The CEO's Role in Digital Mastery: Lessons from Steve Jobs at Apple
Why does the CEO need to be hands-on? Why can’t he just delegate? I am going to let this longish snapshot of 2001 of Steve Jobs and Apple answer that question.
Steve Jobs returned to Apple in December 1996 through the sale ($400 million) of his startup NeXT. Gil Amelio was Apple’s CEO then. He was presiding over Apple’s worst-ever financial quarter. Eventually, Steve Jobs took over the leadership, first as an interim CEO and then permanently. By 2001, he had revived the personal computer business. By 2001, The dot-com bubble had burst, and the NASDAQ had fallen more than 50% from its peak.
Apple was founded 25 years ago, in 1976—Microsoft, a year earlier in 1975. After the long 25 years, the personal computer S curve was expected to plateau. It was now time to ‘think differently.’ But what?
The plateauing personal computer would now start one more high-growth S curve by becoming a “digital hub” that would coordinate various other digital lifestyle gadgets such as music players, cameras, video recorders, etc. The idea was to sync such gadgets with the computer and manage music, pictures, video, text, etc.
Steve was passionate about music. He could have been happier with the experience of portable CD music players and MP3 players. This extended to many other fields, such as video making, camera/pictures, and all aspects of the digital lifestyle. Inspired by what he wanted as a consumer, Steve launched a new grand strategy to transform Apple.
This can be seen as the first tick- Steve Jobs realized that reworking an existing product to make incremental innovations was not the way of the future. He wanted to redefine and disrupt the whole IDEA of personal computing and personal devices- across music, videos, computing….a REAL disruption that the world had never seen before. This would not only completely transform the product, brand, and production plans- it would disrupt the entire industry!
This thought (computer as a digital hub) had lingered in Steve’s mind for a while. In 1999, he introduced FireWire to the iMac, having developed the FireWire tech in the early 1990s. It was a high-speed serial port that allowed digital files (heavy files, music, video, pictures, etc.) to be transferred between the devices.
For the first use of FireWire, Steve thought of transfering videos from video recorders to iMac, edit them, and later share with others. But Apple didn’t have a video editor. Steve reached out to Adobe and asked them to develop their popular editing software for Windows: Adobe Premiere. But to his surprise, Adobe refused to invest in the Mac version of it. The Mac adoption was not high enough for them to invest in Adobe Premiere, solely for Mac. Steve felt betrayed. “I put Adobe on the map, and they screwed me,” he later said. Needless to say Adobe didn’t invest in creating a Mac version of Photoshop, even though the Mac was in the designer community. Instances like these strengthened his conviction that he needed end-to-end control of all key elements of a system. He said, “My primary insight when Adobe screwed us in 1999, was that we shouldn’t get into any business where we didn’t control both the hardware and the software. Otherwise, we’d get our head handed to us.”
Sure enough, Apple started by acquiring Final Cut (video editing software for professional editors) and its team. iMovie was a simpler version made for consumers. iDVD was created for burning video or music onto a disc. iPhoto was designed to compete with Adobe Photoshop. GarageBand was made for creating and mixing music. iTunes was the software for managing songs. iTunes Store was for buying songs. The end-to-end line-up was materialising.
Steve said that the digital hub idea was formed with the camcorder. He noted that iMovie gives your camcorder a 10x more value. Instead of watching long unedited recorded videos of your holiday, you could create short elegant dissolves, add music and roll credits, and make professional-looking videos. It allowed people to exhibit creativity and create something close to their hearts. Steve said: “That’s when it hit me that the personal computer was going to morph into something else.”
Steve had one more insight: If Mac could become and take a load off the gadgets to take care of resource-heavy and complicated stuff (such as editing), then the gadgets could become much simpler and more portable, while the Mac handled those data and computing heavy things much more efficiently, as a hub.
