Taking Back the Market

Succeeding Steve Jobs at Apple: The Moneyball Approach

Tim Nash - 2009.01.21

Moneyball by Michael Lewis is a must-read for anyone who likes baseball, and it's one of the best business books of recent years.

I wish Steve Jobs a fast return to full health, but I believe there is no good reason for him to return as Apple's CEO. Even in glowing full health and backed by the board and top executives, the uninformed speculation will continue. He seems to make little use of his public role at Apple and Disney for high profile socializing, preferring to spend his private time with his family - and no family man will subject his wife and children to this kind of crap.

Jobs' Health

There is a lot of attempted self justification in the press by talking about the effect of Jobs' health on Apple's share price. Almost any talk about Apple has an effect on the share price.

The stock is a speculator's dream. It is widely held, there are a large number of shares, the fundamentals are strong, and yet the price moves strongly on rumor as well as news. Speculators now know that planting a rumor about Jobs health can make them serious money. They will look for other targets. The SEC could sensibly devote a team to investigating who profited from the rumors and how the stories were planted.

The measured, human response of Walt Mossberg of the Wall Street Journal is much rarer than the tabloid approach of Joe 'slime bucket' Nocera in the New York Times. The latter article does have a useful comment from a research note by Charles Wolf, the analyst at Needham & Co., that "investors were likely to assume the worst". This is because Steve Jobs not being able to come back as full time CEO will be priced into Apple stock.

The Moneyball Approach

Let's take a Moneyball approach to replacing Steve Jobs. In other words, let's break down what he brings to Apple and see how and when those skills need to be picked up.

As stated in his email (reproduced below), Jobs plans "to remain involved in major strategic decisions" while out, so not all of this has to be sorted immediately. Mike Abramsky (analyst, RBC) is concerned about the strength of the executive team and downgraded the stock, stating, "Jobs is widely viewed as Apple's chief innovator, dealmaker, leader, deeply involved in minute decisions, inextricably tied to Apple's brand."

Email from Steve Jobs

Much of this is perception. When Jobs came back to Apple, it needed a hero. How else would it get positive press? In Steve Jobs, who founded Apple, made it successful, and then engineered bringing it back from near death, the journalists have one. However, a hero in business isn't just about one man slaying a dragon; he needs great lieutenants who share his priorities.

Clearly they believe in the importance of detail. Otherwise they wouldn't be able to stand working with a perfectionist like Jobs, let alone deliver what he wants. Over time this becomes part of the DNA of the company, and the need to be "involved in minute decisions" - arguably essential in a company facing extinction - becomes less and less.

Steve Jobs at Pixar

From Pixar it can be seen that with the right people in place, they are trusted to deliver. Even though Jobs controlled Pixar by holding a majority of its shares, nobody has suggested he made the movies. He bought the seeds of Pixar from Lucasfilm and funded it for 10 years before it made a profit. That required faith in his vision of the future of computer animation and faith that he was working with the right people.

Jobs made the crucial deal with Disney to distribute Pixar's movies when it was in the middle of an animation hot streak of its own. He renegotiated the deal after two successful films and finally sold Pixar to Disney, making far more than he has from Apple. Yes, his role was crucial, but everyone accepted that the creative talent was elsewhere in Pixar. This is why John Lasseter and Ed Catmull run Disney Animation while Jobs sits on the Disney board.

Leaders at Apple

Apple clearly has at least some of the right people in place too or it wouldn't be the industry leader in so many important areas:

  • Better supply chain management than Dell or anyone else in the industry. This is down to Tim Cook and his team.
  • iTMS - near seamless ramp up to 2 billion songs per year, 500 million apps sold in the last 6 months. Eddie Cue and his team.
  • Product design - but they do have the great advantage of designing for one man, Steve Jobs, not a committee. Jonny Ive and his team.
  • Retail - record ramp up of sales, sales per square foot etc. Apple is generally recognised as a retail industry leader. Ron Johnson and his team.

With time, the strength of this executive team will become better known.

In some ways, Phil Schiller has the hardest act to follow.

Steve Jobs is easily the best at product launches. He is great at putting on a show for journalists. If you want to compete for the hearts and minds of consumers, you need to wow them. I suspect this is part of his makeup. After the launch of Lisa in Paris, an old friend was flying back with the representative of the English General Electric, who was talking about the number of DEC minicomputers he could replace. Over 25 years ago, the Reality Distortion Field was in place.

The Future of Steve Jobs at Apple

I can't think of anyone else who could have persuaded the heads of the major music companies to license content to a startup internet distributor as the iTunes Music Store was. Nor is there anyone else who could have persuaded Cingular (now AT&T) that it should part with a slice of its monthly customer revenue so it could be the exclusive US distributor of a phone it hadn't seen.

Deals like these show Jobs to be a master dealmaker at the top of his game, but these are not everyday deals. Jobs could easily handle these, if he chooses and is well enough, as Chairman of the Board. The new distribution deals for the iPhone are already sorted out by Tim Cook's team.

Although he may be looked on as "chief innovator", it is his vision of the paths worth following that counts. In any company, resources are constrained, and for a project to succeed, it needs focus. The iPod was brought in from the outside but has been continually refined and built out. Indeed, for as long as he is involved with Apple, I expect Jobs to be discussing designs with Jonny Ive and hardware engineering - but he could still do this as Chairman of the Board.

The next six months can be treated as a transition period, a time to change perceptions. If Steve Jobs doesn't go into Apple every day and more and more of the external communications are done by others, the state of his health will be less and less of a story. Whatever role he chooses, paying him $1 a year plus health benefits will be good value.

Tim Cook is the new iCEO, but in the same way that John Lasseter doesn't need to be Walt Disney, Cook doesn't need to be Steve Jobs now or in the future. LEM

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Tim Nash is a Director of WattWenn which has a new approach to scheduling the production of TV and movies to make the most of budgets. The views in this article are his own and are prejudiced from spending more years working for computer companies than he cares to remember.

Tim lives with his wife, her website on the area ariege.com, two daughters, a cat, and a dog in the French Pyrenees. He lapsed for a while after the Apple II, but became a Mac fan when his wife introduced him to the Macintosh IIsi. If you find his articles helpful, please consider making a donation to his tip jar.

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