We discussed about what a strategy is and what it’s not in our last week’s strategy 101. Read it HERE.
We discussed the process of creating a strategy as a 3-step exercise:
2. Setting up guiding principle
3. Concerted action
You’ve probably read about how Steve Jobs saved Apple from imminent death, but it is interesting to look at it from the perspective of strategy!
After the rise of ‘Windows 95’, the multimedia operating system Apple was losing its market share rapidly. The then CEO Gil Amelio was doing everything based on his conventional wisdom to save the company from fall. He fired people, added products, made new departments in the company in his desperate attempt.
By September 1997, Steve Jobs, cofounder of the company returned to serve on a reconstructed board of directors and to be interim CEO.
And he diagnosed the situation and the findings were soul destroying for even the bravest of people.
· The company was going to bankrupt in 2 months
· There were 15 desktop models and they weren’t even different, lot of models of handheld and portable devices, a huge peripherals department that was bleeding costs left, right and centre.
· The distributor network was taking a huge cut of the profits.
· Manufacturing in the US was a costly affair.
· Competing against the Windows Intel partnership in the existing market was impossible.
From the diagnosis, he came up with the following guiding principles:
· Cut down everything that was not the core of the company
· Find the market niche where the competition was low, but the opportunities were high.
And his concerted actions were:
· Cut down the 15 desktop models to 1, same with the portable devices.
· Close the peripherals department.
· Cut down engineers to stop cash bleed.
· Use the NXT OS instead of developing their own.
· Reduce the distributers to 1/6th and started selling online.
· Move the manufacturing to Taiwan.
Then Apple became what it is now – an innovation giant with very niche product lines starting from Ipod to Iphones and everything else they specialise in.
Steve stripped the company down to its core components and removed all the fluff that was bleeding costs to stop the company from hitting the ground. He then waited for the NEXT BIG THING and focused on it.
The power of Jobs’ strategy came from directly tackling the fundamental problem with a focused and coordinated set of actions. He did not announce ambitious revenue or profit goals; he did not indulge in messianic visions of the future. And he did not just cut in a blind axe-wielding frenzy—he redesigned the whole business logic around a simplified product line sold through a limited set of outlets.
Apple turned its course from inevitable death to a TRILLION DOLLOR company with a highly focussed strategy.
We hope you’re motivated to take these steps to analyse and build your own strategy.