“Jobs Made Apple Great By Ignoring Profit”

Via Posterous

From the Australian paper TheAge, Jobs made Apple great by ignoring profit by Clayton Christensen and James Allworth (Reuters):

Steve Jobs retires as the CEO of Apple with a reputation that will place him amongst the pantheon of history’s great global business leaders. Many people have written about what makes Jobs and Apple special, but I think they’re missing what truly set him apart. Jobs has succeeded by eschewing the one thing that most people view as the raison d’être for companies — profit.

When I left the industry to come to academia 22 years ago, it was driven by a set of questions that had troubled me for some time. Why was it that the best run companies in the world — companies that have had incredibly smart leaders, following carefully detailed plans and with tremendous execution ability — reliably seem to come unstuck? The answer to this question is what has become known as the theory of disruption.

It’s not often I argue with Christensen — one of his books on disruption is a cornerstone of a class I’ve taught at the University of Washington since 2003. 

But.

The headline is wrong and so is some of the reasoning.

First. Jobs did not “ignore” profit. If he had, we would not be looking at charts like this one: Apple Market Cap Under Steve Jobs

Or this one: Profit - Apple v Microsoft

Second, “profit” and “disruption” are two very different concepts. I’d argue that you can’t focus on “disruption” any more than you should not focus on “profit.” By focus, I mean singular goal. The authors don’t define what they mean by “focus” but deep in the op-ed Christensen suggests it’s the stereotypical Wall Street focus:

When the pressure is on and the CEO of a big public company has to choose between doing what’s best for the customer or making the quarter’s numbers… most CEOs will choose the numbers.

Apple never has.

And there, there I agree with him. It’s not possible to be “visionary” and take risks and simultaneously worry about quarterly milestones.

The development of the iPod is a perfect example of why the argument that Jobs ignored customers is fallacious. The market for mp3 players was “established” in the sense that there were several products on the market prior to the iPod. There were lots of “personal computers” on the market in 1984, too, but none of them put the focus on the person using the computer like the Mac did. And no mp3 player put the focus on the person listening to music — the person who needed to easily load and buy music — like the iPod and the iTunes store. There’s a reason the iTunes store brings in more than $4 billion a year.

Boeing is a perfect counter-example. In the late 90s, when I worked there as a contractor, I attended an all-hands meeting where the veep stood in front of the gathered masses and asserted that Boeing’s reason for existence was to provide ROI for its shareholders. I kid you not! This was at a time that Boeing’s stock was at a historical low (well below $40 IIRC).

I wanted to run from the room, screaming.

A company exists to provide something — a product or a service — that is needed by its customers and to do so in a way that treats the customer with respect, as though she has both a mind and a pocketbook.

Apple does that.

Christensen closes with a graph that I can wholeheartedly agree with:

Steve Jobs’ legacy isn’t the Mac. It’s not the iPhone. Or the iPad. His legacy is in the creation of Apple itself, reminding us that profit is not the ultimate goal, but rather a consequence of something greater.

http://kegill.posterous.com/jobs-made-apple-great-by-ignoring-profit

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3 thoughts on ““Jobs Made Apple Great By Ignoring Profit”

  1. Permalink  ⋅ Reply

    Kathy E. Gill

    October 14, 2011 at 10:53pm

    Hi, John, I think I make it clear in my argument where I agree with Christensen and where I disagree. Notice that I put the word ignore in quotation marks. Ignore : “Refuse to take notice of or acknowledge; disregard intentionally”

    I think Jobs did not put short-term “profit” (ie WallStreet) at the center of his thinking. But that’s not the same thing as closing your eyes to the relationship between costs and sales (ie, profit when that relationship is positive).

    The “pursuit of profit”? No, I agree that Jobs did not pursue profit. But that’s not the lede and it’s not the headline.

    Did you read the entire essay at TheAge?

  2. Permalink  ⋅ Reply

    john

    October 14, 2011 at 8:37pm

    you missed the point. you say that the graph looks like that because they care about profit. the article makes the point that the graph looks like that because Jobs DOESN’T care about profit.

    “Being the richest man in the cemetery doesn’t matter to me … Going to bed at night saying we’ve done something wonderful… that’s what matters to me.”

    Of course, if you were just saying that to disagree and make people click through, then agree with everything else they wrote… don’t let anyone stop you

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