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Steve Jobs and Apple's Astounding Legacy for The American Enterprise

This article is more than 10 years old.

Image via CrunchBase

By Haydn Shaughnessy and Nick Vitalari

Henry Ford changed the operating model of enterprises everywhere with his vertically integrated factories. Steve Jobs, through Apple, has done the same with the elastic enterprise. What does that mean?

A very small number of corporate leaders over the course of history have become associated, like Ford, with a particular type of enterprise operating system. He provided an example for other leaders to follow and transformed the business landscape for ever.

Think also of Alfred P. Sloan and the integrated conglomerate. Other leaders become better known for their phenomenal wealth – like the oil and banker class at the turn of the 20th century.

Today's leaders need to know how Steve Jobs and Apple have liberated business in the 21st century.

We argue in our new book The Elastic Enterprise that Steve Jobs’ legacy lies not only in the brilliant designs of Apple (AAPL) products nor his mastery of a new form of adjacency strategy as Apple move effortlessly into new industries. It lies in the operating system or operating model that other companies are now copying.

We call that operating system elastic to signal the way that it breaks with the scale economics of the 20th and early 21st centuries.

Existing ways of scaling companies add disproportional cost as a company grows. Elastic enterprises do not. They have created new economies of scale.

This is an historically important distinction. It is as important as Adam Smith recognising the scale and profitability potential of specialised labour, over two hundred years ago.

What it means is that companies can grow without incurring a management overhead that scales faster than revenues and profitability. That in turn seems to allow companies to focus their strategic assets and vision at adjacent markets, further increasing growth opportunities.

It signals a shift in the wealth we are able to create for given types of investment. It changes the economics of wealth creation.

It is a breakthrough and it is available to any company that learns the lessons.

The elastic enterprise has five major components:

  • Business platforms,
  • Business ecosystems,
  • Universal connectors,
  • The Cloud, and
  • Sapient leadership.

How do they apply to Apple?

The most remarkable thing about Apple is that the firm that exists today was virtually nonexistent 15 years ago.

Fifteen years ago, after Steve Jobs returned, Apple was just beginning its a new trajectory.

In the year 2000 Steve Jobs had been back at Apple at  a little over 2 years. He had resuscitated the Macintosh PC line but Apple products still represented a very small percentage of the total desktop computers purchased in the world.

A few short months later, Apple introduced the iPod, which began Apple's transformation, taking it out of computing devices for the first time. It was the first “radical adjacency” move the company made (an adjacency into new markets where the company had little historic experience) but one of many to come.

The iPod was just a product. The real Apple revolution began when the iPod was mated with iTunes in 2001.

iTunes no doubt owed a lot to Job’s immersion in the entertainment industry at Pixar. He was taking Apple in the direction of the liberal arts, from where he had just come.  At that time a lot of companies wanted to crack the code on seamless digital rights management. Apple succeeded. But a lot of companies were also looking around to see how they could evolve from manufacturing to services. Jobs made this transition too.

In creating iTunes, Jobs emulated the platform approach of Dell (DELL) and Walmart (WMT), but “tuned” it in a special way. Instead of, like Dell, using it to sell Apple products, it became the intermediary, a platform that brought other people’s music to a listening audience.

This extensible business platform (iTunes) also came with a ready-made business ecosystem of creative partners and music marketing companies.

Apple at this stage had transformed from selling computer products to becoming a major entertainment vending platform and had moved into entertainment devices. Jobs had created an extensible platform and experience with the music ecosystem, the first two dynamics of elastic enterprises.

Under the hood Jobs was also transforming the Apple OS, introducing knowledge he acquired when heading up NeXT. He created a far more flexible OS that would help support his later adjacency moves.

The next critical step was the introduction of the Apple iPhone in the summer of 2007. At the time Jobs saw it as a slimmed down computer. In the background he already had the iPad waiting. Which should he go with?

Image via Wikipedia

He chose to go with the phone.

With the iPhone, Apple learned how to adapt and connect its platform to the platforms of its partners, the network carriers. They also learned hugely about how to manage APIs at scale.

This required the third dynamic, universal connectors. Universal connectors are a new generation of computing standardization. Think RSS, which allowed companies like Huffington Post to create huge content platforms at very low cost. Think of APIs that are now powering the telecom industry’s transformation. Through the 1990s and early 2000s computing became more modular and automatically inter-connectable.

The addition of the iPhone to Apple's product line established a new pattern for Apple's business. The iPhone was just not a new product; the iPhone itself was part of the pre-existing business platform and business ecosystem that Apple had pioneered earlier.

Whether by design or luck the iPhone was a platform play, with Apple’s platform connected to other platforms for seamless, low cost commerce.

