What happens to a company when a visionary CEO is gone? Most often innovation dies and the company coasts for years on momentum and its brand. 
Rarely does it regain its former glory.
Here’s why.
Microsoft entered the 21st century as the dominant software provider for anyone who interacted with a computing device. 16 years later it’s just another software company.
After running Microsoft for 25 years, Bill Gates handed the reins of CEO to Steve Ballmer in January 2000. Ballmer went on to run Microsoft for the next 14 years. If you think the job of a CEO is to increase sales, then Ballmer did a spectacular job. He tripled Microsoft’s sales to $78 billion and profits more than doubled from $9 billion to $22 billion. The launch of the Xbox and Kinect, and the acquisitions of Skype and Yammer happened on his shift. If the Microsoft board was managing for quarter to quarter or even year to year revenue growth, Ballmer was as good as it gets as a CEO. But if the purpose of the company is long-term survival, then one could make a much better argument that he was a failure as a CEO as he optimized short-term gains by squandering long-term opportunities.
How to Miss the Boat – Five Times
Despite Microsoft’s remarkable financial performance, as Microsoft CEO Ballmer failed to understand and execute on the five most important technology trends of the 21st century: in search – losing to Google; in smartphones – losing to Apple; in mobile operating systems – losing to Google/Apple; in media – losing to Apple/Netflix; and in the cloud – losing to Amazon. Microsoft left the 20th century owning over 95% of the operating systems that ran on computers (almost all on desktops). Fifteen years and 2 billion smartphones shipped in the 21st century and Microsoft’s mobile OS share is 1%. These misses weren’t in some tangential markets – missing search, mobile and the cloud were directly where Microsoft users were heading. Yet a very smart CEO missed all of these. Why?
Execution and Organization of Core Businesses
It wasn’t that Microsoft didn’t have smart engineers working on search, media, mobile and cloud. They had lots of these projects. The problem was that Ballmer organized the company around execution of its current strengths – Windows and Office businesses. Projects not directly related to those activities never got serious management attention and/or resources.
For Microsoft to have tackled the areas they missed – cloud, music, mobile, apps – would have required an organizational transformation to a services company. Services (Cloud, ads, music) have a very different business model. They are hard to do in a company that excels at products.
Ballmer and Microsoft failed because the CEO was a world-class executor (a Harvard grad and world-class salesman) of an existing business model trying to manage in a world of increasing change and disruption. Microsoft executed its 20th-century business model extremely well, but it missed the new and more important ones. The result? Great short-term gains but long-term prospects for Microsoft are far less compelling.
In 2014, Microsoft finally announced that Ballmer would retire, and in early 2014, Satya Nadella took charge. Nadella got Microsoft organized around mobile and the cloud (Azure), freed the Office and Azure teams from Windows, killed the phone business and got a major release of Windows out without the usual trauma. And is moving the company into augmented reality and conversational AI. While they’ll likely never regain the market dominance they had in the 20th century, (their business model continues to be extremely profitable) Nadella likely saved Microsoft from irrelevance.
What’s Missing?
Visionary CEOs are not “just” great at assuring world-class execution of a tested and successful business model, they are also world-class innovators. Visionary CEOs are product and business model centric and extremely customer focused.
The best are agile and know how to pivot – make a substantive change to the business model while or before their market has shifted. The very best of them shape markets – they know how to create new markets by seeing opportunities before anyone else. They remain entrepreneurs.
One of the best examples of a visionary CEO is Steve Jobs who transformed Apple from a niche computer company into the most profitable company in the world. Between 2001 to 2008, Jobs reinvented the company three times. Each transformation – from a new computer distribution channel – Apple Stores to disrupting the music business with iPod and iTunes in 2001; to the iPhone in 2007; and the App store in 2008 – drove revenues and profits to new heights
These were not just product transitions, but radical business model transitions – new channels, new customers and new markets–and new emphasis on different parts of the organization (design became more important than the hardware itself and new executives became more important than the current ones).
Visionary CEOs don’t need someone else to demo the company’s key products for them. They deeply understand products, and they have their own coherent and consistent vision of where the industry/business models and customers are today, and where they need to take the company. They know who their customers are because they spend time talking to them. They use strategy committees and the exec staff for advice, but none of these CEOs pivot by committee.
Why Tim Cook Is the New Steve Ballmer
And that brings us to Apple, Tim Cook and the Apple board.
One of the strengths of successful visionary and charismatic CEOs is that they build an executive staff of world-class operating executives (and they unconsciously force out any world-class innovators from their direct reports). The problem is in a company driven by a visionary CEO, there is only one visionary. This type of CEO surrounds himself with extremely competent executors, but not disruptive innovators. While Steve Jobs ran Apple, he drove the vision but put strong operating execs in each domain – hardware, software, product design, supply chain, manufacturing – who translated his vision and impatience into plans, process and procedures.
When visionary founders depart (death, firing, etc.), the operating executives who reported to them believe it’s their turn to run the company (often with the blessing of the ex CEO). At Microsoft, Bill Gates anointed Steve Ballmer, and at Apple Steve Jobs made it clear that Tim Cook was to be his successor.
Once in charge, one of the first things these operations/execution CEOs do is to get rid of the chaos and turbulence in the organization. Execution CEOs value stability, process and repeatable execution. On one hand that’s great for predictability, but it often starts a creative death spiral – creative people start to leave, and other executors (without the innovation talent of the old leader) are put into more senior roles – hiring more process people, which in turn forces out the remaining creative talent. This culture shift ripples down from the top and what once felt like a company on a mission to change the world now feels like another job.
As process oriented as the new CEOs are, you get the sense that one of the things they don’t love and aren’t driving are the products (go look at the Apple Watch announcements and see who demos the product).
Tim Cook has now run Apple for five years, long enough for this to be his company rather than Steve Jobs’. The parallel between Gates and Ballmer and Jobs and Cook is eerie. Apple under Cook has doubled its revenues to $200 billion while doubling profit and tripling the amount of cash it has in the bank (now a quarter of trillion dollars). The iPhone continues its annual upgrades of incremental improvements. Yet in five years the only new thing that managed to get out the door is the Apple Watch. With 115,000 employees Apple can barely get annual updates out for their laptops and desktop computers.
But the world is about to disrupt Apple in the same way that Microsoft under Ballmer faced disruption. Apple brilliantly mastered User Interface and product design to power the iPhone to dominance. But Google and Amazon are betting that the next of wave of computing products will be AI-directed services – machine intelligence driving apps and hardware. Think of Amazon Alexa, Google Home and Assistant directed by voice recognition that’s powered by smart, conversational Artificial Intelligence – and most of these will be a new class of devices scattered around your house, not just on your phone. It’s possible that betting on the phone as the platform for conversational AI may not be the winning hand.
It’s not that Apple doesn’t have exciting things in conversational AI going on in their labs. Heck, Siri was actually first. Apple also has autonomous car projects, AI-based speakers, augmented and virtual reality, etc in their labs. The problem is that a supply chain CEO who lacks a passion for products and has yet to articulate a personal vision of where to Apple will go is ill equipped to make the right organizational, business model and product bets to bring those to market.
Four Challenges for the Board of Directors
The dilemma facing the boards at Microsoft, Apple or any board of directors on the departure of an innovative CEO is strategic: Do we still want to be a innovative, risk taking company? Or should we now focus on execution of our core business, reduce our risky bets and maximize shareholder return.
Tactically, that question results in asking: Do you search for another innovator from outside, promote one of the executors or go deeper down the organization to find an innovator?
Herein lies four challenges. Steve Jobs and Bill Gates (and 20th century’s other creative icon -Walt Disney) shared the same blind spot: They suggested execution executives as their successors. They confused world-class execution with the passion for product and customers, and market insight. From the perspective of Gates there was no difference between him and Ballmer and from Jobs to Cook. Yet history has shown us for long-term survival in markets that change rapidly that’s definitely not the case.
The second conundrum is that if the board decides that the company needs another innovator at the helm, you can almost guarantee that the best executor – the number 2 and/or 3 vice president in the company – will leave, feeling that they deserved the job. Now the board is faced with not only having lost its CEO, but potentially the best of the executive staff.
The third challenge is that many innovative/visionary CEOs have become part of the company’s brand. Steve Jobs, Jeff Bezos, Mark Zuckerberg, Jeff Immelt, Elon Musk, Mark Benioff, Larry Ellison. This isn’t a new phenomenon, think of 20th-century icons like Walt Disney, Edward Land at Polaroid, Henry Ford, Lee Iacocca at Chrysler, Jack Welch at GE and Alfred Sloan at GM. But they’re not only an external face to the company, they were often the touchstone for internal decision-making. Years after a visionary CEO is gone companies are still asking “What would Walt Disney/Steve Jobs/Henry Ford have done?” rather than figuring out what they should now be doing in the changing market.
