One Principle That Saved Apple From Bankruptcy

Steve Jobs’ approach to work that turned an annual loss of $1.03b into profit.

We can only do three.”

It was 2001, and Steve Jobs had just slashed the seven other ideas from his whiteboard. The list was marked ‘ten things we should be doing next’ — a list his top employees had been deliberating over. Better to do three things perfectly, he believed, than ten things well enough.

This was nothing new to those who worked with him. Drastic simplifications on a whiteboard were just part of Job’s method; it focused the mind and prioritised what was important. Nor would anyone doubt the efficacy of this approach. After all, he had saved the company once before the very same way.

Later that year, Apple released iTunes and the iPod, which revolutionised the music industry for a generation, and once again vindicated Jobs’ principle of hyper-focus on a small number of targets.

The Principle: Simplicity Through Focus

As we see in the sleek and enduring appeal of Apple’s product designs, Jobs instilled a company ethos that revolved around one goal, Simplicity. This was the ‘ultimate sophistication’, as an early Apple brochure proclaimed, and was the ideal Jobs strove for in all aspects of life.

This included his work. But how did he achieve simplicity when doing business? How can we achieve simplicity in fields as diverse as strategy, marketing, logistics, or management?

The principle he used is what I call Simplicity Through Focus.

First, you must remove what isn’t worth your time. Even if that is something you have invested so much into already. It’s hard to do. We are socially wired to feel uncomfortable with not being consistent in our views, opinions, or actions. Yet nothing is more insidious than what Ralph Waldo Emerson described as ‘foolish consistency’, or what others call the ‘sunken cost fallacy’. It is an imperative first step. In Jobs own words:

“Deciding what not to do is as important as deciding what to do.”

This is the hardest step. To have the emotional temperament to admit that something isn’t working and that you need to start afresh. Many people cannot accept, or cannot see, the need for change in the moment. But once you have made this decision, accept it totally. If you don’t, you will be forever distracted by doubts and worried by what-ifs.

For what remains, focus on it. Intensely. We are not all naturally gifted at focusing for long periods of time on one topic, but we should train ourselves in doing so. Create the habit of focusing — schedule a regular time each day, organise a regular work-space, make a focus playlist to listen to whenever you work, use pomodoro timers. Eventually, one part of this habit, sitting at your desk, putting on your headphones, can trigger the rest of the habit.

One of the lessons Apple’s lead designer Jony Ive took away from working with Jobs about focus was to be confident in saying no to other things that could take up your time. If you have truly decided on your most vital work, you must be willing to put aside everything else to focus completely on it. Even when something comes along that you think is a great idea, you must stay focused on your task at hand.

The purpose of your focus is to achieve simplicity. In writing this might mean figuring out what you want to say and expressing your thoughts clearly. In design this might mean working on achieving a desirable finish without increasing price or detracting on quality. In management this might mean reorganising a team to work at their optimal efficiency without causing disruption. Whatever the challenge is, simplicity is achieved by working through the complexity, not ignoring it.

One method Jobs used to re-focus his employees was to ask them rhetorical questions that shifted their perspective from micro-limitations to macro-visions. Re-aligning your perspective can often be the key to simplifying a problem — “Steve had a way of motivating by looking at the bigger picture”, an employee noted.

Such questions included:

  • “If it could save a person’s life, would you find a way to shave ten seconds off the boot time?” —asking an engineer to improve the boot-up time of the original Macintosh. (It loaded 28 seconds faster.)
  • “Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?” — asking a reluctant Mike Sculley to leave the Presidency of Pepsi-Cola to become CEO of Apple. (He joined.)
  • “What’s more important than working on the Macintosh? Who cares about the Apple II? The Apple II will be dead in a few years. The Macintosh is the future of Apple, and you’re going to start on it now!” — asking software engineer Andy Hertzfeld why he wasn’t starting work on the Macintosh. (Jobs unplugged the computer Hertzfeld was writing code on.)

The principle can be summed in the advice Jobs gave to Google cofounder Larry Page when he came seeking guidance on being a CEO:

“The main thing I stressed was focus. Figure out what Google wants to be when it grows up. It’s now all over the map. What are the five products you want to focus on? Get rid of the rest, because they’re dragging you down.

Principle in Action: Steve Jobs Saves Apple

“We’ve got to get the spark back” Steve Jobs told the crowd of Apple employees in 1997. That was an understatement.

Apple’s success in the 80s with the groundbreaking Macintosh and their famous 1984 campaign had run its course. Competitors caught up, and their market share gradually fell from 16% to 4% in 1996. That same year their Q4 sales dropped 30% from the year before, and their share price had collapsed from $70 in 1991 to $14.

