In the lead up to today’s release of the Steve Jobs biography, there’s been an increasing stream of news surrounding its subject. As a business researcher, I was particularly interested in this recent article that referenced from his biography a list of Jobs’s favorite books. There’s one business book on this list, and it “deeply influenced” Jobs. That book is The Innovator’s Dilemma by HBS Professor Clay Christensen.
But what’s most interesting to me isn’t that The Innovator’s Dilemma was on that list. It’s that Jobs solved the conundrum.
When describing his period of exile from Apple — when John Sculley took over — Steve Jobs described one fundamental root cause of Apple’s problems. That was to let profitability outweigh passion: “My passion has been to build an enduring company where people were motivated to make great products. The products, not the profits, were the motivation. Sculley flipped these priorities to where the goal was to make money. It’s a subtle difference, but it ends up meaning everything.”
Anyone familiar with Professor Christensen’s work will quickly recognize the same causal mechanism at the heart of the Innovator’s Dilemma: the pursuit of profit. The best professional managers — doing all the right things and following all the best advice — lead their companies all the way to the top of their markets in that pursuit… only to fall straight off the edge of a cliff after getting there.
Which is exactly what had happened to Apple. A string of professional managers had led the company straight off the edge of that cliff. The fall had almost killed the company. It had 90 days working capital on hand when he took over — in other words, Apple was only three months awayfrom bankruptcy.
When he returned, Jobs completely upended the company. There were thousands of layoffs. Scores of products were killed stone dead. He knew the company had to make money to stay alive, but he transitioned the focus of Apple away from profits. Profit was viewed as necessary, but not sufficient, to justify everything Apple did. That attitude resulted in a company that looks entirely different to almost any other modern Fortune 500 company. One striking example: there’s only one person Apple with responsibility for a profit and loss. The CFO. It’s almost the opposite of what is taught in business school. An executive who worked at both Apple and Microsoft described the differences this way: “Microsoft tries to find pockets of unrealized revenue and then figures out what to make. Apple is just the opposite: It thinks of great products, then sells them. Prototypes and demos always come before spreadsheets.”
Similarly, Apple talks a lot about its great people. But make no mistake — they are there only in service of the mission. A headhunter describes it thus: “It is a happy place in that it has true believers. People join and stay because they believe in the mission of the company.” It didn’t matter how great you were, if you couldn’t deliver to that mission — you were out. Jobs’s famous meltdowns upon his return were symptomatic of this. They might have become less frequent in recent years, but if a team couldn’t deliver a great product, they got the treatment. The exec in charge of MobileMe was replaced on the spot, in front of his entire team, after a botched launch. A former Apple product manager described Apple’s attitude like this: “You have the privilege of working for the company that’s making the coolest products in the world. Shut up and do your job, and you might get to stay.”
Everything — the business, the people — are subservient to the mission: building great products. And rather than listening to, or asking their customers what they wanted; Apple would solve problems customers didn’t know they had with products they didn’t even realize they wanted.
By taking this approach, Apple bent all the rules of disruption. To disrupt yourself, for example, Professor Christensen’s research would typically prescribe setting up a separate company that eventually goes on to defeat the parent. It’s incredibly hard to do this successfully; Dayton Dry Goods pulled it off with Target. IBM managed to do it with the transition from mainframes to PCs, by firewalling the businesses in entirely different geographies. Either way, the number of companies that have successfully managed to do it is a very, very short list. And yet Apple’s doing it to itself right now with the utmost of ease. Here’s new CEO Tim Cook, on the iPad disrupting the Mac business: “Yes, I think there is some cannibalization… the iPad team works on making their product the best. Same with the Mac team.” It’s almost unheard of to be able to manage disruption like this.
They can do it because Apple hasn’t optimized its organization to maximize profit. Instead, it has made the creation of value for customers its priority. When you do this, the fear of cannibalization or disruption of one’s self just melts away. In fact, when your mission is based around creating customer value, around creating great products, cannibalization and disruption aren’t “bad things” to be avoided. They’re things you actually strive for — because they let you improve the outcome for your customer.