Finally, the fourth conundrum is that as companies grow larger and management falls prey to the fallacy that it only exists to maximize shareholder short-term return on investment, companies become risk averse. Large companies and their boards live in fear of losing what they spent years gaining (customers, market share, revenue, profits.) This may work in stable markets and technologies. But today very few of those remain.
In the 21st Century an Execution CEO as a Successor Increasingly May be The Wrong Choice
In a startup the board of directors realizes that risk is the nature of new ventures and innovation is why they exist. On day one there are no customers to lose, no revenue and profits to decline. Instead there is everything to gain. In contrast, large companies are often risk-averse engines – they are executing a repeatable and scalable business model that spins out the short-term dividends, revenue and profits that the stock market rewards. And an increasing share price becomes the reason for existing. The irony is that in the 21st century, the tighter you hold on to your current product/markets, the likelier you will be disrupted. (As articulated in the classic Clayton Christensen book The Innovators Dilemma, in industries with rapid technology or market shifts, disruption cannot be ignored.)
Increasingly, a hands-on product/customer, and business model-centric CEO with an entrepreneurial vision of the future may be the difference between market dominance and Chapter 11. In these industries, disruption will create opportunities that force “bet the company” decisions about product direction, markets, pricing, supply chain, operations and the reorganization necessary to execute a new business model. At the end of the day CEOs who survive embrace innovation, communicate a new vision and build management to execute the vision.
Lessons Learned
- Innovation CEOs are almost always replaced by one of their execution VPs
- If they have inherited a powerful business model this often results in gains in revenue and profits that can continue for years
- However, as soon the market, business model, technology shifts, these execution CEOs are ill-equipped to deal with the change – the result is a company obsoleted by more agile innovators and left to live off momentum in its twilight years
A shorter version of this article previously appeared in the Harvard Business Review.
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Filed under: Corporate/Gov't Innovation |
Great post Steve, thanks. However, I am not sure I see what Steve Jobs could have done differently than Tim Cook in the last five years. Of course, that’s probably why I am not Steve Jobs. I can picture Jobs doing just about everything that Tim has done, and getting very similar results. Why did Steve Jobs fail with NeXT? Was he trying to execute rather than search? I’m not downplaying Steve’s amazing contribution, just feeling that there are times and places when innovation is ripe for the picking and others when its not so easy. If the Apple Watch had taken off (and I still think it is too early to discount it) would you have a different opinion of Tim, or at least Tim and his team? From what I understand Tim Cook has never seen himself as the next Steve Jobs but deferred that role to others in the company (like Jonny Ives).
Steve was brilliant at visualizing potential wins (and failures) from the perspective of the consumer (and consumer to be). He had the ability to look at an Apple product as it would exist in the market. Maybe this is a result of the struggles at NeXT for as long as it existed.
I think Tim is hindered by his former role as CFO, seeing product lines and SKU/$ relationships, and little else.
There is a discernible breakdown in the longterm vision as it relates to those product lines. Far too much attention was paid to Watch bands from the start. The Beats acquisition and the death of the headphone jack is a CFO-brained direction, without any real benefit or impact to the longterm vision apart from brand marriage.
If we consider the ground broken since Steve’s departure, it amounts to the watch (in development since long ago – one need only consider the attention paid to Casio’s watch successes as a lane marker) and incremental changes to the Macbook (without any of the genuine innovation of the predecessors. USB-C, keyboard – not exactly wins.), and possibly the additional finishes (see statements about watch bands).
Integration between iOS and macOS – already in play.
Platform refreshes – applied according to established models.
Automotive – smells like a monumental failure.
Home – they missed the boat with the acquisitions of DirectTV and Time Warner.
Personal – they’re all-in with the overpriced, oversized, underfeatured Watch.
Professional – the Macbook is a success, but has languished to the point of losing share.
Education – iPads and Swift can only do so much here without strong ties to the other product platforms.
They have lost the way, no amount of Rose Gold can change that.
Thanks for your comments William but I disagree somewhat.
I think Tim knew the watch is more a fashion statement than any other Apple product (and that’s saying something) and hence the focus on the bands. It’s Apple’s first wearable so that was different too.
I think the death of the headphone jack is also a classic Steve Jobs move (think floppy disk, DVD drive, keyboards on phones), and the colours, well one only has to go back to the original iMac.
I suggest that disruptive innovation doesn’t come around that often and in between Apple is great at incremental improvements. I do agree Apple is not strong on services though.
Well yes steve jobs may have gotten rid of the headphone jack.
Wether it would have been this year or later.
But he would have given us a better excuse then “courage”
It is clear that they got rid of it so they can get royalty from other third party co that will use their proprietary lightning jack.
And plus. why didn’t they do that for their MacBooks?
I think their product line is a mess and they dont really know what they are doing.
Tim Cook doesn’t know who his market is…
We don’t buy because we have to, we buy because we can.
We don’t want a round trash can server,
We want a server that looks and plays the part, square edges, industrial strength, we can upgrade and brag about and build a supercomputer on the fly.
NCR had cash registers with so many buttons you had to walk to press the far right one, that was a touch bar we didn’t need either.
Colors, we can spray any color we want, we want ghz,
If you have to have a group of non technical people explain why then we don’t need it.
I didn’t know Steve Jobs or Stephen Wozniak, wish I did,
I guess the best motto is
Don’t confuse selling and delivering.
If you deliver selling will not be an issue
Ashley I think Steve’s argument made it clear, Tim Cook is good at execution and so ill on innovation. Look at the iPhone 6-6s-7 models, they are inherited iOS versions from previous models but far disappointed in Siri version and new designs. All things are now similar to Samsung phones so Apple has become a follower but not pioneer (just like another smart phone provider)
Under Steve Jobs (though he was not so active in the his last 2 years), Apple was the pioneer both for iphone, macbook, ipad products. All products are leading the trends and standing out to other market products. And that’s Steve’s entrepreneurial spirit.
With this logical argument, I think there could be other innovative products released to the markets, with much deeper knowledge on the users and the market, if the Company was run by other Steve Jobs, not Tim Cook.
Exactly! And if Tim Cook is good at execution and bad on innovation he should not be a CEO. To be good CEO you need to be a visionary.
Tim was head if operations, but the CFO.
Yes – true. COO.
The issue regarding the article comparing CEO styles and types extracts the root of the problem. Where Visionary CEO’s found these execution style operating executives to be profoundly excellent at carrying out their visions, they neglected to see the basic premise of these individuals, they were excellent support staff, very good at developing and carrying out to successful fruition tasks delegated to them. The difference being they were not the creative originator of these future paths for the company. They were not the protagonist or the catalyst of these innovations.
They were excellent at bringing creations to life, not the progeny of the originator of the vision quest. Certainly gifted execution style operating executives will implement the mechanistic structure, which will perfect operational efficiency & reliability; it shall also naturally snub variation which we know is at the least concussive or at the most a death sentence for all small creative seeds to grow. If we are touching upon Centralized R&D verses decentralized R&D I would have to say this may be centralized R&D effectively ignored by the CEO. Certainly Microsoft and Apple have the most renowned & highly regarded R&D modules in effect. The difference being if no one is listening, it simply does not matter what type of R&D you have in service or action. You might as well be sending messages in a bottle.
An operating executive turned CEO simply wants to make the machine run, he has the oil can close by, he is inspecting it constantly for inefficiency or poor performance and listening to the constant whirring of the machine, listening close for any coughs or signs of malfunction, he has little room in his heart and mind for Machine modifications, certainly not for additional completely different machines. This is his downfall, he is a mechanic stood up in the place of an architect or engineer.
For creativity to be valued and achievable in an organization, Organic structures and a free flowing environment are conducive to new technologies and innovation & disruptive technology. The environment where these are possible , recognized and rewarded is the environment where new roads are undertaken. Understanding the value of more than just the current output of the machine is integral in successful long living business. Innovators are open minded and collective, seeing these on a world view and closely knitted with their customers & suppliers. Constantly listening to their customers’ needs and searching for global solutions to what they hear. Strategic initiative is the heart and soul of any business with a future, to achieve these mighty objectives the CEO must be listening out into his or her world and effectively hearing & responding. Reverence to your own world class R&D would be a step in the right direction in creating and participating in a lucrative future.
I do agree with this thesis. When a business stops creating & innovating, they inevitably start dying. Without the fresh breathe of new concepts and ideas, they are no longer becoming & will stagnate and wither. Risk is inevitable, only thru Risk can a business reinvigorate the machine, whether they win or lose, they shall most certainly learn &change, therein lies the true value.
Agree Apple has Jonny Ives, there never was somebody comparable at Microsoft. Steve Jobs did understand he had to have somebody product focused with a lot of power and influence in the company.
Jobs was the master of building a team for what was needed for each new business model, then abandoning them and moving on to the next team for the next business model. For example, he resurrected the Mac in the second coming of Apple with Jon Rubenstein as VP of Hardware and as Avie Tevanian VP of Software. When he pivoted to the iPhone Ruby and Avie were supplanted by Jonny Ive and Scott Forstall. Same with the move from retail channel to Apple store. He repeated this at every step in his career.
