Inside Apple: How America's Most Admired--and Secretive--Company Really Works (2 page)

Apple is secretive at a time when the prevailing trend in business is toward transparency. Far from being empowered, its people operate within a narrow band of responsibility. Jobs famously encouraged the 2005 graduation class of Stanford not to “let the noise of others’ opinions drown out your own inner voice, heart, and intuition.” Yet Apple’s own employees are expected to follow orders, not offer opinions. Good managers, we have been taught, delegate. Yet Apple’s CEO was a micromanager in every sense of the word, from approving every ad his company created to deciding who would and wouldn’t attend top-secret off-site meetings.

Apple flouts yet another piece of modern management’s love of efficiency: It consistently leaves money on the table at a moment when profits are king and quarterly earnings exert a tyrannical sway over its fellow publicly traded companies. Apple, in fact, shows relatively little interest in Wall Street, seemingly viewing investors as an irritant at worst, a necessary evil at best. It aims to retain the vibrancy of a start-up at a time when many once-nimble tech companies (Microsoft, Yahoo!, AOL, and even Cisco come to mind) find ossification an inevitable side effect of growth.

Apple isn’t even a particularly
nice
place to work in an era when legions of companies compete to be listed on
Fortune
magazine’s annual ranking of most desirable workplaces. (Apple opts out of the competition altogether, choosing not to apply.) Then again, Apple clearly is doing
something right. In fact, it has done little wrong since Steve Jobs returned to Cupertino in 1997. In the latter half of 2011, Apple and ExxonMobil jockeyed for position as the world’s largest company by market capitalization.

If Apple is so good at what it does, just how does it do it anyway? Google’s work environment has found its way into the popular culture.
Hey, I can go to work in my pajamas, eat Cap’n Crunch, and joust with the other engineers while atop my Razor scooter—wheeee!
Precious few have a clue what goes on at Apple when the camera isn’t pointed at whichever executive is conducting a carefully rehearsed demo at an Apple product launch.

This is just how Apple wants it. As far as Apple is concerned, the subject of how it really works is taboo. Privately, executives refer to its playbook as the recipe for Apple’s “secret sauce.” Tim Cook, the longtime operations chief who became CEO in August 2011, six weeks before Steve Jobs died, once addressed the matter publicly. “That’s a part of the magic of Apple,” he said, when asked by a Wall Street analyst to comment on Apple’s planning process. “And I don’t want c don’t to let anybody know our magic because I don’t want anybody copying it.”

As for Apple’s gadgets, as much as the world loves and admires them, few understand how Apple makes and markets them. It’s a topic best grasped through an understanding of the nitty-gritty processes of working at Apple: how its leaders function, the way the company pits competing technology teams against one another, and its unique approach—or lack of an approach—to career development. While many members of Apple’s middle ranks toil for years in the same exact role—yet another difference from the rest of the upward-and-onward cor
porate world—a handful of trusted lieutenants have bubbled up to become next-generation company leaders.

This book is an attempt to hack into Apple’s closed world and to decode its secret systems so that aspiring entrepreneurs, curious middle managers, envious rival CEOs, and creatives who dream of turning insights into inventions can understand the company’s processes and customs. If—and it’s not a given—it were possible to imitate Apple, who wouldn’t want to try? To confront that complicated task, the most logical place to start would be with Jobs. Jobs died at his Palo Alto home in 2011, but his spirit will inhabit Apple Inc. for years to come. To understand how Apple works is to know how his style was a refutation of the conventional wisdom of what a CEO should be.

S
teven Paul Jobs changed the world, but he was the epitome of the hometown boy. In a paradox not unlike the many paradoxes of his company, Jobs was an urbane aesthete who nevertheless lived the life of a dyed-in-the-wool suburbanite. He professed a disdain for shopping malls, yet he put his company’s first retail store in one. He drove to work every day of his adult life, the prototypical commuter more at home on the freeway than in a city center.

