That's my summary of what Stanford Graduate School of Business Lecturer, Mark Leslie, told me about Apple in a March 31 interview.
Leslie's route to the globe's top business school comes not from his academic achievements but from what he has done in business. As Chairman and CEO of backup software maker, Veritas Software, from 1990 to 2001, he oversaw its growth from $4 million to $1.5 billion in revenue, according to SandHill.
Veritas did an IPO in 1993 and used the currency to make acquisitions that helped it to overcome the limits to its growth in the market in which it got started. As Leslie told SandHill, "the big lesson I learned is that whatever the business – no matter how great it is – it’s not always going to be a great business. And you need to start thinking about that, and planning for the changes, when things are going well."
Leslie expanded on this idea in a recent blog post -- the Arc of Company Life -- and How To Prolong It. He starts off with the accepted notion that companies are born, grow fast, mature, and die.
Two of his ideas strike me as interesting. First, he sees two kinds of CEOs -- opportunity-driven ones who transform organizations to seize new markets and operationally-driven ones who boost profitability and make a company's numbers each quarter.
Then he introduces a thought-provoking idea -- that between their rapid growth and maturity phases, companies have what he calls the moment of maximum optionality. At that point, the company can essentially milk its success -- which it will do if its CEO is operationally-driven -- or apply the capital and talent it has attracted to attack new market opportunities -- the likely approach of an opportunity-driven CEO.
By milking that moment of maximum opportunity, an operationally-driven leader may accelerate a company’s long-term decline. As Leslie wrote, “Under this type of leadership, a company can enjoy many good years climbing toward maturity. But failure to create new growth curves when the moment is right puts even the most successful companies in history at risk of extinction.”
I asked Leslie to discuss how this model applies to Apple and he gave me a partial answer. Leslie thinks that the success of Apple when Steve Jobs came back in 1997 was due not so much to great hardware design but to his ability to convince business partners -- e.g., the music and the wireless service provider industries -- to change how they operated to support Apple.
What Leslie declined to address is whether Tim Cook, is an opportunity- or operationally-driven CEO.
Leslie believes that Apple's hardware design skills are good -- but over-rated. "Apple is always recognized for great design. But the Macintosh was marginal in the personal computer market -- it had a small following among artists and architects. And when Apple got into the MP3 player business with the iPod after Steve came back, there were 100 devices, 10 of which had great designs."
The iPod won because Jobs was able to persuade record companies to change their business model to work with Apple. "Thanks to Steve's sense of his own grandeur and tremendous salesmanship, he was able to take advantage of record companies' paranoia about copying through peer-to-peer networking and persuade them to sell digital singles for 99 cents instead of $15 albums," argued Leslie.
Jobs repeated this process when he introduced the iPhone. "The iPhone is a beautiful device but what really made it a success was how Steve transformed the telecommunications industry when he negotiated a five-year exclusive deal with AT&T," said Leslie.
Up to that point, AT&T was charging consumers a huge amount of money for all the things that they might want to do on a smartphone. As Leslie explained, "AT&T charged $45 a month for mobile plus 45 cents a minute plus $2 a month for voicemail plus $2 a month for call forwarding and so on. AT&T did a deal with the devil. It traded all you can eat for market share and a fixed monthly fee."
That was the last time Apple innovated. "Since the iPhone, Apple has had no innovation. The iPad and all the versions of the iPhone since are variations on the same thing. The only interesting possibility for innovation is Apple Pay," said Leslie.
When I asked whether he thought Tim Cook was operationally-driven, Leslie said, "I have no idea who Tim Cook is."
Cook's conduct as CEO fits Leslie's definition of an operationally-driven CEO to my mind.
This leaves me with a question. Has Tim Cook created new growth curves or is his failure to do so putting Apple at risk of extinction?