My bet is that thinking of Jonny Ives as the future rather than the past is the problem not the solution. U/I and product design was the wave that powered the iPhone. It is likely not the path to the next business model.
steve
Great work
Way back in the late 80s I worked for a well known high tech company that was developing a new method for projecting computer information on large screen displays. Steve Jobs visited for a demo. I prepared a presentation but Steve wasn’t interested in seeing it. Instead, he asked for a screwdriver so that he could see what was inside the box… Point made!
Best comment. Steve Jobs leaves a box … no screwdriver needed. This is where the fun begins – happy stream of consciousness trails for the next bloomin thing!
Absolutely true.
Ashley, I think Apple should be focusing on the car and home. The watch is an absolute awful idea. There is no innovation behind that thing. I wrote more about this here: http://tech.co/apple-is-cooked-2015-03 a bit ago for more detail.
Totally agree with Steve Blank and its disappointing to see. Love this conversation!
You wrote, “Of course, that’s probably why I am not Steve Jobs”. And still trying to predict this actions. But you’re NOT Steve Jobs.
Steve, nice post. Question for you. Do you believe that Satya Nadella, albeit it a few years late, is the prototype for the innovative, customer-centric, risk-taking CEO that large, established and post-visionary companies should be looking for?
Steve, this is the eternal succession issue. Finding the Mini Me to replace me when I’ll leave the company. The thing is that you can now make the difference between Apple and Google. Actually, between Apple and Alphabet. Apple continued to grow based on its former products. Google became Alphabet and grew and developed, by creating great impact in every sector it enters / serves. Google is connected to its users and it follows and anticipates their experiences. It’s a trend setter and explorer. Apple remained focused on execution, because it is ran by execution people. I am not sure if they bring a visionary entrepreneur from outside, if he can change the culture of Apple. What Sergey, Larry, Mark, Jeff, or Elon should learn from this story is to find and raise “Mini Me” that have the same vision and DNA, to continue their adventure.
Steve, I have a question for you: What if Steve Jobs would appoint Larry and Sergey to run Apple after he left the company? What do you think would happen to Apple and Google? And to their customers too? 🙂
The question is, CAN visionary CEOs cultivate “Mini Mes”? “This company ain’t big enough for the both of us” may apply to visionaries and the autonomy they need to fully develop.
Unless the CEO can find a branch of the company he can bear to not completely OCD over and hand the reins over completely to potentials, he may have to recruit from outside.
Well….Google is great at technology. Not so great at *solutions*, where everything “just works.” Especially true in enterprise products. Better for people who need/want to tinker, of course.
Jobs simplified things at Apple by staying focused on consumers, with himself as the test subject. Didn’t work at NeXT, which targeted enterprises.
He was open-minded, listened to “feedback” from the market (when NeXT failed).
Amazon seems to be learning very fast. They’ve released several consumer products that bombed, cut their losses quickly, and gotten much better. And focused on a strength (AI) as incorporated into services and products.
Steve, here’s the real question: how much of the succession issue (choosing executors) is related to ego? (“I will choose a successor less creative than I, so that I always remain the visionary.”)
Typo in : “Do we want still want to be a innovative”
Thank you for the excellent writeup and the transparency of your point of view. It will be good to watch the timeline of these companies in the next 10 years.
Steve
Interesting article.
Thanks.
Merrill Newman
Nice overview here Steve. In Europe (yes we still are ‘in’ at the moment) we are hitting this nail on the head as best we can by providing support for educators so that they understand these kinds of dilemma when writing learning outcomes. One of the is the European Sense of Initiative and Entrepreneurship (broad definition) ‘EntreComp’. If you have a moment go take a look – worth looking at and discussing in US?
https://ec.europa.eu/jrc/en/publication/eur-scientific-and-technical-research-reports/entrecomp-entrepreneurship-competence-framework
Strong thoughts and analysis here. But like so many similar pieces over the last few years, I think it falls a bit short in describing what to do about this classic dilemma. and while I by no means claim to have the “secret sauce” answer, my experience and a market strategy consultant does give me a point of view. I conclude that a big part of the answer is in doing two things: First, making sure that there are strong innovation thinkers as part of the senior management teams under the executors. This is not always easy to manage, as it leads to inevitable stress and strife within the operating units’ management processes. But it ensures that there are always a few seeds germinating that could grow into the next great performance leap for the company. the second thing is to hardwire into the company’s communications processes at all levels a constant discussion about how everything the company is doing feeds into a larger, coherent, future-oriented strategy. Doing so forces the leadership team to constantly assess and address not only the immediate operational imperatives, but to be able to put their actions in the context of where the marketplace is headed.
Brilliantly said. The article suggest the very difficult question of how you encourage Boards to have courage and long-range vision sufficiently to select a visionary CEO. That’s a challenge!
Spell check… “Do we want still want”
fixed, thanks
Great piece, Steve. It dovetails nicely with the perspective of my other favorite tech observer, Ben Thompson at stratechery.com, who points out that a company organized to deliver great products (Apple) faces a difficult challenge in delivering great services (Do we need any more examples than Apple’s repeated bungling of its cloud offerings?)
I wonder if the phenomenon of big companies becoming risk-averse explains Apple’s recent dialing back of its car project. Cold feet in the executive suite?
Very interesting blog posting you just published. Thank you.
A thought came to my mind: Given how difficult (or nearly impossible) the succession of an innovative/visionary CEO is, is it perhaps after all not too bad to allow the corporation to go into a cycle of amassing cash, missing a few major trends, and long-term getting ready for a new visionary cycle?
Microsoft with Satya Nadella could be an example. With the cash that was generated under Ballmer’s era, they can now innovate. They have a renewed board, a new CEO and new executives. They have lost major opportunities as you point out, but they are still strongly in the game – innovating again.
If Microsoft had tried to hire a visionary CEO right after Gates, it would have been a risky move. I would say the same applies to Apple.
Then I think about Nokia and how this same transition (from visionary CEO to execution-focused one) nearly put the entire company out of business. Perhaps Nokia’s fault was doing the transition too late. There wasn’t enough cash flow awaiting them to keep the company in good shape from a financial perspective as they figured out what to do next. (Fortunately, Nokia figured out another way out of its dilemma.)
As for companies that tried to hire visionary CEOs to replace a successful visionary CEO there is Yahoo and Sun Microsystems. Both failed.
In summary I don’t know whether there exists a precise recipe for success in CEO successions.
Somehow I think it matters what the exiting CEO does. In the cases of Microsoft, Nokia, Yahoo and Sun Microsystems, the highly visionary CEO stayed on as chairman when he appointed a new CEO. I am wondering if THAT may be the mistake. The past CEO will cast a long shadow, making it difficult for the new CEO to be fully and completely in charge.
Marten,
Often the board has “innovation fatigue” and is happy to have an executor.
And that person often turns out to be a transitional figure of stablity as the company does exactly what you suggest.
Completely agree that there is no “one right path.”
Though it may be useful to diagram out the flowchart of the possible CEO succession paths.
My bet is there are a bounded number of choices.
best,
steve
Keep your bowling alley full. Once you’ve launched a single technology into six lanes. Find the next technology. Ignore your economies of scale when you pick that next technology, Take your time. There is no reason to rush. That company wouldn’t have these problems.
Executing executives and processes are important. But, the structure of the organization would be different from that of an orthodox firm.
Great article. Thank you Steve Blank yet again. I learn a ton reading your stuff.
May I suggest there’s a bigger theme? No matter who is running a company, large or small, leadership better be paranoid. Lloyd Blankfein hilariously describes himself as a “functional paranoid.” Jim Collins details Bill Gates’s paranoia in _Great By Choice_ and describes how the best shops aren’t just looking out for disruption, they are fostering it internally with healthy support for creative radicals in their own orgs.
Seems even a staid, operationally-minded CEO can foster this positive dynamic. Hell, just make sure you’ve got really great people doing R&D. Be scanning the environment like crazy, expecting that a horde of brilliant, determined people are trying to shoot your business in the face. Because they are.
Great perspective, as always. So true, the execution mindset is much different than the founder mindset. Thanks for sharing!
Agree
Since I’ve heard Steve’s sad news I started wondering what would be the next in Apple. It was obvious that the lack of innovation would hit a big organization that was evolving with such speed. Jobs and Gates had an amazing gift … I have seen it very few times in that large scale: how to CREATE the next market need. Bezos has it now, that’s why Amazon is going with that velocity [Alexa products and AI, Cloud servers]. Salesforce’s Benioff has it but he also made a HUGE move: to let community drive his company. Crazy move. That led the innovation to the top [voted many times as the most innovating company through the years and redirected the entire market to subscription-driven model]. I think it’s time to realize that one Visioneer alone is not enough. On the long run, you need to create an ecosphere that will send you back the necessary feedback in order to maintain velocity. That feedback, driven by the correct amount of vision, analysis and fundamentals will be able to sustain what we’ve learned from these great guys. They showed the way. Now it’s time to realize that is not enough. Real-time feedback and Information is the key. #correctInfo
Another example: Andy Grove, who acknowledged his paranoia.
