Strategic leadership and innovation at Apple Inc.

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4 March 2016

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In this case-based report, 2 out of 3 given questions will be chosen to assess and discuss in details from different perspectives in relation to the case study “Strategic leadership and innovation at Apple Inc.” (De Wit & Meyer, 2010, p. 681) (Heracleous, 2010) by using relevant paradoxes and theories from the book: Strategy – Process, content, context: An international perspective (De Wit & Meyer, 2010)

Case – Apple Inc. introduction

Apple Inc. is one of the biggest and most innovative leading electronic product companies in the world. Apple was founded by Jobs with other 2 of co-founders in his garage where the original generation of Apple computers was produced. The company has experienced its up and downs in the highly competitive technology and consumer electronics industry environment since it was founded – rapid increase in business within a few years since founded, struggling for survival while Jobs was away, successful turnaround under Jobs’ lead while returned the company and etc. The period that Jobs returned and became CEO was especially paid attention to since it was such a successful turnaround. Moreover, Apple’s business strategies were not like ordinary strategies that any other tech companies apply. People were interested in the business strategy that Jobs renewed to manage Apple’s
legendary comeback. While Steve Jobs was away, Apple lost direction and competitive position in the market – “the sales dropped due to the higher price in the market; the costs were higher than its competitors and the products lost its charm, etc.” (De Wit & Meyer, 2010) None of the changes made by new CEOs managed to turn the business around since Jobs left, and Apple was on the edge of shutdown. Things started to look up after Apple bought “NeXT” for external help on its product development – a software company that Jobs founded after he was kicked out by Apple. Offered the position of Apple’s CEO, Jobs started renewing business strategies, revitalizing focus, and developed new breakthrough products that gained customers loyalty. Series of activities brought Apple back to life and obtained huge success. Now in the next coming part, the 2 questions will be answered to analyze and discuss by using theories and paradoxes relating to the case of Apple. Questions chosen are Q2 and Q3. This report will focus on how the changes become sustaining and how Jobs’ leadership changed Apple’s fortune.

1. Question 2: Critically assess how Steve Jobs new strategy created a sustaining competitive advantage for Apple. 2. Question 3: The leadership of Steve Jobs was different from all of the previous CEOs at Apple. Discuss his choice of leadership style in relation to the turnaround and re-building of the Apple organization. Your discussion of both questions should include using relevant theories as well as the relevant paradox or paradoxes according to De Wit & Meyer. In first part – Q2, the changes of strategy in the Apple case will be discussed and assessed relating mainly to the theory of sustainable competitive advantage and the paradox of markets and resources. Theories and paradoxes in industry context (compliance and choice) and strategic change (revolution and evolution) will also be discussed slightly to underpin how the competitive advantages are sustainable. In second part – Q3, the theories of strategic thinking will be applied to analyze Jobs as a leader/person relating to slightly discussed paradox of logic and creativity. Mostly importantly, the leadership style of Jobs including paradox of control and chaos for its organization will be discussed in relation with the turnaround and organization re-building. Both questions will have a sub-conclusion.

Eventually, a summarized conclusion of the whole analysis will be given in the end regarding Apple’s situation based on the case study.

1. Question 2: Critically assess how Steve Jobs new strategy created a sustaining competitive advantage for Apple. After Jobs returned, he firstly pointed out the problem was the products that “there was no sex in the products anymore” (De Wit & Meyer, 2010, p. 685). He has made following strategic changes according to the case (De Wit & Meyer, 2010): Re-building an innovative organization:

Refocus on innovation capability – Core value

Cut off 70% of new developing products, kept 30% ‘gems’, added new projects that has breakthrough potential Innovations in line with loyalty to user friendliness– redefined PC industry Entered consumer electronics, entertainment and phone industries with breakthrough innovation

Combination of hardware and software in phones and music players

Play by different rules in the industry: sticking with a proprietary ecosystem Seeking proprietary ecosystem (keep everything in-house) – Core competence

Corporate culture and human capital
Intense work and perfectionism in a casual environment
Encourage employees to think out of box
Reward by best product than salary

