidly simplified their product range and clarified their message to re-establish what an “Apple product” was. A perfectionist approach to product design was taken. For a product to pass the grade it had to provide something different to the marketplace and deliver an aspirational aesthetic. New product design focused on what could be added to the user experience as the key vantage point for product development, replicating the original positioning of Apple as the innovator in their industry. 

Apple has managed to create new markets, seemingly at will – the iPad being the prime example. Credit Suisse estimated that, by 2015, the market for tablets will be worth around $120bn. The iPad is forecast to be around half of that market. By the end of this year, Apple’s iPad is expected to be more profitable for Apple than its traditional Mac business.

Supporting all of this was the leadership of the late Steve Jobs. A very dominant CEO seems to be one of the few things that highly successful and unsuccessful companies have in common. Having someone at the top with such high level of influence can be a curse or a cure.

If you were to question Job’s importance to Apple during his time as CEO, consider the fact that in January 2011 Apple’s share price dropped 9% on the day he announced a period of medical leave. Rarely does the death of a businessman reverberate in the way that Steve Jobs’ passing has done. Although it will be interesting to see what happens next, Job’s greatest success could be the creation of a brand and a team capable of innovating and dominating the market long into the future.

In the words of one industry analyst, Jobs “created a fusion of fashion, brand, industrial design and computing that is unrivalled by any other company in the world today.” In summary, it took fourteen years to turn a stagnated, loss making company into the most valuable business in the world. Surely this must be the greatest turnaround in corporate history?

 
 
Apple hand

      Let's Talk Numbers

  • 18 million: Number of songs in the iTunes store 

  • 90 million: Number of iPhone units sold 

  • 298 million: Number of iPod units sold

  • 14 billion: Apps downloaded in 3 years

  • 15 billion: Number of songs sold through iTunes
    Source: Apple WWDC 2011 conference presentation

apple

      Some Stats.....

  • $337bn: Apple Inc’s value in August 2011: making it the world’s most valuable company, ahead of Exxon Mobil

  • $7.3bn: Apple Inc’s 2011 Q3 profits

  • $75bn: Cash and securities held by Apple Inc in August 2011; more than the US Government. If turned into a hedge fund, it would be the biggest in the world!

Apple Jobs

       Steve Jobs thoughts on:

Previous Apple products’ appeal
“The products suck! There’s no sex in them anymore!”
BusinessWeek, July 1997

New product and market development
“It’s really hard to design products by focus groups. A lot of times, people don’t know what they want until you show it to them.”
BusinessWeek, May 1998

Innovation
“Innovation has nothing to do with how many R&D dollars you have... It’s not about money. It’s about the people you have, how you’re led and how much you get it.”
Fortune, November 1998

Project management
“It comes from saying no to 1,000 things to make sure we don’t get on the wrong track, or try to do too much.”
BusinessWeek Online, October 2004

Issue6 Apple Chart