I think the points in the article are well taken, but I have to question the use of “innovative” in this context.
I deeply respected Steve Jobs’ vision and his ability to create world class products, but I frankly never saw him as innovative in the usual sense. Apple did not *create* any of the markets they are in. Personal computers, media players, cell phones and tablets all existed before Apple turned their hand to them. Jobs’ brilliance came in *refining* the underlying concepts, and producing products that became examples of “This is how that is done!”, which then became the leaders in their markets.
Ultimately, this is all about the price of the stock. The market rewards *growth*. The Apple products became the must have products in their categories, and Apple couldn’t make them fast enough. Apple grew like topsy, and the market gave it a stock price in the ionosphere. Apple also successfully claimed the high end of the market, and created products customers would pay more for and provide higher margins and profits, so they made out while competitors in the low end of the market fought over pennies.
But consumer electronics can go from market defining new thing everyone must have to fungible commodity with razor thin margins and profits within the space of a few years, and sooner or later (and these days, *sooner*) markets get *saturated*. Where does the growth the market loves come from?
As the iPhone and iPad showed signs of peaking, with a healthy replacement and upgrade market but declining *new* sales, I expected Apple’s stock price to get hammered if it didn’t have another category defining product up its sleeve to generate another spurt of growth, and that’s about what happened. And Cook faced an additional problem. Apple had historically not paid dividends, but instead reinvested profits in the company. Investors didn’t care because of the meteoric rise of the value of their holdings. On Job’s death, Apple had accumulated something like $80 billion in cash and short term securities, and the question Cook faced was how to use that to add shareholder value. The usual practice is an acquisition, but there *were* no major acquisitions Apple could make that would be a good fit, fuel growth, and add to Apple’s shareholder value. The alternative was what Cook did – return some of that to investors in the form of dividends for the first time in Apple’s history.
Apple has enormous revenues, profits, and retained earnings, and will be in business for a long time. But it’s facing the same challenge previously faced by Microsoft – it’s in transition from “growth” company to “mature” company. Mature companies throw off enormous amounts of cash, but *don’t* have stock prices in the ionosphere, and investors whose concern is the value of their stock will not be happy. Apple still faces the challenge of growth to please them.
The issue with an execution focused executive is whether that focus on execution impedes innovation. Is there someone at Apple with the concept for the next category defining product to fuel a new growth spurt who simply can’t make herself heard because the execution focus has blocked the channels she might use to push her idea? Or is Apple’s problem that there simply *isn’t* another category defining product they can introduce because they already cover the bases?
I don’t know, and I don’t think anyone else does either.
______
Dennis
Disruption is not enough. Biz model innovation is not enough. We need to do discontinuous innovation in an enterprise structured to do that. An innovative CEO would be the wrong CEO, but innovationg would happen just fine.
Mentioning Sloan is a bit of a reach. Sloan invented management, today’s orthodox management. Sloan certainly did not innovate cars. He bought the companies that innovated cars. He was an executing executive.
Thank you Steve, this essay of the ‘innovation’ CEO vs. the ‘execution’ CEO was awesome and very helpful and reminded me of the essay of the ‘Peacetime’ CEO vs. the ‘Wartime’ CEO –
http://www.bhorowitz.com/peacetime_ceo_wartime_ceo
Also; regarding the note on Clayton Christensen’s book the Innovator’s Dilemma; it seems that even though Apple wasn’t the first to market ‘smart phone’ or ‘smart watch’; they were much more successful in marketing the iPhone vs. the iWatch. Does this mean that Apple will have scratch or spinoff the iWatch to another business unit or separate company because the marketing funnel for the iWatch was terrible leading to a massive drop in sales?
Sadly for Apple and all of us; Steve Jobs wasn’t around to release the ‘iWatch’; however this is not an excuse for Apple not to partner with solid industries in the Athletic, Health, and Education Industry leaders to galvanize and inspire all iPhone owners to become iWatch owners as well.
Thanks Steve for this very thoughtful piece.
I agree on the notion that an operational CEO will never deliver the same extra-ordinary results that a visionary CEO will do. I find it’s not just the passion and drive, but also the fact that as a non-founder CEO the odds are that you will never have the same levy (and possibly control) with your board and investors that a founder CEO gets. At the same time, I imagine founder CEOs have a much harder time convincing the board of their expertise because they tend to be much more inexperienced. Think of how Jobs got fired during his first stunt and how Musk struggled for control during his first two ventures.
It feels like with a visionary founder the game is much more binary, they will either make the business take off and go leaps or they will drive it to ruin. I’m sure over the next two years we will see whether Tesla will go under or really thrive by growing exponentially. Twitter is another example that comes to my mind. Even Jack Dorsey doesn’t seem able to truly re-invent Twitter or maybe he just doesn’t see the need for it.
I also wonder what to think of Marissa Mayer. She was sort of heralded as an innovator and visionary from Google, yet she didn’t really excel on any big vision. Years later Yahoo was still neither a media nor a tech company. Much earlier on founder of Yahoo, Jerry Yang also came back for two years as an interim CEO and didn’t change much.
Perhaps it’s not just the type of CEO that matters but whether also the organizational structure and culture is able to support a visionary CEO.
Anyways, it’s not game over for Tim Cook yet. It would be visionary for Apple to truly deliver an intelligent car, smart assistant or VR/AR experience. Experience tells us that Apple always comes in late to the game and then re-thinks the existing experience. So far that approach backfired with the Apple Watch, which seemed far too complicated and without a true killer app (very un-Apple).
Google cornered the market on search engine technology at a point when users saw Google as the scrappy new kid. When Bing came along, there was a general resistance amongst many users that Microsoft was trying sadly to cash in or catch up; a general snickering amongst the user base that had the vibe “thanks, Gramps, I’ll ‘Bing’ that later.”
I bring this up because you note that Microsoft had smart teams working on search technology, just not the right support. Did Bing fail because Microsoft had already lost its reputation as an innovator (had it become too irrelevant to compete already)? Or was the problem that Google had already won the search engine crown (so Microsoft’s true loss was not investing earlier)? Or was there some way Steve Balmer could have insured that Bing was more successful at the point it was released?
I remember when Bing was fairly new, there would always be some lone voice in the crowd who’d casually say “y’know, Bing apparently has better results than Google, I heard.” But this always sounded like the weird kid who says “I read that Hunts Ketchup actually tastes better than Heinz, in blind taste tests.” Really, fascinating? Can you pass me the Heinz 54 while I Google that?
Nice article and thought provoking. My counter would be that Jobs wasn’t a magician, he put shareholder value ahead of everything but the brand. The ‘vision’ and creativity vested into Jonathan Ives. Most innovation is boring and based on incremental improvement rather than paradigm shifts. Samsung have just been an excellent example of a company which has innovated too quickly and been badly burned. Balmer set up the basis (I.e. Profits) for the creative renaissance at Microsoft and capitalised on core business. Good job. Apple have a laptop refresh coming this month on top of everything else they’ve announced recently. The only time they’ll fail is if they ship consistently bad product and Tim Cook will be all over that.
Good read. We may have changed centuries but the “innovator´s dilemma” still haunts every big company.
Would Cook have performed in a different way, showing his visionary profile, had he be running a small enterprise? Probably yes.
Walt Disney, Tom Ford are often remembered for their initial pursuit of products. By I don´t recall any examples of them once their business were making lots of money. Did analysts bother less for innovation while ececuting at their time?
I also wondered why the list of current visionary-excecutors is so small.
Steve mentioned in his post Jeff Bezos, Mark Zuckerberg, Jeff Immelt, Elon Musk, Mark Benioff and Larry Ellison.
Zuckerberg can be off the list if we ask the same question we test Tim Cook at: What has been his big addition to stay tuned to changes?
Same for Larry Ellison. Both of them have acquired companies who probed to big great innovation runners. Are Zuckerberg and Ellison better “innovators” than Tim Cook for that?
When people commented on the then imminent death of Steve Jobs and how it would hurt Apple’s stock, my answer was that Steve had only so many chances to hit the jackpot. How many more groundbreaking ideas could Steve make happen? We will never know, but each one was a big bet and subject to failure (e.g. iCloud). I even welcomed the idea of Tim Cook as the annointed succesor. A great executor would propel the company to new heights, exploiting the base created by the brilliant founder. Five years later, I’ve sold all Apple’s stock. The company, though one of the greatest ever, has lost its promise. So, you’re right, only a visionary founder can create and deliver on such a promise.
Hi Steve, thanks very much for this insightful article. If a CEO who recognizes his or her short comings on innovation and not wanting to fund 4 projects and have only 1 project succeed, what about filling this gap with an aggressive acquisition strategy buying out small growing companies with commercially viable technology. He or she may then repackage these foreseeing disruptive innovations, improve them through incremental innovation and execute on them which is something the CEO is already very good at.