Above are the main changes he made in strategy. When talking about new strategies, it relates to strategic renewals. This refers to paradox of revolution and evolution. It is evident that Jobs has implemented a revolutionary change since they were immediately made right after his return – in both business system and organization system. For example, “he cut off 70% of new developing products, kept 30% ‘gems’, and added new projects that has breakthrough potential” (De Wit & Meyer, 2010, p. 685) which indicating a change focus in product offering; and the concept of rewarded by making best product than getting highest salary has become a shared value in the organization. However, how these changes create competitive advantages and make them sustainable? In order to analyze the reasons, we need to first have some understanding of competitive advantage and sustainable competitive advantage. According to Jay Barney, competitive advantage is when a firm implementing a value creating strategy not simultaneously being implemented by current or potential competitors. To make competitive advantage sustainable, the competitors should be unable to duplicate the benefits of the strategy. (Reading 5.4, De Wit & Meyer, 2010) (Barney, 2010) Apple certainly acquires competitive advantage in its changed strategy. This is achieved by a unique business system – firstly position priority (innovation as core value); strengthen core competencies by taking advantage of its existing strength in resource and having all experts and know-how in-house, which creates more holistic product system and more tightly knit organization system.

These all together contributes to highly innovated and user-friendly products that appeal to wider customer range. This reflects the argument that “competitive advantage is rooted in a unique business system, whereby the resources base, activity system and product-market position are all aligned to provide goods with a superior fit to customer needs.” (De Wit & Meyer, 2010, p. 249) How these competitive advantages are sustaining will be explained in details below. Firstly according to the paradox of market and resources, Apple tends to have a more resource-based perspective than a market-driven one, as its competitive advantages come more from its strengths inside the company. Rather than being driven by the market, Apple concentrated on its own proprietary ecosystem. Therefore it applies an ‘inside-out perspective which believes that strategies should not be built around external opportunities, but around company’s strengths.’ (De Wit & Meyer, 2010, p. 255). Apple indeed focused on enhancing its strength and let the market followed the opportunities created by its strengths. Apple focused on creating an innovative business system hard for any rival to duplicate in short time. Steve positioned ‘innovation’ as core value and clearly identified its organization strength: 1) Resources –both software and hardware which makes a tight integration and intimacy between its own software and hardware meaning a coherent product system; 2) Capabilities that enable a holistic organization system which comes from keeping all experts in-house than outsourcing (including product design, hardware development and software development).

These 2 aspects made it impossible for competitors to imitate and copy. Because the combination of 2 aspects fulfilled the 4 attributes that gain competitive advantages according to Jay Barney (Reading 5.4, De Wit & Meyer, 2010) (Barney, 2010): 1) Valuable – the 2 resources are valuable; 2) Rareness – it the combination of both is rarely achieved by any rival and rare to find in the industry; 3) Inimitability – such complex system is not easy to imitate and doing it all in-house prevents leaking of know-how to competitors; 4) Non-substitutability. This achieved sustainable competitive advantage has well reflected “competitive advantage comes not from imitation but from using organizational processes and designs to identify emerging asymmetries and build them into capabilities. (Asymmetries are skills, knowledge, processes, relationships, properties, or outputs an organization possesses that competitors find hard to copy or acquire in a cost or time effective way.) When the ‘virtuous circle’ of capability enhancement is created by cohesive combination of resources and capabilities, asymmetries evolve into sustainable core capabilities that competitors cannot copy.” (Reading 5.2, De Wit & Meyer, 2010) (Miller D. E., 2010)The resource and capability tended to strengthen each other over period which as well reinforced the sustainability.

The competitive advantages are sustainable is also because: launching new products every 4 months to sustain the first mover advantage; selectively best companies for partnership and alliance also raised entry barrier (complexity in relationships); opening retail stores to directly sell to customers to gain more control in service; and fostering a corporate culture that people are proud to work in to prevent the mobility of human capital. “Market opportunities are better to be created than found.” (Reading 8.2, De Wit & Meyer, 2010) (Baden-Fuller, 2010) Apple used its strength to create opportunities in the market: making computers, music players and phones with Apple’s own hardware, software and applications. These products are not only better products than competitors’ because of the better integration of hardware and software from its own but also revolutionized the industry by making the breakthrough combination as innovation that is never made by others in the industry. This point refers to the ‘paradox of firm compliance and strategic choice in industries’ (De Wit & Meyer, 2010, pp. 433-434). This is also a reason that Apple gained sustainable competitive advantages over its rivals – break the rules in the industry which is a bold and right decision. Unlike its competitors who comply with industry change, Apple chose to follow an ‘industry leadership perspective’ (De Wit & Meyer, 2010, p. 440) which is consistent with ‘demand for strategic choice’ in the paradox (De Wit & Meyer, 2010, pp. 433-434). Apple played a different rule when most others just find a focus at what they do best and outsource the rest. On the contrary, Apple proceeded series of acquisition in order to strengthen the ability to do everything by itself (e.g. acquisition of company PA semi to do chip design in-house)

