Bill Gates, Andy Grove, and Steve Jobs all had distinctive interests and strengths, which we have summed up as a passion for software in Gates, a passion for discipline in Grove, and a passion for design in Jobs.
These passions anchored not just their contributions to Microsoft, Intel, and Apple, but also their companies’ culture, competencies, and strategic direction. In an era of economic and business uncertainty, their personal anchors provided focus and prevented organizational drift.
Yet anchors can also play a less positive role. Think about the metaphor’s origins: an anchor prevents a ship from moving in new directions; when the tide rises, an anchored boat may be swamped; a fleet at anchor is more vulnerable to attack.
Something similar happened to all three companies. This should not be surprising. The recipe for success in the past will not always work in the future. Technology and markets change. New competitors appear. Core competencies can easily become blind spots.
Microsoft in 2014, for example, still seemed too closely tied to the business model that powered its rise — selling software products with backward and forward compatibility with DOS and Windows. Even in the 1990s, Gates recognised the importance of investing in new devices and Internet-based approaches to computing, but he and his executive team were slow to move beyond their traditional and enormously lucrative base in PC software.
Similarly, Grove and his successors at Intel found it extremely difficult to move beyond what had long been “Job 1” — selling x86 microprocessors, mostly for PCs and servers. And at Apple, Jobs and his successors have proved largely unable to move beyond their reliance on a small number of “hit” consumer products that Apple tightly controlled. The resulting weakness of Apple’s platform strategy has ceded a growing share of the smartphone and tablet markets to competitors such as Google, Samsung, and other Android partners.
It was more than the prospect of lower revenue that made it difficult for Microsoft, Intel, and Apple to move deftly to new markets and business models. The very identity of the business became a brake on innovation.
At Microsoft, Paul Maritz admitted to us that, “the company wasn’t blind to those [new mobile] devices. It’s just that we always believed that our role was going to be to make things that contributed to the greater glory of the PC.” This was the attitude that led Microsoft to use the same operating system — the widely panned but technically novel Windows 8 — for PCs as well as smartphones and tablets.
As [Paul] Maritz explained:
None of us had a consumer bone in our bodies. It was just not what really at the end of the day motivated us. We were system software guys… We got excited about internal architecture, how things worked internally. In spite of protestations to the contrary, we didn’t really care much about the user interface. It’s just not who we were. And certainly because of our technology bent, we reached too far. We tried to cram too much into something that really couldn’t be delivered at that time. So, you know, you either produce things that are not a compelling experience or were too expensive or both.
Similarly, Intel’s focus on the core microprocessor business for Windows computers made it difficult to transition to new growth areas. As Les Vadasz pointed out, due to Grove’s decision to “narrow the company’s focus on a very narrow part of the PC business, the company continuously found itself void of technology depth in neighbouring technologies that it increasingly needed.”
Grove talked at strategy meetings in the company and to the outside world about diversifying beyond the x86 architecture, but he never committed the same level of personal time, focus, attention, and, most important, corporate resources, to win in those new businesses.
In the last few years of Grove’s tenure as CEO, [board member] David Yoffie had several conversations with him about his tendency to be too risk-averse. David observed several strategy meetings where Grove shot down one proposal after another to make aggressive moves in communications and related businesses.
Frank Gill, who ran those businesses, had argued vehemently that Intel should enter networking — before Cisco had become an Internet powerhouse. Gill recalled believing that “networking would be totally complementary to Intel . . . I thought all PCs are going to get connected one day.”
Grove, however, wanted to stay focused, to a fault. Gill continued: “We had a failing systems business, which I wanted to redirect to become a networking products company. To do so would require buying companies and technologies to build market position, recognition, and needed competencies.”
From Gill’s perspective, Intel was missing a huge opportunity.
Yet Grove, Gill said, “was not open to any significant acquisitions that could have catapulted us into a serious player in networking. He limited us to organic growth plus a few very small purchases. Increasingly, his sole focus was on the microprocessor business and building the Intel Inside brand.”
Carl Everett, who ran Intel sales after Gill, also commented that Grove could be very difficult to convince to move in a new direction.
“He was not immovable,” noted Everett, “but he could be so hard to move to a new position that many people would give up, even if they were right . . . If I look at Intel in 2013 from the outside . . . It’s the same model from the 1990s. That inflexibility has Grove’s fingerprint on it.”
In contrast, Jobs did a far better job of pushing Apple to invent new products and move into new markets. His gift, and perhaps his curse, was that he never looked back. Jobs got bored very quickly with the last success, and this led him to focus all his energy and attention on the next great opportunity.
Ironically, this gift for envisioning great products partially blinded him to the power of platform competition and ecosystem partnerships. Jobs had a front row seat when Microsoft and Intel relegated the Macintosh, despite its superior design, to a tiny sliver of the computer industry.
Yet he resisted developing more open platforms that might have made it harder for Google and Android to do the same thing to the iPhone and iPad.
Of course, the verdict is still out. Apple’s great brand, loyal installed base, and enormous ecosystem of applications developers and service providers left the company in a powerful position. Apple’s historical strategy has also delivered spectacular returns over the past decade.
But if Jobs’ successors do not find a better balance between platform strategy and product strategy, competition from Android could pose a serious long-term threat to Apple’s future.
Imagine, for example, how different the mobile device world would look today if Apple had licensed iOS and opened up the App Store, iTunes, and iCloud platforms?
From STRATEGY RULES: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs by David B. Yoffie and Michael A. Cusumano. Copyright © 2015 by David B. Yoffie and Michael A. Cusumano. Reprinted courtesy of HarperBusiness, an imprint of HarperCollins Publishers.
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