My question is what will be the down side to the long term sustainability to an organization pursuing such an acquisition and execution strategy?
Thanks,
Leo
Fantastic insights Steve, as usual.
In my view, you are giving too much credit to Tim Cook. He is not that good at execution:
Since he has taken over, the quality of each MacOS and iOS release has consistently been worse than the previous one. As you point out, the MacBook Air has not been refreshed in almost 2 years, sales of the iPad are going down … I believe that Steve Ballmer did a much better job at preserving the Windows and Office monopolies than Tim Cook is doing at preserving the advances of iPhone and Mac, hardware and software.
People used to hate Windows and Office, but somehow Microsoft made sure there were no credible alternatives. People used to love the Mac and the iPhone, but now these products are on the verge of “sucking” … and decent alternatives are starting to emerge.
Thank you again for sharing your wisdom
Bernard
So true same with Jorma Ollila (visionary) and OPK (sadly not even execution) at Nokia
I don’t think there really is all that much you can do with this sort of situation. You can do your best to minimize the problems. But people like Steve Jobs, Bill Gates and Elon Musk don’t exit in huge numbers. You can’t expect to be able to line up exceptional and visionary leaders for the top position at a company.
What you can do is what Steve Jobs tried to do. Make sure that the company stays focused on products instead of margins, costs and MBA stuff. His way of doing that was to give a lot of influence to Jonny.
It might not have been enough, but he had the right idea.
Really prescient Steve Jobs observation about the difference between process and content:
https://youtu.be/l4dCJJFuMsE?t=1m30s
Thank you Steve!
From video –
“..that’s what makes good products; it’s content not process”
– Steve Jobs
FYI –
http://money.cnn.com/2016/08/24/technology/apple-tim-cook-five-years/?iid=EL
An article that considered Tim Cook more of a ‘socially-responsible’ CEO than a ‘visionary’ CEO.
http://www.washingtonpost.com/sf/business/2016/08/13/tim-cook-the-interview-running-apple-is-sort-of-a-lonely-job/
Also in Tim Cook’s interview with the Washington Post in the last question when asked about his tenure; interestingly he said:
“I put them in 3 (three) buckets:
* people,
* strategy &
* execution.”
This appears to be straight out of Verne Harnish’s 2015 award winning book Scaling up –
https://www.amazon.com/Scaling-Up-Companies-Rockefeller-Habits/dp/0986019526
On the book cover the four ‘highlights’ on the cover of Scaling Up are:
* People
* Strategy
* Execution
* Cash
Scaling Up: How a Few Companies Make It…and Why the Rest Don’t (Rockefeller Habits 2.0)
Winner of the 2015 International Book Awards for General Business
Winner of the 2015 National Indie Excellence Award for General Business
Winner of the 2015 Readers’ Favorite International Book Award Gold Medal for Non-Fiction Business
Winner of the 2015 Paris Book Festival Award for Business
If the above is true; than at least we now know what Tim Cook is reading and obviously why he didn’t mention the factor of ‘cash’ since for Apple it’s not a ‘bucket’ rather ‘buckets’ 🙂
I worked at both Polaroid and Apple and have observed many of the same characteristics of the 2 companies. Polaroid forced out their founder, Edwin Land, who provided much of the direction for the company’s innovations. He was replaced by the head of manufacturing, just like Steve Jobs was. The companies never showed the same level of innovation again. The characteristics of an operations person are so different from the founders, like speaking different languages. I expected this when Cook was made CEO. And in his numerous presentations he just doesn’t come across as a “product person”. He missed the Apple maps fiasco, he overhyped the watch with its awful OS, and the company has gone years without revising their notebooks. All of this while adding thousands of employees.
I would add that today’s introduction of a new notebook line after a 2 year drought was somewhat underwhelming. All of the hype was about adding a $300 touchbar to replace the function keys with context sensitive keys. Clearly clever, but just an alternative to Microsoft’s touchscreen. And yet I cringed listening to Tim Cook expound on how innovative and revolutionary it was.
I think todays MacBook announcement made the point of the post.
Would it be appropriate to further generalize your definition of a startup for companies in general: “Healthy companies search for business models, dying companies execute them”
Yes!
I suggest the greatest legacy a CEO can provide is an enduring culture. When guiding principles are not just words collecting dust on an HR office wall plaque, they infuse empowerment to each individual. Clarity of purpose, efficient execution, and encouragement to reinvent are manifestations of a solid culture.
Siri still uses data from Yelp which is lousy. I get the feeling that Apple won’t be the leader for AI devices. In the short term, I think they will be left behind. Maybe they come back from the pack and win the race.
As for Cook, yeah he’s a distribution guy so this article makes a good argument. He was a safe choice. The brilliance of Jobs went beyond ideas. He was a shrewd judge and manager of talent. If you have friction, you create a combustible chamber of ideas. When things are too harmonious, creativity suffers IMHO. How he managed to keep Forstall in line, we’ll never know.
The jury is still out on the Apple Watch as to its potential. I could see some simple shopping from it. Need that prescription refill sir?
It’s possible that there are some good products in the can that Jobs left. Remember it took Apple 5 years to develop the iPhone. But long term, I don’t see evidence of that creative and innovative spark. Time will tell.
Apple has gone from a computing centric company to a consumer hardware company. They may not be so different than Sony was in the 1980’s. Sony didn’t leverage its brand to do the heavy lifting in software to retain its lead in the digital age. Even though Microsoft started to lag on the consumer front, it never gave up on doing fundamental R&D. Cook has increased R&D over the last couple of years, but to what ends? What are they putting the money towards? A car, the watch?
Cook needs to run, not walk, towards AI and deep learning. Apple has more money than anyone. Buy the talent and build the teams. Otherwise Siri will never be as smart as Alexa, Cortana or Google’s assistant. And with AI being smart is what counts. Whoever wins AI will win the next 10 years, and right now Apple is clearly losing.
Apple has developed a very arrogant approach to many aspects of innovation with their strong NIH – not invented here – attitude. They have missed so many opportunities to improve their products if they were more open to the outside. A prime example is around the same time their Maps debacle occurred, they could have bought Waze, but passed it up. Even today with their latest iOS10 software, many addresses of businesses in Maps are incorrect. The product has never come close to matching Google Maps.
Hey Steve,
Love this post. I didn’t even realize Microsoft missed the boat that many times. And, I agree that CEO’s end up shaping the markets they operate in. They are extremely customer focused and their changes show they have deep understanding of the details going into their company’s core projects. Their empathy and compassion allow them to maneuver projects carefully and “pivot” as you mentioned.
Really like the site,
Dennis
Catchy article title, lots of click potential, but thin analysis, poor understanding of tech trends/industry, eg incorrect use of products/services terms, ‘saving’ MS (hint: 2016 core revenue comes from what LOBs?) Doesn’t say much for HBR that they printed this, pretty disappointing this article is getting so much attention.
Good read. Minor point of fact, the founder of Poloroid was named Edwin not Edward. Both Gates and Jobs were hard acts to follow.
I’m one of your biggest fans and promote your work at the two MIT groups I mentor at, as well as The Social Innovation Forum. And I couldn’t agree more with your premise that Tim Cook is Steve Ballmer and why he still has his job at Apple. Your example of who demo’d the Apple Watch is telling, not to speak of its modest impact.
But I beg to differ with your article about visionary CEOs.
The people you list: Steve Jobs, Jeff Bezos, Mark Zuckerberg, Jeff Immelt, Elon Musk, Mark Benioff, Larry Ellison with the sole exception of Jeff Immelt, are all founders.
Of the 20th century visionary CEOs you list:
Walt Disney, Edward Land at Polaroid, Henry Ford, Lee Iacocca at Chrysler, Jack Welch at GE and Alfred Sloan at GM all but Iacocca and Welch are founders.
So I think you are setting up boards and existing CEOs with a virtually impossible task in requiring them to hire visionaries as CEOs – visionaries aren’t employees, they are entrepreneurs/founders. In fact, as you know, most entrepreneurs make lousy employees!
Who at Apple was an employee better equipped than Tim Cook to succeed Steve Jobs? Who would have been your choice to head Microsoft after Gates stepped down? Answers to those two questions would have strengthened your premise.
This issue is exactly why startups eat big companies’ lunch – startups have visionary CEOs; large, mature companies don’t. That being said, I’m impressed by Satya Nadella, Microsoft’s new CEO, but let’s see how he plays out over 5 years.
As most before me I think this is a strong article. Good analysis of the situation, showing the resemblance.
Yet, you start of with some “mistakes”. You may have used them to make your article stronger, but are nevertheless not the complete story.
First of you say that Microsoft had 95% of desktop OS shares, then you compare it to their current position in mobile OS. This is comparing apples and oranges if you ask me, they still are leading in the desktop market. One which is shrinking, but still very important.
Also that they missed the cloud, yes they missed the boat on cloud on first hand. But they are, together with Google and Amazon, the three biggest cloud providers at this moment. This last bit hasn’t happend under the lead of Steve Balmer, that brings me to the question.