He was born in San Francisco in 1955. His adoptive parents moved the family first to Mountain View, and then Los Altos, both small towns in what was known at the time as the Santa Clara Valley. He attended high school in nearby Cupertino, and in some ways he never left. For brief periods he strayed from the sunny, arid strip between San Francisco and San Jose, an area where a
collection of nascent defense-technology companies were replacing the apricot and prune orchards that dotted the landscape when Jobs was a boy. He briefly attended Reed College in Oregon, a liberal campus where the 1960s lingered well into the 1970s. Jobs camped out for a time on a friend’s farm in Oregon, but when he needed money he came home to work for Atari. In these early years, he embraced strict vegetarianism, sampled a course on calligraphy—early evidence of a lifelong obsession with design—and sought to find himself in India. Again, he returned home. Years later, Jobs bought an apartment in the exclusive San Remo apartment building overlooking New York’s Central Park. But the pull of lean-to buildings and the entrepreneurs who were creating companies in them proved strong: He never took up residence on the Upper West Side.

A cheerleader for what became known as Silicon Valley, Jobs would question the judgment of entrepreneurially minded people who advocated starting companies or furthering their careers anywhere else. Toward the beginning of his rejuvenation of Apple, in 1999, he belittled the former Disney executive Jeff Jordan for having graduated from Stanford University, “in the epicenter of entrepreneurship,” and then leaving town for various positions. A decade later, Andy Miller, CEO and co-founder of Quattro Wireless, a mobile advertising company thatme company Apple bought and whose technology became Apple’s iAd, discussed geography with Jobs when the two met to hash out their deal. “Your company is in Waltham,” Jobs said, mispronouncing the name of the Massachusetts town where Quattro was located. Miller tried correcting Jobs on the pronunciation, but Jobs cut him off. “I don’t care,”
Jobs said. “You know what’s in Waltham?” he asked, still mispronouncing the name. “Absolutely nothing.”

The other titans of the tech industry immigrated to a place where Jobs was a native. Andy Grove of Intel was born in Hungary, Oracle co-founder Larry Ellison, in Chicago. Google’s Larry Page and Sergey Brin hailed from Michigan and Russia, respectively. Mark Zuckerberg, the newest superstar of Silicon Valley when Jobs died, was born in suburban New York and founded Facebook in a Harvard dorm room. They all sought out the Silicon Valley that Jobs wove into his personal fabric at a young age. He loved to tell the story of phoning his neighbor, William Hewlett, to ask for spare parts for a device Jobs was building called a “frequency counter.” He was thirteen years old. Hewlett, the co-founder of Hewlett-Packard, the original Silicon Valley company to start in a garage, gave Jobs the parts—and a summer job.

Jobs may have been of Silicon Valley, but he didn’t always fit its stereotypes. He was savvy and knowledgeable about technology, but lacked formal training as an engineer. He was enough of a nerd to hang out at the Homebrew Computer Club with his friend Steve Wozniak, the personification of a 1970s propeller head. But Jobs was precocious: confident around women, a sharp dresser once he acquired some wealth (and before he began wearing the same clothes day in and day out), and a shrewd and demanding marketer and businessman. He was everything the engineers were not, yet he understood their technology well enough to tell them what products he wanted them to build for the consumers who would be his customers.

Apple began when Wozniak created the Apple I in
1976. Jobs had the gumption to realize that there was a broader market for the device, which “Woz” built mostly to impress his computer-club pals. The Apple II, released in 1977, sold so rapidly that Apple listed its shares on the Nasdaq stock exchange in 1980, making millionaires of the two young founders. As Apple grew, Woz quickly lost interest and Jobs dominated the company. He hired older men, including experienced Valley hands Mike Markkula and Mike Scott, and in 1983 the Pepsi executive John Sculley, to provide what Silicon Valley investors have long called “adult supervision.”

Jobs oversaw the development of the Macintosh, a revolutionary computer in its time because it implemented the breakthrough technology Jobs had observed at nearby Xerox PARC, the photocopier company’s Palo Alto research lab. With a computer “mouse” and a “graphical user interface” that allowed ordinary users to change sizes, fonts, and colors on their screens, the Mac changed the computer industry. When business faltered, however, Sculley kicked Jobs upstairs to the post of vice chairman. Jobs chose exile over sinecure, leaving Apple altogether in 1985.

Jobs’s wilderness years were also some of his most important in terms of growth, professionally and personally. He founded NeXT, a high-end computer company initially targeted at education markets. It never gelled, but it gave him his first experience as a CEO. He’d gone from a mercurial screamer to a more nuanced developer of talent: Several of his top managers at NeXT formed the core of his eventual resuscitation of Apple. In 1986, he invested $10 million in a >
models—Pixar for a time sold expensive workstation computers—the company would settle on computer-aided animation as its niche. Pixar was an “overnight” success when
Toy Story
debuted in 1995 and the company quickly went public, earning Jobs his second fortune.