This led to one more insight: All this comes together when Apple could integrate all these on a standard protocol driven through Mac as a digital hub and all other devices, applications, and hardware (FireWire) aligning to that. “I became even more of a believer in providing end-to-end solutions,” Steve said. While Microsoft specialized in operating systems, IBM/Dell/Compaq in hardware, Sony in gadgets, and Adobe in editing software, only Apple was in a position to create an integrated ecosystem for an excellent customer experience. He said, “We can take full responsibility for the user experience. We can do things that the other guys can’t do.”
Video emerged as the first use case of the integrated user experience. FireWire allowed users to get their Sony camcorder (or any such) into Mac. iMovie allowed for editing it into a professional-looking video without professional help. With iDVD, you could burn that onto a DVD and hand it to your family or friends to view on TV. Steve focused on making all this simple for the end user to learn and do. That was a critical success factor.
When Steve saw the first version of iDVD, he didn’t like it. It was too complicated for him. He drew a simple rectangle on a whiteboard and said, “Here’s a new application. It’s got one window. You drag your video into the window. Then you click the button that says ‘Burn.’ That’s it. That’s what we’re going to make.”
The natural progression was to digital photography, as Steve realized that digital photography was the only activity that was pending in the long chain of creative and personal things the Mac would become the tech hub for. Excited about the latest idea, this was the first year that Jobs overlooked a new business opportunity. While there were brands that had developed a drive that could burn a music CD, no one had tried to do it with a video, and Jobs was already looking beyond that - towards video CDs and storage, sharing, and creating capabilities.
Interestingly, the Mac still had a tray disk drive, which Jobs wanted to replace with a more elegant slot drive, but this also meant that the Mac had already missed the boat on CD burners. But in his characteristic way, Jobs knew when to leapfrog over lost opportunities and land well beyond where competition was still struggling to get it perfect. He was to work on something no one had even started conceptualizing. The mark of a true future-ready leader- to know when an opportunity is already crowded, bypassing that and going beyond the crowd, to start a whole new concept.
iTunes
Music was Steve’s passion. But before we go into what Apple did with it, let’s go into a little side story of Sean Parker.
When Sean was about 15 years old, he met Shawn Fanning and Hugo Sáez Contreras, who were about the same age, online. They shared a common interest in programming, theoretical physics and hacking. A few years later, they co-founded Napster. Napster was a peer-to-peer free file sharing application. The focus was on music file distribution. Sean raised $50,000 and Napster was launched in June 1999. The service caught the fancy of young music lovers and within the first 12 months, they had tens of millions of users. Audio songs shared on the service were typically encoded in the MP3 format.
By 2000, millions of people downloaded music from Naster or ripped music CDs. They created their own playlists and then burned that on blank disks. In 2000, 320 million blank CDs were sold in the United States, whose population then was 281 million. This meant more than one CD per American person.
It didn’t take much in 2000 to appreciate that the market for disrupting the music industry was huge. By 2001, Napster’s business model came into trouble. It started running into lawsuits from music labels for copyright infringement. It started losing a number of lawsuits and shut down its operations in 2001, filing for bankruptcy in June 2002. But by that time, the dent had been made. Napster had shown the new, untrodden path, and the music industry was getting ready for newer players and exciting new business models. The time was ripe for inspiring leaders to take centre stage and completely change the face of personal-computing-weds-lifestyle.
Steve Jobs stood at the head of the list - as yet, alone.
He already knew that music was going to be huge. While he had identified the opportunity earlier, Mac hadn't done enough for burning, transferring and also sharing music, effortlessly. The aim was to make it super simple to transfer music from a CD, manage it on the Mac, and then burn playlists. while music management applications already existed, they were complex, clunky, and in his opinion, completely not up to the mark - Real Jukebox, Windows Media Player, HP’s product. he was amazed at how the user was expected to understand the complicated process, and be able to enjoy music after a nerve racking process was conquered! What was the market thinking!
The clear way forward was to de-complicate the apps, make the process creative, enjoyable, and very, very simple.
Providence had a soft corner for Jobs. he would always get the people who he needed, right when he needed them. Rather, he worked hard towards identifying the right people and convince them to join the journey.
