An Examination of Executive Power at Apple, Part II

| Hidden Dimensions

"We thought, because we had power, we had wisdom."

-- Stephen Vincent Benet

Last week, I listed the components of power, looked at the first three, and applied them to Apple based on my recollections of what I saw. This week, Iill look at the last two -- which can be more controversial.

  • Judgment and restraint
  • Money and influence

The Purpose of Power

Utimately, power and authority are granted in order to achieve some goal. No one person can do everything, and so authority is delegated. Unfortunately, for reasons described last time, very little real authority is delegated at Apple. And so an examination of power leads more or less to the upper levels of Apple.

Before I can do that, I want to make an observation about the progression of power. An easy way to do that is to take a look at people who have a great deal of money.

Initially, when one comes into great money, the natural impulse is that one can buy anything. But when one has billions of dollars, there are only so many things one can buy. (Except for Larry Ellison.) One is quickly sated. So the next adventure is that one can experience anything. This can manifest itself in things like a trip to Mount Everest, racing yachts, setting world records (like Steve Fossett), learning to fly a business jet (like Steve Wozniak), and so on. Eventually, one either becomes exhausted or realizes that these things are fairly dangerous. About this time, after one has bought everything and experienced everything, there is a subtle and dangerous transition. One can do anything. And by that I mean do anything at all. Not getting caught becomes the thrill.

For an independently wealthy adventurer or a movie star, this sometimes leads to excesses such as weive seen in the news. I wonit name names. You can think of many.

But if youire the principal of a company, then that slight human tendency to take the last step, over the line, can affect the lives of many other people. Enron is a good example.

Judgment and Restraint

One of the most popular columns Iive ever written was in 1999. It was a column about a Canadian teenager, Abdul Traya, who was 16 at the time. Abdul had legally registered the domain "appleimac.com", but Apple wanted it. The thrust of the article was that Apple took by force what a young boy had obtained legally. Yes, Apple needed that domain to avoid scurrilous Internet crooks. And they grabbed some similar ones. Even so, I pointed out that it was the responsibility of Appleis most senior executives to step in when lawyers go overboard, but they didnit.

Years later, not much has changed. Appleis attorneys, it seems, manage to get on the wrong side of sensitive issues regarding the treatment of those less powerful and wealthy. We tend to hope that the company we love best will manifest its power in ways that earn our respect and live up to Appleis vision of individual worth and self-realization. But when Appleis attorneys are on the loose, Appleis executives appear to turn their heads and look away. So do we.

Another area where we see some questions raised about restraint is the well-known tendency of Apple to fire people for infractions that would, at other companies, result in some stern words, mentoring, and encouragement. Apple is very selective in its hiring and only hires the cream of the crop. So it is rather odd that some Apple managers take too much pleasure in firing talented people who make a human and relatively minor mistake. Since this is an internal matter, you donit hear much about it. I think it happens more than it should and for not enough good reason.

It reminds me of Germany. For historical reasons, many houses are handed down, and there isnit a lot of new home building in Germany. So people spend their money on cars. Also, the German culture is a little more rigid about some things, so people take refuge in the Autobahn where they can exercise some personal freedom. When people donit feel empowered to do certain things, they find alternative, creative ways to exercise their power anyway.

If Apple has a weakness, it is that authority is so restrictive that talented, aggressive people find ways to exercise their power within Apple that donit always reflect judgment and restraint. Itis almost as if their natural tendency to solve executive problems gets subverted by their powelessness, so they seek other avenues to solidify their authority. I would give more examples, but I think itis more important to analyze the overall effect than drag out the uncomfortable history of others.

As Apple moves from being merely a company that produces computers and software into a more mainstream consumer electronics company, the ritual of tactical surprise will become less and less useful. The war with Microsoft will fade out of the limelight, especially as Microsoft itself fades from prominence. Millions of consumers who have never heard of Macworld and WWDC will become customers of "iTV" and the iPhone. In time, it will be necessary to slowly convert Apple to a more conventional company in which executive power is focused on the new tasks at hand instead of turned inwards on the employees.

Money and influence

This is an area where I have to give Apple high marks. Steve Jobs and his hand picked executive team have always felt that the way to succeed is to build great products that people appreciate. Itis been a long, uphill battle to get consumers to take harder looks at Apple products. After ten years of Steve Jobsi leadership and ten years of infrastructure building, Apple is finally seeing the benefits. That kind of patience is rare in corporate America.

Another key to Appleis success was the character of Fred Anderson, Appleis CFO for many years. Fred was so cool, so talented, and so honorable that the all of Appleis finances could be placed in his hands with full confidence. Apple is where it is today, in part, because of the way Fred Anderson managed Appleis money. And he mentored Peter Oppenheimer to do the same.

As a result of the above, Apple can afford to be rather low key in its political donations and selection of board members. You wonit see him on a yacht with Governor Schwarzenegger, drinking Martinis. When Steve uses his business jet, itis for business (so far as I know) and not to extend favors to people he wants to influence. Asking Al Gore to be on the board was designed to keep tabs on the winds of influence in Washington D.C. and point to Appleis sense of responsibility towards the earth and its people. Itis the kind of low-key, passive thing Apple does. After all, many important things are simply a matter of exercising good taste.

You wonit see Steve Jobs at big Hollywood parties. When design awards are handed out, he sends Jonathan Ive or someone else. It seems to me, Steve pays much more attention to family, such as he can in his position, than many other executives of equivalent rank.

When Steve does work with Hollywood executives, itis intended to work out something mutually beneficial. Steve has his vision and his terms. As weive seen in the stories about Steveis work with the record studios, and now the movie studios, itis not about selling out for short term gain. Itis all about making life better for Appleis customers, creating a worthy legacy, and remaining true to his vision.

Final Thoughts

Apple has had to run a tight ship since 1996. Often, draconian measures were taken. The spirit of a company about to go under still lingers.

Now, Apple is entering a new era. As they move into consumer electronics, theyill start to face challenges in terms of customer support that they have never faced before. When a customer calls and wants something made right, Apple will have to start thinking in terms of employee empowerment to make the customer happy on the spot. Penalties for bad decisions will have to be further training and mentoring, and not dismissal -- so that their people actually build a repertoire of skills instead of new guys repeating the same old mistakes. There wonit be time to run approvals up the chain to a VP when there are 50 million iPhones in the field.

Apple is also going to be severely challenged in terms of management talent for the next few years. When Apple was a $5.4B company, they could be managed by a coterie of ten or so people. Now that Apple is nearly a $20B company headed for $30B in a few years, theyill be hard pressed to be successful unless genuine authority is delegated to a more mature breed of serious, capable VPs brought in from other Fortune 100 companies. These men wonit put up with the constraints typically imposed on Apple VPs whose attraction these days is mainly to put in a few years with a fun company, get rich, get pushed around by Schiller and Jobs, and then move on to the golf course. Theyill need more men like Tim Cook. Mature, competent, self-confident, and equally energetic in their vision.

The time to prepare these men, inculcate them with the Apple vision and values, is now. Steve is old enough and successful enough that he no longer needs to feel threatened by VPs, men and women, who can assume significant responsibility and delegate authority to others. Thatis the road to $30B and beyond.

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