Inside Apple: How America's Most Admired--and Secretive--Company Really Works (22 page)

The first sign that this would be a different kind of Apple product unveiling was when Tim Cook strode onto the stage from behind a curtain in the wings at stage left. (His was the empty front-row seat.) Cook had anchored
Jobs-less events before—the relentless cadence of product launches continued throughout Jobs’s medical leaves—but this time was different. And painful though it must have been for him, Cook acknowledged the transition. “This is my first product launch since being named CEO,” he said. “I’m sure you didn’t know that,” he continued, to gentle laughter in the room. “I consider it a privilege of a lifetime.” Cook reminded the audience that Town Hall was the site of numerous historic events in Apple’s past: the launch of the iPod in 2001, a new MacBook Air in 2010. The room, he said, “is like a second home to many of us,” eliciting more chuckles. “Today will remind you of the uniqueness of this company,” Cook went on. “It is an extraordinary time to be at Apple.”

No one in the auditorium mistook Tim Cook for Steve Jobs. But for the time being, Cook’s material—alternately self-deprecatory and messianic—stood on its own. Gushing that “there is amazing momentum here” and “only Apple could do this,” Cook ticked through Apple’s recent accomplishments. It had opened a new store in Shanghai, which drew a hundred thousand visitors on its opening weekend. Cook showed a video of the grand opening that displayed plenty of shiny, happy Apple faces—Chinese Apple faces. “I think I’ve watched that a hundred times, and I think I could watch it a hundred more easily,” Cook said, deploying a Jobsian conceit of subtly instructing the audience that what they had just watched was amazing—and also peeling back the curtain on Apple’s methods: Cook, a literal man, likely
had
watched the clip a hundred times during endless rehearsals for the event.

Cook breezed through a review of Apple’s performance, following the script and hitting Apple’s key points.
“Our products are at the core of everything we do,” he began. The MacBook Air, Cook continued, is “thin, light, beautiful, and wicked fast,” using nearly identical language to his “off-the-cuff” observations when the laptop was unveiled a year before. Other executives, including Eddy Cue, Scott Forstall, and Phil Schiller, reviewed various product areas, including a handful of upgrades to existing products. Then Schiller addressed the news of the day. When he uttered the words “iPhone 4S,” there was an awkward silence in the room as the energy seeped out of it. The phone had a faster processor, a better camera (eight megapixels… better than most $200 point-and-shoot cameras), and other new features. But it was not a new phone physically, and it wasn’t an iPhone 5. Never mind that Apple typically redesigns the iPhone every two years and that the iPhone 4 was only a year old. The audience felt deflated, as if Apple had failed to meet the high expectations everyone had for the event. (Apple’s share price dipped on the news—only to hit fresh highs nine trading days later.)

There was one more feature to show—which neither Schiller nor any other executive referred to as “one more thing”—and that wa kaont sizes the Siri personal assistant feature of the new iPhone. Forstall demonstrated Siri, as he had done for Steve Jobs a few weeks before. Forstall pointedly referred to Siri as a “beta” product, one that wasn’t necessarily finished but was ready for widespread customer use. That marked two subtle departures for Apple: the public release of a beta product—a favorite Google technique, the better to test and adapt to user behavior—and the adoption of a brand name of a company Apple had acquired. In the past, when Apple had acquired a
company and then put its technology to work, Apple had subsumed the company and rebranded its handiwork. The mobile advertising start-up Quattro had become iAd. Streaming tunes provider Lala Music was now part of Apple’s iCloud offering. SoundJam, which created digital jukebox software, long ago had given way to iTunes. But Siri, the name of the start-up Apple acquired in 2009, survived.

Letting a beta product out of the protective cocoon of Apple before it was perfect was just one of the ways that October 4 will be remembered as a defining moment in the transition from Apple’s Golden Age to whatever comes next. (Apple had released beta products before, but it was not the norm.) There were other telling details: Instead of a showman on stage, there was an IBMer. Instead of all the product names being tagged with the lowercase
i
(which might as well stand for having been “inculcated” into the Apple system), another company’s creation was allowed to steal the show. Was iAssistant unavailable? Would it have mattered if it were? (Siri is Norwegian for “beautiful woman who leads you to victory.”)