One fateful day, a former Apple software engineer, Bill Kincaid, was driving to the Willow Springs track in California, to race his Formula Ford sports car. He was also listening to National Public Radio, about Rio, a portable music player that played a digital song format called MP3. The ‘ expert’ casually commented that Mac users would not be able to work with Rio! Interesting, thought Bill.
The next thing was, he teamed up with his friends Jeff Robbin and Dave Heller, also former Apple software engineers, to write a Rio manager for the Mac. SoundJam was thus born, offering Mac users an interface for the Rio, helping them manage their music on their Mac.
Come mid 2000, as Apple looked for better, more user friendly music management that could be working with Mac as the centre hub, SoundJam was identified, and immediately Apple acquired it. The team of three enthusiastic men were absorbed into Apple, and quickly became Job’s close circle. Robbin, in fact, continued to lead the music software development for Apple for the next decade! In the meantime, Jobs took personal interest to ensure SoundJam transformed into an Apple product. He ensured the complexity it was born with, twiddled down to easy UI, less screens, and made it more fun. The query box was a simple format, to look for whatever you wanted- the song, the artist, the genre- and the look and feel was inspired from iMoves- the new super sleek, super simple little appendage was called iTunes!
It was unveiled at the January 2001 Macworld, as part of the digital hub strategy, as iTunes, an exciting new freebie for all Mac users. A visibly excited Jobs announced “Join the music revolution with iTunes, and make your music devices ten times more valuable. ” This was exactly the kind of reception Jobs wanted- and the slogan hence was to become - Rip. Mix. Burn.
That afternoon, Jobs was having a rough interview with John Markoff from the New York Times. Things turned around when Jobs decided to show off iTunes on his Mac. As colorful, psychedelic patterns moved on the screen, he mentioned, "This reminds me of my youth." He then shared a personal story about his experience with LSD, telling Markoff that it was one of the most significant experiences of his life. He believed that people who hadn't tried LSD could never really understand him fully.
After this, Steve Jobs realised that Apple had a corner of the market for personal digital devices, made into a digital hub, the only thing to be added, he felt, was a portable music player. He figured that it could be done in tandem with iTunes, making the next move a simple step of software collaboration. The iPod was conceived out of this thinking process. So, while there were already many music players in the market, to the music lover Jobs, they were not quite up to the mark. In the fall of 2000, Jobs started the idea of a music device, but due to the unavailability of the components, the development had to wait a few months.
Phil Schiller and Jon Rubinstein worked on getting it, and after a few months, Rubinstein managed to get a suitable small LCD screen and rechargeable lithium-polymer battery, but the bigger challenge was still unsolved. They needed a small disk drive with ample memory to be able to store a big number of files, while being completely portable and user friendly. As luck would have it, one of their suppliers in Japan, Toshiba, mentioned that they had developed a new product - a tiny, 1.8-inch drive (the size of a Parle G biscuit) that would hold five gigabytes of storage, but were not clear what to do with it. The Apple team calculated that it would hold about 1000 songs, and of course, they had a perfect use for it! with a straight face, Rubenstein met with Jobs that night and told him he had found the perfect device. He would only need a 10 million dollars cheque to start on the product.
He authorised the money immediately, and work on the small music device started.
But, who were these men with a mission?
Jon Rubinstein started his career with Hewlett Packard after his M.S. in computer science from Colorado State University. At HP he worked at the manufacturing engineering division, and later, on HP workstations. In 1986, the entrepreneur bug bit him and he left HP to start his own company- Ardent Computer Corp., where he was instrumental in launching two well known machines, the Titan Graphics Supercomputer and the Stardent 3000 Graphics Supercomputer (the company was later renamed to Stardent).
Jobs approached him in 1990 to head Apple's hardware engineering at the newly launched NeXT, at its RISC workstation, and he agreed, joining as Senior Vice President of Hardware Engineering, and a member of its executive staff. however, hardware did not ever become Apple’s strength and the project was abandoned in 1993.