If Tim Cook is bringing Apple down right now, can a person with heart for the product (like Jonathan Ive) turn the ship to the front without the mayority noticing they came from the end? Is there a simple way to “save” Apple?
I enjoyed this article and agreed with almost everything in it, except for the description of Bill Gates as a visionary. I believe that I could make a strong argument that Bill Gates was not a visionary, but the ultimate process-operational CEO instead.
Under Bill Gates, Microsoft did not develop the word processor, spreadsheet or web browser. However, Bill Gates brilliantly and ruthlessly absorbed/bundled these technologies into his Windows-based software products and crushed his competition due the overwhelming advantage of his Windows-based monopoly. It seems to me that he built (and kept improving) one of the very best one-trick-ponies of its time and rode it with a firm whip, but as with any technology, it couldn’t go on forever. Steve Ballmer just took the reins and kept whipping that winning horse. (Probably too simplistic and not giving enough credit to Bill Gates, but…)
Finally, visionaries that can elevate a company to the stratosphere, such as Steve Jobs, are extremely rare. I think it might be a little too much to expect that Apple to hit two grand slams in a row. A question that I would pose would be, “How many companies can you name that have had two Steve Jobs visionary-type CEOs in a row?”
David,
As you correctly point out Gate’s genius in innovation was not in tech.
His innovation was in the distribution channel.
Microsoft’s forced bundling strategy (along with Intel’s “Intel Inside” campaign) turned PC manufacturers into captive suppliers.
Disney is probably the closest example of a creative company with a parallel to Apple. They had a visionary innovator/founder as CEO, and when he died they appointed the exec team Walt Disney had anointed as his successor. They went into creative decline for over a decade. Finally, the board, about to lose the company to corporate raiders fired the CEO and brought in Eisner and Wells to run the company (and they hired Katzenberg to run the studio.) The second coming of Disney was even bigger and more innovative than the first.
steve
This article is spot on. There are too many wrong CEO’s and managers on the right places. Social connections and CV’s are more important than real capability and creativity when hiring. That’s reason why most companies will fail in this creative economy and times
The main reason I disagree here, is that Microsoft never had a strong DNA to begin with, that could reproduce major success beyond the Windows OS in other markets with the same consistency as Apple. Bill Gates is still here with us today. He hasn’t lent his visionary expertise to his own company in decades, and still doesn’t do so today, because frankly he is not a visionary. Tim Cook is standing on much stronger legs.
Jobs made a phenomenal difference in Apple. His absence is palatable. But I credit him greatly for leaving behind a company with an incredible DNA that can carry it until surely the 22nd century. Bill Gates did not leave Microsoft in nearly as good shape as Jobs left Apple.
Apple will never recapture the magic of Steve Jobs. But thankfully it doesn’t have to. Not for now.
Although I do miss Steve…
Adam,
I’m curious.
What specifically is the Apple DNA you are referring to? And how will having it allow Tim Cook to make product and business model decisions?
steve
Apple’s DNA is essentially a living hotbed of ideas that evolves over time. Some of those ideas manifest into processes, values, principals and products, but the DNA remains highest on the hierarchy. Which gives Apple the flexibility to stay relevant, and holistic.
If you want to do your best to define Apple’s DNA, you can talk about simplicity, making things easy to use, combining sciences with the liberal arts, etc…but in actuality, goes even deeper than that. It’s a feeling. Which is why when you hear Jobs, Cook, Cue, or other executives talk about Apple’s DNA, it’s never a memorized set of rules or values, but rather it’s something they themselves can’t strictly define. A strict definition of their DNA would be a shallow attempt.
You see, Apple did a great job at knowing who Apple was, and expressing itself through products, marketing, and other customer touch points. And in doing so, they attracted like minded people to its organization. Therefor genuine values are much more deeply embodied by their entire employee base, rather than just a few. A democratization of genuine values, if you will. This is why Apple’s DNA provides an incredible stable ground for Cook to stand on. It’s bigger than him.
Compare the thoughtfulness, work and care that went into developing the culture at Apple under Jobs, versus Microsoft under Gates, and the next 50 years or so will make a whole lot more sense.
Apple is not as strong as they were with Steve, but they are light years beyond MS, Google, FB, Amazon, and the rest. And they will continue making the right bets in the decades to come.
To answer your question more specifically:
Cook has better sensibilities in the product development process, and holistic operations that Ballmer never had. Cook was in the trenches with Jobs when they turned Apple around, so he witnessed first hand the culture that created the replicable success.
You have to admit that Apple 2.0 was/is culturally way more sophisticated than Microsoft. Cook witnessed first hadn’t that entire transition. He has a better idea of who to talk to, and what things to think about when launching new products.
I think your entire theory is great. Your breakdown was very informative, and I agree with most of your logic. However, I think we need to give Jobs much more credit for leaving Apple in excellent shape. Do you not agree?
Great theory, but I think the MacBook announcements made my point.
Opposite to IBM.
I agree that Steve and Tim are two different CEOs. But disagree on what kind of CEO was Steve.
Steve not only gave a vision to Apple, like many companies have one. Steve knew how to execute it. It wasn’t about big words, motivational speeches, dreams and excitement. But about going to work every day to execute that vision, make it specific, feasible in one way or another.
He worked on specific goals, and people helped him to reach them (some times not in a very professional way). In my opinion that is very different from the CEO that always talk about that vision that never gets there.
Some other people have said this already. Steve wasn’t an innovator. He just gave the last twist to technologies that were there.
We had devices like the iPhone, but they weren’t built and designed like it. Microsoft had the best mobile operating system before iOS. You could install apps, and do many things. Nokia had an app store. Everything was already there, but nobody knew how to stick it together and push it to the next level.
For sure many CEOs and not only CEOs had ideas on how to get there. But ideas are cheap, you can get the next big one from an everyday person on the street. Executions are what makes the difference.
Tim can execute what is already there but I don’t see him funnelling new things into the pipeline. Why? Don’t know. May be he doesn’t know where to find these new ideas. May be he doesn’t know how to work on those ideas to create something functional. Steve was doing that job. Tim isn’t doing it.
This is one your best ones Steve. Thanks
When you’re in the midst of a company slowly failing to innovate and execute well, it’s not always obvious, particularly when the company is so good with its PR and has strong sales momentum from its existing products. Yet that seems exactly what’s happening at Apple:
– Very slow product cycles. Three years with minor changes to the iPhone, 4 years with few changes to their notebooks. When changes come, their minor and underwhelming
– Less competitive. Phones with shorter battery lives, lower resolution screens than their competition, no wireless charging.
– Arrogance. Removing the phone’s headphone jack, removing the notebook’s SD memory slot, all creating more inconvenience to their customers.
– Poor software. The Watch introduced with a confusing OS, so bad that it had to be completely revised. Maps software that was buggy and never worked well. Mac software that hasn’t changed or kept up with the competition, specifically Mail, Calendar, etc.
– Overhyping. Tim Cook and Jony Ive, in particular, exuding about the special alloys of “aluminium” and stainless steel used in the watch cases, the revolutionary winding stem and the revolutionary touch bar. – When the biggest change to a new product is offering new colors.
And this is occurring while Apple’s R&D budget has increased to $10B, twice that of NASA.
“Increasingly, a hands-on product/customer, and business model-centric CEO with an entrepreneurial vision of the future may be the difference between market dominance and Chapter 11”
Steve Blank
Great post thank you. I will use this part as a quote/post as a reminder.
Jobs would have fired Ivy by now, and most every other team member who would have gone in the current direction, except Cook. You always need someone who can execute on your vision. I don’t buy post Job version of apple products. My mac is about 8 years old, ipad gen 2, i think Cook squeezed as much out of every product to reduce cost in production. I don’t get a sense the quality or durability feels the same. As for the watch, I thought it was visionary, then recognized the styling as un-inspired. I think actually Jobs would have scoured the earth for his replacement had he had time, and saw that cook was not The Man. I think Musk would have been a strong contender. Heavy industry, the tube, robotic factories, and then how to solve a world where not many actually work.
To shock you, Jobs laid out a 4-year plan for Apple prior to his resignation as CEO. Apple seemed to do down quality-wise 4 years after this. Jobs mistake seems to be that he was a great leader and visionary but not a good teacher or someone who duplicates himself in others.
tim cook is like a dead herring stuck to a dock a summer long–he stinks. Jesus, ANOTHER iphone? a 5″ screen, a 6″ screen, a new color black . . . wow. NO imagination, no creativity, no personality (he has even borrowed Jobs’ black outfits to “play” the leader). Please oh please, APPLE–PLEASE lose this turkey and find someone–anyone–with the barest SPARK of creativity
Isaac Newton famously said “if I have seen further, it is by standing on ye shoulders of giants.”
Projecting special visionary abilities onto any individual is a dicey proposal since genius is usually some proportion of opportunity and preparation fortuitously aligned. Henry Ford is publicly acclaimed for his successes while his other ventures are in obscure documentaries.