It’s tempting but inadvisable to carry this pivot-point-of-history analysis too far. Steve Jobs was heavily involved in nurturing Siri and the engineering team that created it. Moreover, Jobs had presided over similar events in the past that had been evolutionary rather than revolutionary. Also, for all its elevated importance in the new iPhone, Siri represented a continuation of a recent Apple strategy of quietly making targeted acquisitions of people and technology (as opposed to fully formed or revenue-gushing products) and integrating them into Apple offerings. More would come. In 2011, Apple made a handful of
acquisitions it didn’t announce. And past acquisitions had yet to see the light of day. It paid $253 million in 2010, for example, to a Canadian mapping company called Poly9, presumably to better control the mapping technology in its mobile products and services.

But there was no escaping the gaping hole Jobs left. Tim Cook’s debut as CEO was workman-like but absent of whimsy. He is earnest and forceful, but the words that come out of his mouth sound scripted, because they are, rather than magical, the way they sounded when his predecessor spoke from on high. Unlike Cook, Forstall has a glimmer in his eye when he speaks. And the nerds must have taken note when Forstall mentioned his own history with artificial intelligence while praising Siri. Yet when Forstall demonstrated the “humble personal assistant,” he asked it only easy questions he knew Siri could answer. Would Steve Jobs have challenged Siri by asking a question that would have elicited a dazzling but unhelpful response, just to show the whiz-bang feature’s limitations? We’ll never know.

A
dulation was expected, but no one could have anticipated the personal nature of grief that people around the world felt when Steve Jobs died. Few of the millions who grieved for him knew him personally. He was not a movie star or statesman or athlete. Yet one million people signed an online tribute page to him on Apple’s website. Mothers brought their kbror statesma children by his house to pay their respects—so that their children could one day tell their grandchildren of this brush with greatness. Love for Jobs was strong, and love for his company was stronger, even
among those who don’t like companies. As Jobs neared the end of his life, a grassroots protest movement with anarchist undertones mushroomed into mass demonstrations against Wall Street specifically and capitalism generally. Right-wing critics delighted in pointing out that the protesters used their iPhones to take pictures and their MacBooks to create propaganda. Capitalism of the Apple variety was okay, Goldman Sachs not so much.

The fact that a company worth $360 billion is embraced as revolutionary and not derided as “the man” or “the establishment” is directly attributable to Jobs and the bond consumers felt with him. Maintaining this paradoxical relationship between Apple’s market value and the perception of its products will be a tall order for Tim Cook. Today Apple is that rare company that enjoys an emotional connection with a wide-ranging array of consumers. As the company takes its first baby steps away from Jobs’s graveside, it is instructive to remember that this bond was not always widespread. I, for one, was a longtime skeptic, and the way that I was won over speaks volumes about how Jobs seduced the world.

The story of Apple’s resurrection resonates with me because it coincides with my tenure in Silicon Valley. I moved to California in the summer of 1997 to start a new column about technology stocks in the hometown newspaper, the
San Jose Mercury News.
It was an exciting time for the tech industry, the investing public, and most certainly for me, having arrived in California from Chicago, where the tech scene amounted to the lumbering giant Motorola and not much else. A bubble was just then inflating, and an entire nation was puckering up to help blow.

Online discount brokerages like E*Trade, DLJ Direct,
and Charles Schwab made investing in tech stocks a breeze. Armchair and professional investors alike were snapping up newly issued shares of fledgling companies like Netscape,
Amazon.com
, Yahoo!, and Excite. The most powerful info tech companies by far—Microsoft, Intel, Oracle, and Cisco—were seen as engines of the new economy. Sun Microsystems, Dell, and Compaq were surging as well. Even Hewlett-Packard, the stalwart tech shop that had provided the mythic underpinning of a “Silicon Valley” when its founders launched their start-up in a garage near the campus of Stanford University, was humming along. The Internet tailwind was filling all sails.

