Stewart held up an iPad so they could use its “surprisingly reflective” screen to see themselves.
“It wasn’t supposed to be this way. Microsoft was supposed to be the evil one, but now you guys are busting down doors in Palo Alto while Commandant Gates is ridding the world of mosquitoes. What the fuck is going on?”
Stewart suggested that if Apple wanted to break down doors, it should start with its mobile service provider AT&T. “They make your amazing phone unusable as a phone. I mean, seriously! How do you drop four calls in a one-mile stretch of the West Side Highway?”
Or he proposed, “Why don’t you kick in Paul McCartney’s door for not letting us buy Beatles songs on iTunes?
“C’mon, Steve,” Stewart implored. “Chill out with the paranoid corporate genius stuff.”
Stewart’s rant hit Apple where it hurt the most. The “1984” anti-establishment commercial that he had referred to still best represented Apple’s core identity as an underdog. To accuse that company of turning into Big Brother, to suggest that Jobs was turning into the old Bill Gates, while Gates was off saving the world—Stewart couldn’t have lobbed a bigger insult.
Apple was now an empire. Before the iPod, iPhone, and iPad, Apple’s products had been primarily purchased by Apple fans, designers, and other discerning users willing to pay a big premium. Now Apple’s products had become mainstream. Mac computers started at $999, the iPad at $499, and the iPhone 3GS at $199 with a subsidy. Apple was also selling the previous-generation iPhone 3G for $99, half of its original price.
By the end of June 2010, Apple was experiencing some of its strongest growth in recent history. Despite the initial skepticism, Apple sold 3.3 million iPads. Fears of the iPad cannibalizing computer sales were proved wrong as Apple sold 33 percent more computers in the quarter ended June than the year before. Concerns that the current-generation iPhone 3GS wouldn’t sell in anticipation of the new iPhone 4 also proved unfounded. Phone sales increased 61 percent. Quarterly profit jumped 78 percent to $3.25 billion. Its stock was trading at around $250 per share.
Apple was morphing into the establishment. It controlled the market. That changed expectations. As an underdog, Jobs could stomp as much as he wanted. The bigger his target, the bolder he had seemed. But as a global giant, the aggression that had seemed puckish before now came across as dictatorial.
Apple’s board recognized the need for an attitude adjustment.
“We need to make the transition to being a big company and dealing with the hubris issue,” declared Art Levinson.
Jobs disagreed. “We are not arrogant,” he insisted in board meetings. In his view, the start-up mentality he had instilled was essential to the company’s success, and there was no way he would let outside forces dismantle it.
But realities were realities, especially when the government began taking a closer look at the company’s practices. A few months later in September, Apple relaxed the restrictions on its App Store, so developers could use Adobe’s Flash-based tool as well as other programming languages to write their apps. It also removed language from its developers agreement that prohibited mobile ad networks from collecting user data to target ads within iPhone apps. Responding to criticism about its opaque app review process, Apple published review guidelines for the first time. The remarkably candid document was at once humble and authoritarian, perhaps reflecting Apple’s struggle with its changed status. It also sounded like Jobs himself had written it.
“We’re really trying our best to create the best platform in the world for you to express your talents and make a living too. If it sounds like we’re control freaks, well, maybe it’s because we’re so committed to our users and making sure they have a quality experience with our products,” it said. “Just like almost all of you are too.”
Some of the bullet points took on a sterner tone.
“We have over 250,000 apps in the App Store. We don’t need any more Fart apps. If your app doesn’t do something useful or provide some form of lasting entertainment, it may not be accepted,” one said. Another: “If your App looks like it was cobbled together in a few days, or you’re trying to get your first practice App into the store to impress your friends, please brace yourself for rejection. We have lots of serious developers who don’t want their quality Apps to be surrounded by amateur hour.”
The FTC’s inquiry eventually dissipated.