Excellent piece Steve. Definitely a conundrum for all stakeholders–BOD, employees, customers.
The part of all this I find ironic is that Steve Jobs was very aware of this exact dilemma. He just seems to have forgotten about it when he put Tim Cook in charge.
The famous Jobs quote:
“I have my own theory about why the decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The product starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company.”
Google seems to be aware of this too. It has diverted lots of money off search (and supporting products like Maps) profits and pumped it into Cloud, G-suite and other new sources of revenue. It is not having monumental success, but at least it is experimenting with catching a new wave, before the search phenomenon dies out. Apple has forgotten about this
Thanks for this thoughtful piece, Steve. I left thinking about two issues on which I’d love to see you expand.
First, what really leads CEOs to conflate the ability to execute effectively with the ability to innovate consequentially? And is that as wrong in theory as it is in practice? What you wrote had me thinking about trust. I can imagine Steve Jobs developing so much trust in Tim Cook’s ability to execute Jobs’s vision – but really, let’s be a little more charitable: to translate, implement, and concretize it as well – that Jobs believed Cook possessed or could build the skills to develop his own vision. It seems like Jobs was wrong in this case, but I wonder whether you disagree with him in principle. Are we prepared, in other words, to disqualify senior executives as successors to their visionary CEOs, simply because their present role is oriented toward execution?
On a second and related point, isn’t your depiction of those who envision and those who execute – which seems overly binary to me, whether as a matter of function or ability – precisely what leads us to this succession issue? If Jobs had a greater capacity to include his direct reports in his creative process, wouldn’t he have left a little less of a vision/innovation vacuum (if not a capable successor)?
Much more to say here, especially on the paragraph immediately above, but I leave it here as an invitation to discuss further.
The good thing about this is that it is a great article and it touches the heart. The bad thing about this information is normally realized by the relevant people way too late.
I am getting of the mindset that good companies become bad partially due to Board of Directors. This group supposed to be an unbiased mirror into how a company is doing. If that mirror is blurry, a company may think it is doing the right thing when it is not.
Great article!
I wholeheartedly agree with you: Tim Cook is more businessman than visionary and is focusing too much on the top and bottom line (translation: the iPhone at the expense of everything else). It’s interesting that Steve Jobs once said that the product people at IBM and Xerox were driven out management decisions, and yet appointed a supply chain guru to replace him.
https://www.youtube.com/watch?v=ZBma82g3Uag
In all fairness however, I do not know if Bill Gates would have done much better than Steve Ballmer had he stayed CEO. Bill Gates was just as obsessed around Windows and Office as Ballmer was – he killed the Microsoft Courier tablet because it did not integrate with MS Exchange. He did not see either the importance of the Internet (initially, because “there’s no money to be made”), search, and never understood how mobile changed the game.
The problem when you’re a juggernaut company is that a new market needs to be a certain size to make it worth your while. And it’s very hard not to be obsessed about your top-grossing products – whoever you are.
Thoughtful post. If organizations gravitate towards the visionary-executors model then they are doomed after the first leadership-generation. If the model is accurate, the new Visionaries are either relegated by the visionary-CEO and they either leave or never amass strategic weight for the organization to rise up above the first line of executives. Steve probably missed the opportunity to groom and prepare a visionary personality like Jony Ive.
One of the traits of a product visionary based on my Apple and Polaroid experiences is that they are not necessarily very good delegators and likely not very good at grooming a successor, which would require lots of delegation to learn. By doing so, perhaps that would diminish their sense of uniqueness in the organization.
The alternative would be to find another proven visionary to bring in, but that often leads to clashes between two strong-willed people.
Apple has no true visionary and it doesn’t need more “stewards.” Apple had only one visionary, and regardless of his views on life or how poorly he treated all but a handful of people; he remained true to his vision. None of Apple’s replacement CEOs have been effective. I listened to the words of one ex-Apple board member who alluded to how Apple has been run over the last 5+ years. He said that it is essentially a trust that delegates different areas of responsibility to people that were loyal to Steve Jobs and they were very amply rewarded for their loyalty, and not all of those remain today. But that’s essentially running a company on auto-pilot. As visionary as someone might be, it is difficult to anticipate the market, and it requires someone willing to make their own mistakes and still power through it when adversity strikes. But that doesn’t appear to be the formula at Apple. If your job is just to maintain and not lose ground, then I would say Tim Cook was a fine selection for the job. But I liken it to replacing your first string quarterback who’s taken out of the game with your first string running back. Tim Cook is an excellent operational executive. But that’s not what the job fully requires in my opinion.
Steve, I think you have made some insightful points here and I tend to agree with most of them. I have two points to add:
1) based on the dilemma of how wildly successful innovators shape their companies, is it even reasonable to expect a new innovator to ever replace the previous one and run boldy into the future? Perhaps giant companies who have been successful due to the strong influence of an innovative CEO are simply not sustainable. Their greatest strength is their Achilles heel and upon the departure of a rare innovator, they’ll only ever be able to execute the tail/wake of the business left behind by the innovator.
2) One could argue that the board just needs to hire another innovative CEO. But the odds of finding that person are incredibly high. Only about 1-3% of the population even have the characteristics of a true innovator. Now think about the typical dilemma of hiring a good exec at a reasonably sized company…it takes great resources and a lot of time to find the right fit. When you are trying to do this with a true innovation role at the very top of a global company that thrives in volatile markets, the effort can increase 100-fold and easily be impractical to execute in any reasonable timeframe. Even if a board facing the exit of an innovative CEO fully understands your points, I doubt they can do much more than to find a good execution CEO to hold down the fort and buy them the time they need to attempt to get a new innovation successor in place, and would take years, if it even happens at all.
Aron, I agree with you that there is way too much hype about “visionaries” when true visionaries are extremely rare. However, there is something to be said about what Steve Jobs called “product people” i.e. who can tell the difference between a good and a bad product and who are first and foremost knowledgeable about the product rather than the execution.
I agree with your comment. I am a product guy myself and I have seen over and over again the limitations of having senior leadership that doesn’t understand the products and the marketplace intimately. In every case, this leads to hollow statements of vision and direction for the company. Steve (Blank) pointed this out well…Jobs knew the products intimately and he knew very well how they would fit into the consumers’ world/context. He would envision a superior experience, then wrap the whole business around making it happen. He intuitively knew where products would ultimately fail and then he built around those fail points. This all came from a very unusual depth of understanding that most CEOs lack.
I see Tim focusing on transforming Apple (social conscience and responsibilities, equal opportunity, …) and less on actual products. It sometimes feels like Apple is the product Tim is trying to sell and shareholders are the audience. Jobs was different. For him, it was all about the actual products and Apple and its employees never took centre stage. Under Tim, there is subtle hint of self-indulgence when you watch various interviews with the executives. Job’s passion seemed to be the products that used to delight us with their ‘magic’. What is Tim’s passion? Apple itself.
Another evidence of a dynamic world from DNA evolution, the rise & fall of T-Rex, empires to Microsoft!!!
I watched Tim Cook’s presentation on Apple TV, and I came off feeling that Apple has lost that original vision of augmenting human abilities, the so called bicycle for the brain. Cook was on stage showing what are all the channels you can watch on Apple TV, and not talking about what he might watch himself, as a CEO of a large company. Jobs always had this aspirational idea around educating our young, and enabling creativity, and a lot of people, including myself, believed in it.
An insightful analysis. Thank you! Precisely why I started the Fire Tim Cook page on Facebook. http://facebook.com/FireTimCook/
Excellent thought-provoking piece.
Reflecting a bit more on it, where it’s clear that Tim doesn’t have the product “fire”, he does have incredibly high social ethos including his stance on privacy which by itself could be the main destructive force to Apple as we move to the future world of cloud-powered AI services.
I think this is an excellent and very precise analysis of the situation “after a visionary CEO”. Thanks for that!
I’ve been an Apple customer for years now and I feel that change. I call call it “totoptimiert” (german for “optimized to death”, see http://blog.projektmensch.com/2016/05/04/totoptimiert/ – in German only). The companies earn a lot of money, are loved by shareholders as they betray them in the same moment, because they sell the company’s future. May be that this is one main reason, why Schumpeter was right?
Great piece. Very insightful and thought provoking, yet with no clear answers and I don’t think there will be one. The recipe for success in any of the examples is perhaps a combination of factors going beyond just the CEO. Things like company culture, the era of computing they are in, opportunities that are ripe for the picking, etc. Clearly in many cases the visionary CEOs themselves have failed to find repeated success. Steve Jobs is perhaps the exception.
Comparing Balmer, a CEO who doubled his revenue from $9B to $22B, with Cook, one who doubled revenue to $200B, is like comparing the guy who opens his second pizza shop with the guy who runs a global chain of pizzerias with the best selling, most profitable and best reviewed pizzas in every market. Which is to say, scale matters in making comparisons and Cook is not Balmer.