But not Apple’s. Jobs had recently returned, and that summer my new employer went gaga over his every move. The firing of Gil Amelio was front-page news. So was the Microsoft investment. The appointment of Steve Jobs as interim CEO was celebrated the same way. I didn’t get it. I certainly understood that Apple was a big local story: Its rise was the stuff of industry legend. It employed thousands of local newspaper readers, and many of the paper’s subscribers were loyalists of Apple’s elegant products. Apple also was the scrappy hometown team; Microsoft already was the Valley’s sworn enemy, even before the browser wars with Netscape that would begin the following year. A collective cheer for underdog Apple could be heard around the newsroom—and the rest of Silicon Valley—coupled with an implied hiss for the vulgar villain from Seattle.

I brought an outsider’s perspective to the hullabaloo about Apple, wondering silently if all the fuss was warranted. I hadn’t used a Mac since col kMacs plege, eight years earlier. The computer I bought with my own money was an IBM clone (from Gateway) running Microsoft software.
When I joined
Fortune
magazine four years later, I was so stuck in my Windows ways that although
Fortune
’s editorial staff used Macs I requested a PC.

I wasn’t the only one shunning Apple; the rest of the world used PCs, too. Apple was for loyalists, for artists and other creative types, as well as for educators, with whom Apple had crafted particularly close ties. The business world and average consumers who wanted to surf the Web or balance their checkbook used PCs.

Over time, however, I started to use some Apple products—just like everyone else. I downloaded iTunes onto my PC and used it to sync with my iPod, the first portable music player I’d loved since the Walkman. Then I got an iPod Touch and additional iPods (a Nano, a Mini, and even one of those tiny Shuffles that attaches to a shirt collar). Eventually I became one of those people who wanders into an Apple store for no apparent reason, admiring the elegant machines and chatting up the sales staff. Finally, I bought an iMac for my home, unwittingly acknowledging that I was the target demographic for Apple’s uproarious “Mac vs. PC” ad campaign that mocked the uncool complexity of PCs compared with the hip simplicity of Macs.

The hoopla in Silicon Valley surrounding Apple’s activities that summer of 1997 notwithstanding, it is shocking in hindsight just how unimportant Apple was at the time. Steve Jobs was fond of saying that when he returned to Apple, the company at one point was ninety days away from insolvency. On August 9, 2011, Apple first passed ExxonMobil as the most valuable company in the world, at $342 billion. As for Microsoft, the once-pitied Apple had passed its erstwhile foe a year earlier and quickly widened the gap in market value by more than $100 bil
lion. In 2011, a flailing if still wildly profitable Microsoft was the tech giant that looked increasingly irrelevant.

Most companies have just one point of entry, one product to catch a customer. It is only in hindsight that I can see the subtlety with which I was converted from a PC-using apostate and the way that my conversion mirrors one of the greatest entrepreneurial runs in modern American business. Research In Motion makes smartphones. Dell makes computers. That plucky little Canadian company Kobo makes e-readers. Apple has category-killing products in each of these and several other categories. In retrospect, Apple had us at “iPod.” We’re all inside the AppleVerse now, meaning Apple’s challenge isn’t finding new customers anymore but instead figuring out what amazing new products to sell us.

T
he clues to understanding whether Apple can maintain its stratospheric trajectory without Steve Jobs will at first appear in its organization chart and then in the company’s posture with partners and competitors. In the near term, Apple must quickly adjust to the loss of the ultimate key man. Further out, it must figure out how to adjust to the absence of its entrepreneur in chief by tweaking Apple’s unusual management structure to welcome in and nourish outside entrepreneurs. That or somehow magically transforming its existing leadership into entrepreneurially minded executives. Can it evolve, in other words, from an autocracy to an incubator?

Common sense suggests that Apple simply cannot cope, in the long term, with the loss of Steve Jobs. Jobs identified himself as an entrepreneur. (His death certificate
liste k

So in the post-Jobs era, Apple is a massive entrepreneurial enterprise, but its people generally are not entrepreneurs—and they are not encouraged to be. The entrepreneurs Apple acquires typically don’t stick around for more than a couple of years. Andy Miller of Quattro, Bill Nguyen of Lala, and Dag Kittlaus of Siri all left, despite having had rich, productive experiences at Apple, where there truly was room for only one entrepreneur. Today, instead of an entrepreneur born and bred in Silicon Valley in the executive suite, Apple has an emeritus business historian from Harvard lecturing about long-dead entrepreneurs. It is undeniably a cause for concern.