When I first learned about the theory of disruption, what amazed me was its predictive power; you could look into the future with impressive clarity. And yet, there was a consistent anomaly. That one dark spot on Professor Christensen’s prescience was always his predictions on Apple. I had the opportunity to talk about it with him subsequently, and I remember him telling me: “There’s just something different about those guys. They’re freaks.” Well, he was right. With the release of Jobs’s biography, we now know for sure why. Jobs was profoundly influenced by the Innovator’s Dilemma — he saw the company he created almost die from it. When he returned to Apple, Jobs was determined to solve it. And he did. That “subtle difference” — of flipping the priorities away from profit and back to great products — took Apple from three months away from bankruptcy, to one of the most valuable and influential companies in the world.
By Cathy N. Davidson
Cathy N. Davidson teaches at Duke, where she co-directs the HASTAC/MacArthur Foundation Digital Media and Learning Competition. Her new book is Now You See It: How the Brain Science of Attention Will Transform the Way We Live, Work, and Learn.
As IBM celebrates its 100th birthday, many observers are rightly calling attention to the many strategic changes the company put itself through to remain relevant amidst dramatic technological and economic change. But one of the biggest transformations IBM went through is less about computers and more about culture. Over the last decade and a half, the company has realigned its HR practices and strategies to move away from the analog ways of the past and to embrace a variety of 21st century approaches, including some highly unconventional ones.
A first step in changing its HR profile occurred back in the mid-1990s when the company dropped its famous dress code requiring a dark suit and “sincere” tie in favor of “business casual.” Next, the company that grew powerful in the early 20th century largely by manufacturing punch clocks got rid of “badging in” for a substantial portion of its workforce. According to the company, a full 40% percent of IBM’s 400,000 global employees now work remotely.
The major reason IBM changed its HR rule book? The old one no longer fit the workforce. In the twenty-first century, the company has flourished by buying up successful companies around the world and selling off divisions that aren’t thriving. That means half of its workforce has been with the company less than five years and a 65% now reside outside of the United States — a dramatic change from even just two decades ago.
To maintain high worker morale, productivity, and loyalty in such a diverse and changing conditions, IBM has placed new emphasis on the “resources” component of HR in four directions.
- First, it emphasizes equitable benefits for all, in all countries, regardless of race, gender, ethnicity, or sexual preference. By extending same-sex partner benefits, IBM earned 100% rating from the Human Rights Campaign and has received similarly high ratings from international women’s labor groups.
- Second, the annual Global Pulse Survey gathers feedback from over 40% of the IBM workforce each year, on both workplace conditions and issues and on the community conditions in which IBM workers live. The company emphasizes and rewards volunteer work in its communities.
- Third, employees, not just executives, are eligible for a performance-based bonus program.
- Fourth, and perhaps most indicative of the depths of the change at IBM, training has taken on paramount importance. The company invests approximately $1700 per IBM employee to train people to new skill areas needed by the company, including interactive and interpersonal skills.
To maintain its leadership position, the company has been willing to experiment with bold new methods. It has found you need innovative ways to train productive interaction and collaboration for such new IBM hallmarks as global teaming, crowdsourcing, mass collaboration, and endeavor-based work (where the company moves employees as needed for short periods of time, to contribute particular skills to a specific project, in the manner of a movie crew).
Enter Chuck Hamilton, Virtual Learning Strategy Leader at IBM’s Center for Advanced Learning in Vancouver, Canada. He exemplifies IBM’s unconventional attitude toward developing the talents of its unconventional workforce. Hamilton makes about 15 business trips a year via commercial airlines but he also, on any given day, might be found zooming around the virtual world Second Life with spiky hair and a kilt, holding training sessions with colleagues from a dozen different countries whose avatars might be international superheroes like Monkey King or Captain Vyom. Or he might be holding a session with a hundred Chinese colleagues in IBM business casual for whom it is just more efficient live-chatting via desktop than battling the Beijing traffic.
When I ask Hamilton, skeptically, if it is possible to conduct a conventional business meeting in a virtual environment, he answers that of course you can — but why would you? He is convinced that the zaniness of virtual environments plus the steep learning curve of making your avatar function from a keyboard is an effective icebreaker, especially important when partners need to overcome differences in cultural traditions, languages, work ethics, and political systems in order to complete a project together. Second Life’s oddities lend an improvisational quality to interactions that it’s harder to achieve in formal business meetings. “Playing in a band I learned that you need to leave spaces for others to fill,” Hamilton insists. “Given this opportunity, people step into the gap. Talented teams connect, commingle and co-create.”