He then moved to launch another startup- Power House Systems, later renamed as Firepower systems. However, by that time, Rubinstein had won Job’s confidence, and it developed and launched high end systems using PowerPC chips. It was reportedly bought over by Motorola in 1996.
After moving from Apple, Rubinstein worked in many different brands- as executive chairman of the board at Palm, Inc., on the board of directors of Amazon and also Qualcomm.
so, with the Toshiba miniature in hand, Rubinstein identified a young entrepreneurial genius, Tony Fadell to lead the development project, cajoled him into joining Apple full time. Well, because he trusted Fadell’s engineering genius combined with sheer common sense of an entrepreneur.
This is another interesting story that needs to be told.
As a young and brilliant programmer, Fadell had started showing signs of entrepreneurial genius early on in life. While still a student in Michigan in the early 1990s, he had already launched three companies! He had worked in the General Magic, a spinoff from the Apple stables, which consisted of a collaboration between Sony, Philips, Matsushita, Toshiba, and other consumer electronics firms - focused on developing a new brand of personal handheld communicators. His association with Phillips in this association got him the position of Mobile Computing Group and served as the Chief Technology Officer and Director of Engineering, for their Mobile Computing Group. But it turned out to be an awkwardly uncomfortable place for Fadell’s style of functioning- since Phillips was a process oriented company with bureaucracy that did not satisfy him. Understandably, the stint didn't last and after developing some products for Phillips, he left, to launch his own brand which he has conceived as ‘ the Dell of consumer electronics’- Fuse. He was hoping to develop a small hard disk-based music player, but Fuse failed, even though Fadell’s enthusiasm didn't. Nor did his love for music wane, and his efforts to use technology to provide a consumer music device. He was looking at making an MP3 player by 2001, and selling it to another brand when Rubinstein called him. In the middle of a skiing holiday in Colorado, Fadell was confident that he would deliver on Rubenstein’s need for the base for the iPod he and Jobs were planning (though it wasn't called iPod just yet!) he was invited to Cupertino, and he willingly went , assuming he was to work on some product that would most likely to be some sort of a digital assistant. But in his meeting with Rubenstein, things were going in another direction, clearly, Rubenstein was pitching to him a device that would be a perfect form of an MP3 player, and could use iTunes too!.
Fadell assumed again- that he was to be hired as a consultant, to produce this device but Rubenstein had other plans for him. he gave Fadell an ultimatum that he would need to come on board full time, if he were to lead the team that was to launch the iPod! bad idea! Fadell valued his freedom much more than any work he could get! Unwilling and unsure, he would not give in to sign the dotted line and become an Apple employee. Rubenstein was clear, though, he needed Fadell on board as an employee to lead the team that would do this development.
In a dramatic turn of events, Rubensten decided he had no choice except to force Fadell to give in. So, when Fadell walked into a room full of the team that was to work with him, he was served an ultimatum - either join, or leave! He had to come aboard ast he team lead for the project- there was no other way this could continue as a project. Fadell gave in, though with a doubt he expressed very clearly.” “Does this always happen at Apple, that people are put under duress to sign an offer?”
But he did give in, though it left a tiny bit of discomfort between the two men on this method of getting Fadell on board. Rubenstein also agreed that Fadell never fully forgave him for the subterfuge!
The slight discomfort lingered because as time went by, both men felt they were the creators of the iPod. Rubenstein was certain of his claim since Jobs had given him the job a few months earlier- and he had also identified Toshiba as a possible solution. Fadell because, well, he had been hoodwinked into joining, so he was actually indispensable. Besides, months before he joined Apple, he had already planned for the development of an MP3 player! There certainly was some resentment on both mens’ parts, as to who was actually the father of the iPod, and it never really got resolved. Of course, both of them felt like the father of the iPod, but it was the product that really changed the music world. The ‘fatherhood’ of the iPod was a matter of opinion for quite some time, as both Rubinstein and Fadell thought they were most deserving of the title of Podfather!