This core competence of Apple – a proprietary ecosystem reached by vertical integration of value-adding system has raised the barrier of industry new entry, lowered supplier’s bargain power, prevented copycats and raised the complexity to copy its system for rivals. It is also this competence that allowed Apple to innovate the products that revolutionized the PC and consumer electronics and entertaining industries – this also relates to ‘discontinuous renewal perspective’ in ‘paradox of revolution and evolution’. (De Wit & Meyer, 2010, p. 179). “The discontinuity in such revolutionary change in industry is driven mostly by technology and competitors.” (Reading 4.3, De Wit & Meyer, 2010) (Tushman, 2010) In conclusion, Apple’s strategy of sticking to innovation as core value and enhancing its proprietary ecosystem as core competence achieved by implementation of series strategic activities, have all along in the service of each other and successfully, forcefully and effectively created the company a sustaining competitive advantage hard for rivals to copy; helped turn the business around in a short period of time.

Question 3: The leadership of Steve Jobs was different from all of the previous CEOs at Apple. Discuss his choice of leadership style in relation to the turnaround and re-building of the Apple organization I would like to start discussing Jobs’ leadership style by introducing the ‘paradox of demand for control and chaos’ (De Wit & Meyer, 2010, pp. 486-488). According to the case study, “the company used to be known as the ‘ship that leaks from the top’ due to it relaxed management style,” therefore it obviously had more demand for top management control rather than organizational chaos at that time. “Jobs was credited for imposing discipline on Apple, a quality that it had lacked for years. The corporate culture was soon transformed into a tightly controlled and integrated machine after Jobs’ arrival”. (De Wit & Meyer, 2010, p. 690) At Apple, it is not hard to tell that Jobs’ leadership style is through an ‘organizational leadership perspective’ (De Wit & Meyer, 2010, pp. 491-493) by the fact that he was able to impose his own will and disciplines to the organization. “To convince people in the organization to let themselves be led, managers cannot simply fall back on their position power, they need personal power as well” (De Wit & Meyer, 2010, p. 438) This is why it is not wired that Jobs could have such influence at Apple – he has got his position power as the CEO and the personal power from “his innate instinct for design and visions on the right products and the ability to choose the most talented team” (De Wit & Meyer, 2010, p. 690) which people admired. Jobs was described as two extremes in his character as a leader by his colleagues and others, such as “brilliant, powerful, and charismatic, he could also be a demanding and impulsive perfectionist”, “both inspirational but also experienced as scary”, “terrifying and addictive experience”, “temperamental” and “made his employees burst into tears through direct and personal criticism” “asshole” (De Wit & Meyer, 2010, pp. 689-690), through these two extremes of comments on his personality and characteristics as a leader, we can see that his leadership style is more of a combination of ‘Autocratic’ and ‘Charismatic Leadership’ (Leadership Styles, 1996-2013).

Autocratic leadership style refers to a ‘tyrant’ style that the leader holds a lot of power over its employees; and a charismatic leadership style refers to “leaders inspire enthusiasm in their teams and are energetic in motivating others to move forward. This ability to create excitement and commitment is an enormous benefit. “(Leadership Styles, 1996-2013) Jobs is exactly a combination of the two leaderships that seem opposed. He can criticize his employees until they burst into tears, he can also once in a while tell them their work is excellent and it is all worth it to make them extremely happy and motivated. His temperamental and charismatic character and perfectionism scared people to work longer and try harder to do better. Jobs managed to push the best people to be better with his leadership. On the other hand, Apple created a corporate culture that fostered innovation under Jobs’ leadership. It includes seeking perfectionism through working long but in a relaxed environment; passion for excellence than salary; only recruiting the top-notch folks; encouraging to thinking out of box (be a pirate than join the navy); and talk about the coolest thing that had crossed their mind. Jobs as a leader is a creative thinking person himself, Jobs and the fostered corporate culture had the “3 conditions for creativity: vision, focus and inner drive” (Reading 2.2, De Wit & Meyer, 2010) (Ohmae, 2010)– Apple always first vision the product whether it has the development in the market, then focus on the innovation and wait for the more innovative opportunities it could bring. He believed that innovation doesn’t come from the processes but from chatting with each other in the hall way. “The 3 leadership functions – organizational function; interpersonal function and decisional function” (Reading 9.1, De Wit & Meyer, 2010) (Cyert, 2010) are all accomplished by Jobs in organization re-building and turnaround process.