IBM is one of the only manufacturing behemoths of the industrial age to thrive in the digital age and it has done so by redefining its company mission from business machines to global connection, data flows, and interactive human networks. It understands what most businesses — and MBA programs- — are only beginning to understand. Getting rid of the punch clock and the sincere tie are just a starting point. To be successful as an interactive global network requires changing your HR game all the way down.
by Branko Milanovic
Branko Milavonic is Lead Economist in the World Bank research group and a visiting professor at the University of Maryland School of Public Policy. His most recent book isThe Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality.
To understand last week’s riots in England, we have to place them into their wider contexts. The geographic context includes the protests that the young have staged in France, Greece, Spain, Portugal, Israel, and most recently, Chile. The English riots are but the most recent example.
For the other broad context, we have to go to the undeniable success of pro-market reforms introduced during the Thatcher-Reagan years, and “underwritten” by economists like Milton Friedman and Friedrich Hayek. The market revolution went through almost 30 years of uninterrupted ideological success (1980 to 2008 or so), dominating policy-making and public discourse, and winning over large parts of the public, first in the United States and Europe, and then increasingly in China, Russia, India, and the rest of the world. It was a two-pronged revolution: the privatization of most functions that previously belonged to the state, and the promotion of a view of the world according to which economic success is regarded as revealing intrinsic moral worth. Failure became associated with low personal merit. Only the latest financial crisis shook the previously undisturbed confidence of the neo-liberal elites.
The protests certainly differ in their particulars, but violent or non-violent, spearheaded by an “excluded minority” or not, they each had clear direct causes: increased tuitions, high rents, high unemployment — causes that we could broadly place under the label of the general unhappiness of the young. Because the successful neo-liberal revolution somehow failed to win them to its side — those who, for its continuation, matter the most.
How did it happen? The reason lies in inequality of incomes and wealth that the neo-liberal reforms have produced, combined with an incessant ideological emphasis on material success and consumption as key desirable features of life. While this ideological bludgeoning is perhaps indispensible to stimulate consumption and growth, its effects on those who cannot afford all the desirable luxuries was ill considered. Indeed, the young too “bought” the ideology that wealth equals ethical superiority but found themselves on the wrong side of the equation. The venues that could have led them to wealth were closed — by rising unemployment, cuts in social services, higher costs of education, higher rents, and not least almost open corruption and immorality of the elites.
Edward Gibbon, the historian best known for his Rise and Fall of the Roman Empire, wrote of soldiers “enervated” when faced with many luxuries of ordinary peaceful life. Similarly, to the youth whose chances of success were slipping, the wealth of consumer civilization around them provided “enervement.” They reacted like the Roman soldiers. What they knew they could not get by ordinary means, they decided to grab by extraordinary ones.
Two factors make worse the predicament of the young, whether in Puerta del Sol in Madrid or Tottenham in London. First, their hopelessness that hard work and ambition will be sufficient to provide them with all the goodies that older generations or those born luckier enjoy. They see the old welfare economies disappearing, while politicians, businessmen, and music stars cynically seize society’s riches. Second, they don’t have an alternative social blueprint. If they truly believed that a different world is possible, they would have organized into political groups, not mobs. But they do not, and apparently nobody these days does. After two months of protests, the M-15 movement in Spain barely managed to come up with a timid and impracticable list of a dozen of proposals for change in economic and political life. Here was a true case of a failure of imagination.
The neo-liberal economic revolution’s victory was complete: nearly all have accepted its value system (no less those who rioted in London last week). In that sense, it has produced, as prophesized, the “end of history”: the realization that this is the best political and economic system mankind has devised, and that nothing better lies beyond the horizon.
The problem is that the neo-liberal revolution has failed to explain what to do with those who do not prosper in the new system and yet adopt its values. The young men and women robbing stores are not, as some believe, an example of the failure of liberal market reforms. On the contrary, they exemplify the reforms’ overwhelming success. But unfortunately, the protesters also reveal the reforms’ ultimate Achilles heel: people who — as the Spanish demonstrators put it — are without future, without the idea of a new and better world, and without fear.
The challenge, should we choose to accept it, is to figure out a way of engaging a generation that doesn’t seem to want to be engaged.