It was discussed for many years over media- interviews, articles, all sorts of opinions and claims- but it was never really resolved. The ‘fatherhood’ of the iPod was a matter of opinion for quite some time, as both Rubinstein and Fadell thought they were most deserving of the title of Podfather!
But to continue with our narrative, this clash did not stop the work. The men worked swiftly together, since Jobs wanted the product unveiled for christmas, so back calculations said, it would need to be ready by October. That left no time to breathe! Looking for a company that would be able to design a small MP3 player for their new device, Fadell identified a small brand called PortalPlayer. He wooed them with the promise that the new project will change the brand Apple forever- making of a music business, moving out of computers! The company signed an exclusive deal for their player- and Apple's team started picking out the drawbacks it had, and rectifying them. It suffered from complex UI, short battery life, and to go beyond a 10 songs playlist.
The iPods click wheel style interface was the brainchild of Phil Schiller. This was in addition to a few more Apple products- iMac, MacBook, and MacOS, in which he had a major role to play in design. When Steve Jobs returned to Apple in 1997, Phil Schiller became a very significant part of the executive team- that did the brainstorming for creating products that went on to make history, even though he had been a part of Apple's keynotes for many years before that as well. Phil became the first person in over two decades to become an Apple Fellow, in 2020.
Now back to the iPod story in fall of 2000.
The history of the music industry changed with one swift signature authorization by Steve Jobs! He authorised the money immediately, and work on the iPod started. Rubinstein identified who Tony Fadell was and why did Rubinstein trust him with something like a new music product?
What happened next was history being created!
it is not merely business, neither is it completely the power of brilliant leadership. Some meetings, some days are fated to change the course of how businesses operate, forever!
On a sunny April day in 2001, this fateful meeting was being held at Apple’s fourth floor conference room. The men gathered were perhaps the best brains in design engineering the consumer tech world has ever known! Fadell, the maverick technopreneur, was to present his work, his ideas to the gathering of Rubenstein, Schiller, Ive, Jeff Robbin, and marketing director Stan Ng. And of course, Jobs, who was an intimidating presence by all accounts, even to super confident Fadell. stories of Steve Job’s ruthless business instincts and sharp talk had reached him, and he wasn't the most comfortable with them.
True to his fears, Jobs was every bit as brutal as his reputation. He had no patience with presentations and slides, he was completely uninterested in what competition was planning, or doing. He already knew all that, even more than they did. Really well!
All the data collected to show Jobs , all discussion faded into the background, as Jobs swiftly got down to business. He wanted real information, what would work, right there, right then.
Fadell was prepared for this onslaught. He had been well informed by Rubenstein- on the sequence of events, and unveiling of the product options, so he brought three options of the product- the best was saved for the last- the piece de resistance! Showmanship was needed for that, and so, they hid the best and the final option under a wooden bowl in the centre of the table.
As Fadell took the team through the various options, Jobs was getting impatient. Fadell displayed his designs and workarounds for the most workable piece. He showed a 1.8-inch drive, LCD screen, boards, and batteries, all labelled with their cost and weight. The business pros and cons of each were discussed in detail. They could be pieced together in various different ways to deliver optimum efficiency. Then he sharted unveiling some of the models- with fishing leads inside styrofoam designs- for the right weightage to be achieved for study.
As Fadell presented various models of the MP3 player base, the designs for the proposed iPod, for his study, Jobs was restless. He needed the touch and feel! He needed information, not presentations. He wanted to see objects he could touch, feel, understand, analyse, there was complete order in how he thought.(In fact, Steve Jobs famously has been quoted saying that if you need a presentation, you don't know what you are talking about!” But that is a story for another time.)
His very first piece had a memory card slot, which could be inserted and removed. Jobs found it too complicated.
The second was dynamic memory RAM. This was cost effective, but if the m=battery ran out (which it would), all the music would be lost! no points for guessing Job’s response.