He recognized the necessity to focus on innovation, highly praised people when they did a good job and motivated them; and made a number of strategic decision that successfully turned Apple around. Jobs’ method of leadership is “role model” (Reading 9.1, De Wit & Meyer, 2010) (Cyert, 2010) as he simply is a great leader with superior visionary and instinct that everybody admired. Jobs’ leadership role is “leader as designer” (Reading 9.3, De Wit & Meyer, 2010) (Senge, 2010)as he redesigned the organizational core values and competences since he came back. It’s said that “few acts of leadership have a more enduring impact on an organization than building a foundation of purpose and core values” (Reading 9.1, De Wit & Meyer, 2010) (Cyert, 2010). Jobs excelled at targeting the core value and it became a sustaining advantage which consolidated new organization system. What is interesting was that, Steve’s leadership style was different at Pixar from Apple, he spent less than a day at Pixar every week and was hands off and doesn’t tell employees what to do. (De Wit & Meyer, 2010, p. 690) He was described benevolent there. This sufficiently proved that Steve’s ability of shifting choice of leadership style to ensure the organization change in accordance to the environment. In conclusion, Jobs’ choice of leadership style at Apple efficiently supported its core strategies in line with the organization re-building and the comeback and saved the company when no other nice guys can. Briefly summarize the report: Through the analysis of the 2 questions, it demonstrated that under Jobs’ management and leadership, Apple’s new business and organization strategy fitted its situation and successfully helped the company out of trouble and turned its core value and competence into sustainable strength. Like said in the case, Jobs was the right one to lead Apple and had the impact on it that no one had.

Baden-Fuller, C. S. (2010). The firm matters, not the industry. I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 451-455). North Way: Thomas Rennie. Barney, J. (2010). Firm resources and sustained competitive advantage. I B. M. De Wit, Strategy: Process, content, context (An International Perspective) (s. 290-299). North Way: Thomas Rennie. Cyert, R. (2010). Defining leadership and explicating the process. I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 501-504). North Way: Thomas Rennie. De Wit, B., & Meyer, R. (2010). Strategy: process, content, context. An international perspective (4th udg.). South Western. Heracleous, L. P. (2010). Strategic leadershi and innovation at Apple Inc. I B. M. De Wit, Strategy: Process, content, context: An International Perspective (s. 681-692). North Way: Thomas Rennie. Leadership Styles. (1996-2013). Hentede 20. 11 2013 fra Mind Tools: Miller, D. E. (2010). Strategy from the inside out: building capability-creating organizations. I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 273-282). North Way: Thomas Rennie. Miller, D., Eisenstat, R., & Foote, N. (2002). Strategy from the InsidOut: Building Capability-Creating Organizations. California Management Review , 44 (3), 37-54. Miller, E. a. (2002). Strategy from the inside out: Building capability-creating organizations. California Management Review . Ohmae, K. (2010). The mind of the strategist. I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 78-84). North Way: Thomas Rennie. Porter, M. E. (1980). Competitive Strategy: Techiniques for Analyzing Industries and Competitors. New York: Free Press . Senge, P. (2010). Builiding learning organization . I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 510-516). North Way: Thomas Rennie. Tushman, M. O. (2010). Ambidextrous organization: Managing evolutionary and revolutionary change . I B. M. De Wit, Strategy: Process, content, context (An international perspective) (s. 203-212). North Way :
Thomas Rennie. Chapters used from De Wit and Meyer: Chapter 2,4, 5, 8, 9.

Readings used from each chapters: 2.2, 4.3, 5.2, 5.4, 8.1, 8.2, 9.1, 9.3

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