Jobs still ruled over Apple. But Cook was the shadow warrior, his kagemusha. Cook was able to articulate Jobs’s values so clearly in the “Cook Doctrine” because he had spent his career at Apple totally focused on Jobs’s needs. Cook was the perfect steward to succeed Jobs when the inevitable happened. Unlike some of the others, who fancied themselves to be mini-S.J’s, he was more likely to embrace Jobs’s legacy as he guided the company toward continued prosperity.
Cook couldn’t have been more different from Jobs. While Jobs exuded a titanic personality, Cook was impenetrable—quiet and self-contained. He started his career at IBM after graduating from college in 1982. Identified early on as someone with high potential, he rose quickly through the ranks. He worked his way up to director of North American Fulfillment in North Carolina, where he managed manufacturing and distribution for IBM’s PC business in the United States, Canada, and Latin America.
“Tim was the first to work, the last to leave, and the smartest guy around the conference table,” said Ray Mays, a former boss.
Cook stayed at IBM for twelve years, until he was offered an executive position at a small computer reseller in Colorado called Intelligent Electronics Inc. He rose quickly there as he helped restructure the company and nearly double its revenues. When the board accepted his recommendation to sell the company three years later, he was plucked by Compaq Computer Corporation, the industry’s leading computer company and one of Intelligent Electronics’ suppliers. Cook moved to Houston to run the group that purchased materials for products.
His colleagues at Compaq found him to be effective but aloof. While everyone else was in the suburbs, he lived in the city. While most of them had families, he was single.
Still, Cook liked Compaq and thought he could work there for a long time. Then one day a headhunter called. Apple was looking for a senior vice president of worldwide operations. “Why don’t you come and meet Steve Jobs?” the recruiter suggested. Cook declined at first but was persuaded to at least meet him. He took the red-eye to California on a Friday evening and met with Apple’s CEO the following morning. Cook later said it took him five minutes to change his mind and make the leap.
It was a surprising decision for someone reputed to be as rational as Cook was. In 1998, Apple’s survival was far from certain. There was no logical advantage to leaving Compaq. A mentor warned him the move was foolish.
“Steve is a very compelling person. He has great vision,” Cook said, shortly after accepting the job. “I saw this as a chance to participate in a corporate turnaround in one of the best companies in the world. The Apple brand is very powerful in the marketplace, especially in the design and publications industry, and in education as well. I saw this as a once-in-a-lifetime opportunity.”
“My instincts have never let me down,” he said. “This job felt right.”
Apple needed new blood. In that spring of 1998, when Cook joined the executive team, the company was in the throes of restructuring, desperate for a capable executive who could work with Jobs and make Apple’s manufacturing process more efficient.
Apple’s operations unit was a mess. Long after its rivals had outsourced its manufacturing, the company continued to make most of its computers in its own factories, until demand plunged and the production costs became untenable. By the time Jobs returned to Apple, the company had sold off the bulk of its plants, but there were still hundreds of millions of dollars’ worth of inventory lying around. The warehouses looked like Xanadu in the final scene of the movie Citizen Kane. Jobs wanted a lean operation, modeled after Dell. But better.
The trou
ble was that Jobs didn’t have anyone to lead the team. He had gone through every qualified internal candidate in the first months after his return. Joe O’Sullivan, Apple’s vice president of operations in Asia, was asleep one Saturday morning at his home in Singapore when the phone rang at six thirty. Jobs wanted him to come to the States.
“What about Jim McCluney?” O’Sullivan asked, naming the head of operations.
“McCluney’s gone,” Jobs said.
“What about Heidi?”
“She’s gone.”
“What about Vic?”
“He’s gone.”
“What about Sam?”
“I don’t like him.”
“What about John?”
“I don’t like him, either.”
“Ah,” said O’Sullivan. “I’m the last man standing.”
“No, no, someone over here said you’d be able to do it,” Jobs protested. “I really want you to do it.”
O’Sullivan had served as a vice president for only four months and knew he wasn’t the right person. But his boss wasn’t really asking. O’Sullivan got on a plane that weekend and reported for duty on Monday morning. He agreed to stay in Cupertino until Jobs found a more suitable replacement. O’Sullivan advised Jobs to hire someone with experience in procurement.
