Steve Jobs and His Magical Business Decisions

Jobs gambles on selling a new computer

When Jobs and Steve Wozniak built their first computer, they had next to no money. Woz sold his programmable computer and Jobs, his VW bus to raise $1,300 for parts. And then a computer dealer wanted to buy 100 units. That was $50,000 in sales. Except they didn't have the money to buy what they needed.

So they got dealers to sell them parts on credit and they spent weeks building the machines, getting family and friends to pitch in. Had anything gone wrong, had the dealer reneged or been late with payment, they would have been screwed. But Jobs took the chance. The computers got built, the two received their payment, and the parts were officially paid for. With one day to spare.

A little quiet mutiny never hurt

One of the basic business tenets is to follow orders — at least until you become CEO. But Jobs had a problem with authority that did something he thought was foolish. Many people know that Jobs went to see the graphical user interface technology at Xerox Palo Alto Research Center, known as PARC, and brought it back toApple (AAPL). But what they often forget is that he presided over the roll-out of the Apple III, an unmitigated disaster. It was so bad that Apple upper management wouldn't let him run another serious project, the Lisa, and essentially left him doing nothing.

But Jobs heard about the Macintosh, an easy-to-use computer championed by someone else at Apple. Company management was uninterested, so he went renegade, getting involved with the project and taking it over. It was an insane decision. How could he eventually get to the top of Apple management if he went off on his own like this? And yet, he'd ultimately bring to market an industry icon and the financial foundation of the company.

Bladerunner marketing

The Super Bowl 1984 Macintosh commercial might be the most famous television spot ever made. It ran once and made an indelible impression on millions of people, and on multiple industries.

But to get there, someone — Steve Jobs — had to trust ad agencyChiat/Day and its recommendations, including hiring director Ridley Scott, two of whose three previous movies had been flops. The hits? Alien. The misses? The Duelists and … Bladerunner. Yes, what is now a movie classic would considered a box office loss.

Jobs had a reputation of being mercurial and dismissive of others, but if you study his business decisions, he often invests significant trust in those he works with. He saw enough in the Chiat/Day concept to trust what they were doing. That was a big roll of the dice, not only because of Ridley, but a $900,000 production budget.

Apple's board hated it, but Jobs still backed the project (and got the sales department excited so it helped get acceptance). It further drove a wedge between him and top management, but the decision helped make his reputation and taught him invaluable lessons about marketing.

Starting over

When Apple fired Jobs, he could have taken the money he made from his stock and done what many entrepreneurs have done — invested, become a guru mentor, and otherwise cashed in on his reputation. Instead, he started over with a new computer company, NeXT, that embodied even more of what he had learned from Xerox PARC.

The computers the company made had a cult following and was used to write the first Web server and browser. But, more importantly, Jobs hadn't given up. It's tough to start from scratch again, but sometimes it's the only way to move ahead. And although NeXT wasn't a financial success, it was hugely influential on the industry in general and formed what would become the operating system of future Macs.

Jobs ought to be in pictures

Buying a computer graphics group from George Lucas to eventually compete withDisney seemed crazy. No one else had succeeded in large scale animation the House of Mouse did. MyBNET colleagueConstantine von Hoffmanargues that Pixar was the greatest achievement of Jobs.

But it's easy to forget that Pixar was originally in the business of selling high-end graphics computers. After Apple and NeXT, Jobs had leaned to what came automatically. However, the animation, which was just a way to promote the products, was captivating and something that no one else could do. Jobs had the courage to make an abrupt change because it was the animation, not the machines, that mattered. So what if it meant a complete change in the direction of the company?

Remove everything but the necessary

Agreeing to sell NeXT to Apple and return to the company was smart, but many people in business could have made that choice. It was watching old opponents eat crow. No, the brilliant decision that Jobs took when he began to run Apple was to vastly pare down the company's products. It was, in a word, focus.

The move angered many people inside Apple. Saying no to pet projects and directions is a terribly painful process. But Jobs was right. The company needed a coherent strategy if it was going to find its way again, and the organizing idea had to be what would delight the customer, not what would keep the engineers happy.

Put design front and center

If you asked most people what made so many people buy Apple products, the answer would probably be a variation of, "They just look and work so cool." Good design, that takes into account what people want and tries to give them exactly that, is the hallmark of the company. One of the most important decisions that Jobs ever made was to promote Jonathan Ive from out of nowhere to head the company's industrial design group.

Ive was a genius buried in the depths of Apple's design department. On a tour, Jobs noticed his work and immediately put him at the head of the group. Did he have the "official" background for management? No, Ive just knew how to get products to the best point they could be.

Time to change directions

In the last ten years, Apple has done many things: opened retail stores, introduced the iPod, iPhone, and iPad. It created iTunes and got recording labels to cooperate. But the biggest and best decision that Jobs took was to change the focus of the company from being a computer manufacturer to being a consumer products company.

Looking back on his history, it's no surprise that he was capable of making such a move. At NeXT, he eventually went from selling hardware to selling software. At Pixar, he dropped hardware sales for doing pure animation.

Moving to a consumer products model let Apple focus on the customer the way Jobs had always preferred. Moreover, it gave the company a chance to get away from being marginalized as a second fiddle in the personal computing world to become a leader in entertainment and communications. A bold move, for sure. But then, it was Jobs.

 

3 tips from Steve

In a way, simply leaving all this as an homage to Jobs would be doing the man's memory a disservice. Instead of sentimentality, let's take three tips from these decisions and learn how to make better ones going forward:

Work on principle — Jobs believed in certain things, like the importance of the customer and doing things as well and as cleanly as you can. Making decisions is far easier when you know those fundamental things you support and want to achieve.

Be open to change — Don't restrict your choices. Maybe the details of what you or your company has always done in the past won't make it going forward. The only thing to do is accept that and understand what has to come next. Don't obsess about how to make time stop. It won't.

Courage is the only choice — There will be lots of pressure to back off from a strong course of action. Don't give in. That's not to say never listen to others. But you can never please everyone. Trying to do so makes you lose your way and your opportunities.