The third was a small demo- of putting together an 1.8 inch hard drive as a device- which Jobs found interesting. Now this was the climax. The wooden bowl was lifted, and the company was astonished to see a wholly assembled model of this alternative. Jobs Loved it! It was a new and exciting situation for Fadell- he was more used to ( and hence unimpressed by) the slow decision making processes he encountered at Phillips. This was a pleasant shock!
Phil Schiller's turn to showcase his idea came next. He brought out a few models of the iPod that were designed and hidden under the bowl! but these had a strange device on the front- a cartwheel. He suggested that the user need not press the button hundreds of times to hear hundreds of songs in a playlist. a cartwheel component will give smooth access to all the songs, in just a slide. all they needed to do was turn the wheel with the thumb, and the list would be scrolled.
‘That's it!” was JOb’s immediate response.
Fadell and the rest of the engineering team immediately started work on it- the 1.8 inch device with a cartwheel- a little powerhouse of music for everyone.
The team started full throttle, and that included Jobs too. His daily command was a single word- simplify! He wanted to make sure it was an extremely easy device to use, taking in minimum number of clicks to reach a desired song. Jobs was putting each function to a gruelling test of simplicity and functionality.
The engineers working on it would be racking their brains thinking of possible solutions to complex problems, and JObs would come up with a simple question that changed the entire train of thought- simple questions with simple solutions.
He would essentially redefine the problem in a manner that allowed it to be broken into bite size solutions. it soon became a game with the team members to test ob’s insights, leading him with questions, getting to a solution. Jobs’ sharp mind and quick thinking, coupled with his ability to go down the route of developing the easiest possible device the market has ever seen- was the fire in everyone;s belly. they just had to get it done. One very important part of the process of drawing deeper insights was Jobs insistence that the most complex functions would need to be performed on the computer, using iTunes. the playing device, then, would only have the job of delivering as many songs as possible in under 3 clicks, and a much higher battery life. Apple owned the iTunes software, Apple owned the iPod device- if these were synced properly, the complexity could be placed in a space that ensured least complexity for the user.
The icing on the cake was an idea that Jobs used for all Apple devices- no on-off switches. Why bother? if the device is not in use for a certain time, it will go dormant. In the world of automobiles high end cars lock if they are allowed to stand unoccupied, or not used. Something similar was at work here- simplicity.
And suddenly, all the bits fell into place. The idea had blossomed into a simple, uncomplicated device that could house upto a thousand songs ( without needing that much space), an interface that did not even need pressure- just a scrolling wheel that could reach you to your song in no more than 3 clicks, a FireWire connection with the ability to sync a thousand songs in less than ten minutes; and a battery that would last through those thousand songs!
The proof of how cool this device would be was that each of the distinguished gentlemen who helped to craft it- wanted one of themselves.
The naming ceremony was as interesting- a copywriter suggested ‘Pod’. But it's an Apple product- so iPod it was!
Getting deep into the concept that will certainly revolutionise the business, owning the whole idea, driving it with deep understanding, and not wasting any time in bureaucratic delays- Steve jobs was a CEO who was clued in for the new idea! That was perhaps the biggest reason why there was no scope for its failure. with half a dozen brilliant minds at work, Jobs knew exactly what HE wanted- SIMPLIFY, and deliver. his iPod was to be the simplest music device, and beat the market with just that one attribute! Again, this was JOb’s foresight, though he had to select from various ideas. Jobs was convinced that the Pod would deliver much more than just iTunes. But trying to put all of it on the pod would make it bulky. That insight meant the computer could be loaded with features for music to be delivered through the iPod. For instance, the playlists needed to be made on iTunes and then synced with the pod.
Job’s decree that the iPod would not have an on-off switch- a hallmark for all Apple products- made it unique to use, and pride to possess. The power of the brand was driven by the complete ownership of the CEO! If he had left the choice of the best device to any of the brains around the table that fateful day, the iPod may have been something completely different. Ultimately, the fortunes of Apple are as much tied to the iPod, as today.
