Contents
The strategy scholar Richard P. Rumelt wrote a book about why so many strategies are not strategies at all. They consist of goals, values and buzzwords, but not of an answer to the question of what is actually going on and what you are going to do about it. One of his examples of the opposite – the Kernel of Good Strategy – appears right in the first part of the book: Apple in 1997.
A company without direction
Situation
In the mid-1990s, Apple loses market share year after year. In fiscal 1997, according to its own annual report, the company posts a loss of just over $1 billion. Steve Jobs, pushed out of his own company 12 years earlier, comes back when Apple acquires his company NeXT in February 1997. Starting in July, he is effectively running Apple, and on September 16, 1997, he officially becomes interim CEO.
Link to the principle
In a situation like this, it is tempting to proclaim a goal: grow again, innovate again, become the market leader again. Jobs starts differently. First he establishes why Apple is in this situation.
The diagnosis: too much of everything
Situation
Apple offers a bewildering number of computers, printers and other devices, many of them in several versions. The company’s energies are spread across too many projects, none of which really stands out.
Link to the principle
A good diagnosis makes a confusing situation simpler. It names the real problem. At Apple, the problem is not “too little revenue” but “too much dispersion.”
The guiding policy: four quadrants
Situation
Jobs draws a grid with two axes: consumer and professional, desktop and portable. Each of the four quadrants is to hold exactly one product, and an outstanding one at that. Everything else is discontinued. Projects such as the Newton handheld computer are ended too. According to Apple’s annual report for 1998, the lineup shrinks from about 15 individual products to three product families.
Link to the principle
The guiding policy does not say what the end result should be, but how to deal with the situation. It rules out a great deal, and that is precisely where its power lies.
Coherent actions
Situation
Apple discontinues product lines, cuts jobs and, in August 1997, reaches an agreement with Microsoft: the rival invests $150 million and commits to continuing to develop its office software for the Mac. In August 1998, the iMac comes onto the market, the desktop computer for consumers. Apple closes fiscal 1998 with a profit of $309 million.
Link to the principle
Each individual action supports the others. Fewer products free up money and engineers, the agreement with Microsoft secures the software, and the iMac shows what the new Apple stands for.
What it was not
Situation
What people remember most from this period is an advertising campaign: “Think different” launches in 1997. It stands for an attitude, not for the plan. The plan itself consists mainly of leaving things out.
Link to the principle
Rumelt calls the opposite “bad strategy”: mistaking goals for strategy, failing to name problems, wanting everything at once. Apple in 1997 shows what happens when you avoid that.
Key takeaways
Key lessons
- Start with the question of what is really going on, not with the goal.
- A good diagnosis makes the situation simpler, not more complicated.
- Your guiding policy has to say what you will stop doing.
- Check whether your actions support one another or merely stand side by side.
- Don’t mistake a slogan for a plan.
Summary
In 1997, Apple was facing the end. Steve Jobs saved the company not with a grand vision but with what Richard P. Rumelt calls the Kernel of Good Strategy: a clear diagnosis (too much dispersion), a guiding policy (four quadrants, one product each) and coherent actions.
Sources
- Richard P. Rumelt: Good Strategy/Bad Strategy: The Difference and Why It Matters. New York: Crown Business 2011.
- Walter Isaacson: Steve Jobs. New York: Simon & Schuster 2011.