A previous CEO had attempted to sell the company to its competitors, with no buyers. And the current CEO Jobs described as “the worst CEO I’ve ever seen…I think if you needed a license to be a CEO he wouldn’t get one.”

This was a business in decline. Top employees were being poached. Moribund product lines limped on under the steam of their own bureaucracy. Months worth of aging stock piled up in cavernous warehouses across the country. Worst of all, the company was losing money. $1.03 billion worth of losses at the end of 1997, to be precise.

Yes. Getting the spark back was an understatement. Rather, a whole trial by fire was needed. But if any person was the firebrand willing to burn those who stood in his way, Steve Jobs was that fire.

This is where we can observe the exacting demands of attaining simplicity through focus.

Jobs brought in the many product line-teams to judge what they were working on, and was not impressed by the presentations they brought. “I hate the way people use slide presentations instead of thinking…People who know what they’re talking about don’t need PowerPoint.” (For if you have attained the deep knowledge required to explain something simply and confidently, there is little need to lean on the support a presentation provides.)

The PowerPoints continued. Weeks of bureaucracy. Weeks of busybodies justifying bloated budgets.

In the end, Jobs had had enough. He stood up, walked over to his whiteboard, and drew four quadrants. The two columns read “Consumer” and “Pro” — the two rows, “Desktop” and “Portable”. Four great products. That was it. That was all the company needed. Richard Koch might describe this as the 80/20 rule — recognising the key 20% of products that would drive 80% of the company’s business.

The audaciousness of such simplicity was met with stunned silence. Product teams and board members alike were nervous. The effort to radically restructure a business the size of Apple would be fraught with risk, doubt, and discomfort. But what choice did they have? Choice was no longer a luxury Apple could afford. Jobs had started the fire. Now it had to burn.

Jobs brought in many of his top employees from his former company NeXT, who had themselves followed Jobs when he first left Apple. He knew their worth, knew what they were capable of, and knew they were excellent at the level of focused work he required of his employees. He also re-priced many of the remaining top Apple employees share-options, despite reluctance from the board of directors and shareholders. This move would incentivise the best workers Apple had to stay at the company, for Jobs knew that the company could not create its best products, could not achieve success and simplicity, with ‘B teamers’ and ‘bozos’. He needed the very best, and despite the losses the company was making, was willing to pay for that premium.

To focus on solely four products, Jobs cut 70% of the models and products Apple had in production. No more printers or servers. No more handheld digital assistant ‘Newtons’. No more Apple software in other company’s hardware. No more multiple-model series of the same product. 3000 workers lost their jobs in service of simplicity, because their products were not worth focusing on.

Tim Cook was also brought in to run logistics, and it was soon clear he shared an appreciation for the power of focus in attaining simplicity (or in Cook’s case, smooth efficiency). Cook halved the production time of new products, whittled 100 suppliers down to a lean list of 24, and closed 10 of Apple’s 19 warehouses, all the while reducing Apple’s inventories from two months to two days worth of stock.

Such changes were not easy, nor particularly pleasant. Some employees were elated that they now had clear direction and drive. Others were devastated at being told they were surplus to requirements. Simplicity cost millions in broken contract and supply agreements. Simplicity cost thousands of workers their livelihoods. The price of focus, in an environment of sunken costs, can be incredibly high. But what was the return?

From complexity came simplicity. From excess came efficiency. From indecision came focus. And in one year, this principle was the vital factor in reversing Apple’s losses of $1 billion into a profit of $300 million.

Conclusion

The reversal of Apple’s fortunes in the 90s is a story under-appreciated by the younger generation. We grew up exposed to Steve Jobs legacy at its very zenith, with the sexy, world-changing innovation of the iMac, iPhone, iPod, and iPad.

Yet to achieve the unparalleled success that Apple did in the new millennium, to create the incredible products that consumers didn’t even know they wanted, the company had to be profitable. It had to endure.

The principle of Simplicity Through Focus did just that. It saved Apple from bankruptcy.

It meant cutting thousands of jobs. It meant removing inefficient product lines. It meant upsetting a lot of people. But it motivated those who remained. It gave a clarity of vision and purpose. It empowered the remaining employees to fulfill their potential and focus on creating a narrow range of world-changing products. It gave Simplicity.

I cannot think of any other revival so sudden or so driven by one person in the modern era. If you have any examples, I would love to hear of them.

I must give thanks to Walter Isaacson and his biography on Steve Jobs. It continues to be a fascinating and insightful source of information, and is a favourite of mine for re-reading. I sourced my information for this post from his book, and I highly recommend you read all of his works if you have not already. He is a fantastic writer, and any enjoyment you have had from this post must ultimately rest on his shoulders.

I hope you find something of value in this principle.

OCM

“Nothing can bring you peace but the triumph of principles.” — Ralph Waldo Emerson

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