More importantly, the innovation within Apple is not uniquely or even primarily product innovation; it’s business model innovation–and that includes things like the best logistics machine on the planet, the best materials sourcing and procurement on the planet, and the best retail and service offering in the industry, by a long shot.
Getting to the scale of $200B demands more than a Kinect or X-Box (which lost money for 10 years), it takes business model innovation across the organization in the manner that Cook has executed, that’s right: executed. As Jobs was fond of saying, “innovaton ships.”
To ask the obvious rhetorical question: whom should Jobs have chosen?
I see your point .
The real question i have for you though is: What is more difficult ? to go from 9 Billion to 22 Billion or to double up to 200 Billion ?
From a financial point of view its clearly the first one.
So cudos to Balmer for that .
Nevertheless neither though are visionaries like Steve
One could argue that Steve Jobs was 0/2 when picking a CEO other than himself for the company he founded. One might even wonder if he learned nothing from the way the first time turned out, but to think that would be foolish– he knew exactly what he was doing.
Steve Jobs was a human being first and a visionary genius second, and human beings have thoughts and feelings, particularly emotionally charged individuals like Steve was. So if Laurene Powell-Jobs revealed to the world that Steve’s dying wish for Apple was something like, “If I can’t have you no-one can,” would his choosing Tim Cook over Scott Forestall make more sense in hindsight?
Oddly, I’ve never really thought of Apple as “innovators.”
Apple didn’t originate any of the markets they were in. Personal computers, media players, smartphone, tablets, and smart watches all existed before Apple entered those markets.
Steve Jobs’ genius was *refining* existing products, till they became the canonical expressions of “This is how you do that!” He was totally focused on how users would interact with the products, and provided a superior experience. In the process, Apple showed dizzying levels of growth, and got a stock price in the Ionosphere.
The problem for Apple is that it’s all about the *price of the stock*, and the financial markets reward *growth*. Where will the growth the stock market wants come from? Everyone is waiting for Apple’s next category defining product, and being disappointed.
Apple reminds me of Microsoft in the days when Bill Gates stepped aside and Steve Ballmer became CEO. For decades, MS had been the quintessential growth company, posting regular double digit increases in revenues and profits, and getting a stock price in the stratosphere. But markets become saturated, and MS’s had. It was in transition form “growth” company to “mature” company. Mature companies throw off great gobs of cash, but *don’t* have stock prices in the stratosphere.
Gates picked a good time to step aside. He went out a winner, and at one point had been the world’s richest man. Steve Ballmer got the likely impossible job of supporting the price of the stock.
I’d make a case that Apple is in transition from growth company to mature company, and even if Steve were still alive I think that would be the case. Apple is *very* healthy financially, with revenues and profits competitors would kill for. But the sort of growth the stock market loves seems unlikely to occur.
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Dennis
Actually, Apple WAS one of the pioneers in personal computers. The Apple I (1976) was one of the first personal “computers” out there – way before Commodore, Atari or Texas Instruments (to name a few) entered the market.
But yes, they were not pioneers for media players, smartphones, tablets or smart watches. But that does not mean they were not innovators. Apple is the company that found the winning formula for the *consumer* smartphone market (Nokia tried beforehand and failed miserably), and coming up with the first iPhone was a huge challenge. After the iPhone was unveiled to the world, Google scraped their version of a smartphone they were working on, realizing they would need to mimic the iPhone. And Blackberry thought Apple was “lying” and that it was impossible to come up with such a device that wouldn’t have a battery life of more than 2 minutes.
Very interesting read. The question here is, how easy is it to replace a visionary CEO? Especially one that was truly revolutionary? It must be easier to find an executor CEO who will maintain momentum and wait for a creative champion to take over. Not all visionaries are successful, while executors tend to have a verifiable track record.
There seems to be way less visionaries than people who are excelling operationally. So replacing a visionary by another one is no easy feat. Also, most visionaries are one-time visionaries. Like Henry Ford who persisted in lowering prices when GM competed on color and year model, not understanding that the customer’s desires had shifted.
Another issue is that a lot of operationally excellent executives (wrongly) believe they are visionaries. John Sculley, Jean-Louis Gassée or Steve Ballmer come to mind.
It’s important to remember that Tim Cook was personally selected by Steve Jobs, and he could have chosen anybody in the world and no one would’ve argued with him.
So why did he choose Cook and not his dynamic young prodigy Scott Forestall?
Apple is Steve Jobs’ legacy, it was *his* company and if he could have done so, he’d have taken it with him to the grave. But being a publicly traded company this of course was impossible.
So he did the next best thing.
Tim Cook may be the least charismatic executive of the entire top-level team, and I wouldn’t be surprised if firing Forestall wasn’t part of the deal when Cook took over the reigns. Jobs was a human being first and visionary second, and if I can’t have you no one can is a well-known cliché for a reason.
As long as their top competitor’s flagship phones catch fire on airplanes Tim Cook’s Apple is safe, but in a nutshell, Tim Cook was chosen to succeed and picked to fail.
Apple bought beats by dre. A company that sells 3 dollar headphones for 300 dollar…
enough said
It’s very sad yet true
Interesting to examine this in light of Apple’s recent product introduction. One of the biggest disappointments has been the new line of phones. The 8 and 8 Plus are the 4th year of minimal change and minimal innovation. Yes the X is more innovative, but a near copy of the Samsung S8. I expect that the sales of the 8 series will be a huge disappointment. There’s just no imagination in this product. What might have helped? Make the phone a little thicker and double the battery life. That would cause many to upgrade. But with the current offerings it’s hard to justify upgrading from a 4 year old phone, that, by the way, has an audio jack 🙂
This is hogwash. Cook is the new Ballmer? Cook can only wish! I used to think Ballmer was a terrible CEO but actually he did good. What is this nonsense about Ballmer missing the boat 5 times only to be saved by Satya Nadella?
Who the hell do you think started the Azure Platform anyway? It was Ballmer! Ballmer liked to bet big and he invested heavily in the Cloud long before the Cloud became the thing. And he put Nadella there to take care of it.
People like to rag on Steve for “missing the boat” but the truth is he was a man who liked to invest and bet heavily on upcoming promising products. The Cloud was one of the them — Nadella wouldn’t be anyone today if Steve didn’t invest heavily in the Azure platform back in the early 2000’s. People seem to think that Nadella was fully responsible for Azure, but this is 100% wrong. He ran and built it, but it was Steve who invested in it and made the huge bet to go with it.
Tim Cook is not Steve Jobs, anymore then Steve Ballmer was Bill Gates. Both Cook and Ballmer are not visionaries because they were never the founders. They were the followers hired by Gates and Jobs to replace them. I always believed Cook was more there to see Apple still make money then continue the innovation. Yeah Apple also had the Home Pod added to its new products. But it never was a got to have product. People have branched out from being all in with Apple stuff. Smartphone’s have become stagnant in innovations, and also more expensive. How many can afford to replace a thousand dollar phone very often? Cooks ideal like Ballmer is to make as much as possible with what we have made and hope it continues. Even Apple’s design inspiration has dwindled of late. The examples of Mac Min, MacBook Air and iPad Pro’s are just rehash of designs already in the can. Nothing really inspiring about them.
That matters, because as you’re no doubt aware, Jobs has taken on deity-like status in the worlds of business and finance. People peddle books and seminars on how you can “think like Steve.” But I was there when Steve became Steve.
Still,he was a great visionaly much more than tim cook and steve Balmer together. At least from a technical prespective of things
Hey Steve,
Love this post. I didn’t even realize Microsoft missed the boat that many times. And, I agree that CEO’s end up shaping the markets they operate in. They are extremely customer focused and their changes show they have deep understanding of the details going into their company’s core projects. Their empathy and compassion allow them to maneuver projects carefully and “pivot” as you mentioned.
Really like the site,
Sam
There seems to be way less visionaries than people who are excelling operationally. So replacing a visionary by another one is no easy feat. Also, most visionaries are one-time visionaries. Like Henry Ford who persisted in lowering prices when GM competed on color and year model, not understanding that the customer’s desires had shifted.
Love this post. I didn’t even realize Microsoft missed the boat that many times. And, I agree that CEO’s end up shaping the markets they operate in. They are extremely customer focused and their changes show they have deep understanding of the details going into their company’s core projects. Their empathy and compassion allow them to maneuver projects carefully and “pivot” as you mentioned.
Really like the site,
Sam
Jobs is a category of his own !
There seems to be way less visionaries than people who are excelling operationally. So replacing a visionary by another one is no easy feat. Also, most visionaries are one-time visionaries. Like Henry Ford who persisted in lowering prices when GM competed on color and year model, not understanding that the customer’s desires had shifted.
Love this post. I didn’t even realize Microsoft missed the boat that many times. And, I agree that CEO’s end up shaping the markets they operate in. They are extremely customer focused and their changes show they have deep understanding of the details going into their company’s core projects. Their empathy and compassion allow them to maneuver projects carefully and “pivot” as you mentioned.
Really like the site,
Sam