It was also during his time away from Apple that Jobs transformed himself from a glamorous, if ascetic, bachelor—for a while he dated the singer Joan Baez and the writer Jennifer Egan—to a family man. After addressing a business school class at Stanford in 1990, he introduced himself to a student who had caught his eye, Laurene Powell. They married the next year and ultimately raised their three children on a quiet street in Palo Alto, not far from the Stanford campus. Once again, Jobs led a paradoxical life. A world-famous businessman at work, he lived in a home with no security, no gates, and no lawn: The grounds outside the Tudor house were covered with California poppies and apple trees. The neighbors all knew when Jobs was home, because his silver Mercedes SL55 AMG coupe would be parked in the driveway. Jobs succeeded in keeping his children, and his wife, for that matter, out of the public eye. Laurene Powell Jobs ran an education-oriented philanthropic organization and served on the board of Teach for America (with her husband’s biographer, Walter Isaacson). A former investment banker, she spoke only occasionally in public. At the time of Jobs’s death, their son, Reed, a Stanford undergraduate, lived next door with some friends in a house his parents bought after persuading a longtime neighbor to move down the block. That way Reed could be close to his ailing father, as well as his younger sisters, Erin and Eve.

Known for being alternately bullying and charming at
work, Jobs showed his neighbors the same combo package. Evelyn Richards, who lived around the block from Jobs, once sent her Girl Scout daughter to the Jobs household to sell cookies. “Jobs answered the door himself,” Richards recalled. “But he told her he wouldn’t buy any because cookies are sugary and bad for you.” At the same time, his neighbors frequently spotted Jobs strolling around the neighborhood, either with his wife or, often, with his close friend and Apple board member Bill Campbell. Jobs also showed up at local gatherings just like everyone else. Richards recalled the Fourth of July block party in 2007, days after Apple began selling the iPhone, when Jobs showed off the phone to all who were interested. A poignant snapshot from that day shows Jobs out of uniform: He wore a baseball cap, a long-sleeved white shirt, and blue jeans, with a flannel shirt wrapped around his waist. In it, he stands next to another man, demonstrating the iPhone, looking like just any other Palo Alto dad displaying a new gizmo.

I
f power corrupts, then success enhances: It makes the qualities of a leader appear in sharp relief. As Jobs entered the last and mind-bogglingly productive phase of his career, the many paradoxes of his personality became the management systems of the company. This Jobs-ian transformation began in earnest in 1997.

The previous December, a floundering Apple had purchased NeXT. The prodigal co-founder returned as a “technical adviser,” and NeXT’s software became the foundation of a new operating system for Macintosh computers. The following July, Apple fired its CEO, Gil Amelio,
a former chip executive from National Semiconductor who had failed to halt the hemorrhaging of cash that had begun under Apple’s two previous CEOs, John SculleyansJohn Sc and Michael Spindler.

Even good news at Apple highlighted the fallen icon’s weaknesses. On August 6, 1997, Apple announced a $150 million investment from Microsoft. The cash certainly helped, but the real value to Apple was Microsoft’s commitment to continue developing its Office productivity software for the Macintosh for at least five years. Apple was so diminished that summer that many software programs didn’t come in a version for the Mac. The online publication CNET at the time opined that Microsoft’s move “amounts to little more than good public relations.” Microsoft, after all, didn’t want Apple to die. The elimination of Apple would hurt Microsoft in the eyes of antitrust regulators. This same observer, a newsletter writer focused on Windows products, noted: “The investment still doesn’t give Apple a coherent strategy for turning things around.”

Behind the scenes, though, Jobs’s turnaround plan was well under way. The next month, Apple announced that Jobs would become interim CEO of Apple until a suitable replacement could be found. It would be three years before Apple made Jobs the permanent CEO. Until then he was known around the company’s headquarters as Apple’s “iCEO,” foreshadowing the i-nomenclature that would permeate Apple’s branding. Interim or not, Jobs was busy putting the pieces into place for the company’s rebirth. He recognized the importance of work Jonathan Ive was doing in Apple’s design laboratory, and Jobs set Ive to work on what would become Apple’s candy-colored iMacs—translucent, all-in-one computers that looked like
clear TVs connected to a keyboard. He hired Tim Cook—an operations whiz from Compaq, and IBM before that—to revamp Apple’s bloated and broken supply chain.