In rapid succession over the next 3 years, Apple would use this new business foundation to grow its business dramatically. In 2008, Apple would add the App Store and profoundly expand the impact of its business ecosystem with tens of thousands of app developers, and 100,000 of thousands of Apps that would extend the functionality and utility of its iPhone.

Since then Apple has continued to improve the iPhone in rapid succession with the iPhone 3G, 3Gs, 4, and 4s, in 2008, 2009, 2010, and 2011 respectively.

In 2010 Apple introduced the iPad.

Many commentators thought the tablet would be a major flop for Apple, despite the exuberance of Steve Jobs. It turned out to be a phenomenal success. But the iPad was not just a good product or a great design – it was part of a huge platform, the App store and its ecosystem, connected to an endless chain of new opportunity as the developer community exercised its creativity and adapted the device to a variety of new use cases that not even Apple had anticipated.

These three elements, platform, ecosystem and connectors meant the iPad, and the iPhone, were not just Apple’s products. They were a project that hundreds of thousands of organizations signed up to.

Image via Wikipedia

This was already an entirely new form of enterprise operating system.

2010 became a validation not only of Apple’s marketing and design expertise, but also the power of its business model. And the business model, the platform and ecosystem, appeared to give Apple a unique ability to make new moves and to execute at scale.

It is now clear in 2012, that Apple has the foundation to continually expand its business platform, its business ecosystem, its range of products, into virtually any industry it chooses.

The platforms that Apple now uses are gravitating to the Cloud, allowing Apple to extend its service offerings still further, for example with Siri.

And finally in the process Jobs adapted his leadership style to take into account the fact that he was no longer in sole charge of the wealth generating machine he had created.

Steve Jobs, as a leader, embraced the power of the business ecosystem. He became a leader of a powerful peer group.

We use the term “sapient” to indicate a range of new leadership skills and the most potent of those is to recognize that leadership is a relationship with an ecosystem of peers who have just as big a stake in decisions as you do. You need to lead by wisdom. You have to be recognized by your peers as the right guy for the job and you have to build or maintain that position through your behavior and decision making in the public arena.

Already Apple has signaled that the pattern will continue. And this is important because it will continue without Steve Jobs. But consider what Steve Jobs has left for future leaders at Apple as well as for other enterprises that want to follow suit.

Many commentators attribute Apple’s success only to Steve Jobs genius and his vision of the future.

They are partly correct.  But that does not get to the heart of Apple’s competitiveness and its future as an investment.

Jobs left a powerful organization and a powerful system of business that will persist.

Like Henry Ford, 100 years before, Steve Jobs leaves a prototype of the 21st Century enterprise.  He did not invent the components, but he melded them together, and galvanized them to the point that they forged a transformational model of business.

To illustrate the point, let's look at other companies that have exploited the same dynamics as Apple used some of the same techniques, but have not achieved the same results.

Let's start with the telecommunications industry. RIM (RIMM) and Nokia (NOK) are prime examples.  RIM had the makings of an elastic enterprise.  RIM had a powerful business platform with a global presence and spectacular server-based software that could interface with virtually every e-mail system on the planet in a secure and efficient manner.

It had a mobile device that was so popular with executives that pundits dubbed the device, “CrackBerry,” to denote its addictive capacity.

But RIM never understood the idea of a business ecosystem. RIM was a closed proposition from the outset. Its partners were treated simply as suppliers. All of its innovation was done within by RIM employees, engineers, and executives. It was RIM against the world.

Its closed system leanings ultimately led to its decline. Without a business ecosystem, even if it had someone like Steve Jobs at the helm, it could not and would not be able to compete with the likes of an Apple.

A similar story can be seen at Nokia.

Nokia was the global leader in cellular technology. The brilliance of its engineers was visible in all its products and highly regarded by all of its competitors.

However, Nokia was insular as well.  Most of their designs depended on Nokia-developed technologies.  This was fine when the cellular industry was new.  However, early in the 21st Century the componentry became standardized.

It was only a matter of time before components that were Nokia-proprietary afforded no advantage.  Although Nokia virtually invented the smartphone, they were so wedded to the interface concepts of the pre-smartphone era that they simply failed to make a usable device.

Nokia also had a business platform and they had the Symbian operating system – actually the most used smartphone operating system in the world.  But Nokia could not create a business ecosystem.  They found it difficult to share with outsiders and collaborate with partners outside the enterprise.

In the end both firms were defeated not by technology or design, but rather by a superior enterprise operating system.

Apple began its rise to prominence as a closed company but graduated to a more open organization as the interaction between the cornerstone company and ecosystem created new realities.

Jobs adapted, and in the process created the new enterprise operating system that we call the elastic enterprise.  It is a repeatable and replicable operating system. Executives need to learn what it means, how to put it together and how to change leadership behavior to make it function. Apple is a model for the new enterprise OS.

Follow me on Twitter @haydn1701