“We’re going to be managing contract manufacturers,” he said. “The whole business of operations is managing third parties. You need somebody who is very comfortable with that.”
Jobs took his advice. Though Cook had been at Compaq for less than a year, his tenure there had coincided with a strategy shift that Apple wanted to make. Instead of manufacturing finished products ahead of time and letting them stack up on shelves, Compaq had switched to a build-to-order model, where it wouldn’t start building computers until orders were received. This gave the company more flexibility and predictability in its manufacturing, but its success depended on the company’s ability to manage suppliers and meet orders quickly and cost-effectively. Cook had been the man in the middle, who worked with Compaq’s contract manufacturers to make that happen.
Cook was unflappable, making him the perfect counterbalance to the volatile Jobs. Executives who interviewed him for the job remembered how he coolly answered questions while munching on energy bars that he kept in his pocket.
Unlike his predecessors who sat with the operations team, Cook asked for a small office kitty-corner to Jobs’s on the executive floor. It was a shrewd, chesslike strategy that allowed him to be four moves ahead. He had figured out that he needed to stay close to his boss in order to be attuned to his thinking. Few people thought much of it at the time, but they would later look back at it as an indication of the new leader’s ambition.
From the beginning, Cook set colossal expectations. He wanted the best price, the best delivery, the best yield, the best of everything. “I want you to act like we are a twenty-billion-dollar company,” he told the procurement team. It was a bold suggestion, considering that Apple only had about $6 billion in annual revenues and was barely eking out a profit. One person recognized the moment as a potentially significant turning point in Apple’s history and carefully saved the notes from the meeting. They were playing in a new league now.
The first product the operations team shipped under Cook—the second-generation PowerBook G3—turned into a lesson on how he operated.
The black laptop computer, code-named “Wallstreet,” was being assembled in Singapore, but it was running into serious problems ramping up production. Cook interrogated his staff in a manner that would soon become legendary. His questions grew more and more pointed until finally one of his deputies, Sabih Khan, offered to fly to Singapore to clean up the mess in person. A few moments later, when Khan spoke again, Cook looked at him.
“Why are you still here?”
Khan stood up and headed for the airport without a change of clothes.
The team soon got used to hearing “Who’s on a plane?” and “Just fix it.” Cook wasn’t satisfied until someone could evaluate the situation with their own eyes.
Later when “Wallstreet” encountered another problem securing enough parts for production, Cook pushed the team to think creatively. “I want you to make them without the parts,” he told one of his managers. It sounded like a joke, but the team soon found a way to build most of the computer without the missing piece, so they could cut down on lost time. The manager never again brought up an issue without considering every option.
Cook also tackled Apple’s monstrous inventory. The company had already started whittling it down, but Cook considered any inventory to be fundamentally evil. “You kind of want to manage it like you’re in the dairy business,” he had said. “If it gets past its freshness date, you have a problem.”
On his first trip to Asia, his operations team in Singapore thought it had thoroughly prepared for a meeting with him. At that time, Apple’s manufacturing was managed regionally. The staff served Cook’s favorite snacks—Mountain Dew soda and energy bars—and put together a presentation on inventory turns, a measure of how often a company sold and replaced its inventory. Asia was already turning inventory with an industry-leading standard of twenty-five times a year, up from a below-average performance of eight to ten turns previously. But Cook’s reputation for thoroughness had preceded him, and the team was ready with a plan for how to get to an unprecedented one hundred turns. The higher the inventory turns, the more efficient the operation.
The meeting unfolded as predicted with Cook asking how they could get to one hundred turns. When they provided a satisfactory answer, he asked, “What about one thousand turns?” Assuming he was kidding, the team began laughing. He was asking them to figure out a way to turn inventory more than twice a day. Impossible.
“I’d like you to look at it,” Cook told them.
Eighteen months after he started, Apple was turning inventory daily. Warehouses for components and raw materials were placed on the same factory grounds as the assembly lines, and the products were shipped directly to consumers whenever possible. Products were sent by air instead of sea to cut down on delivery time.
Within a few years the Asia team even accomplished near infinite turns, the epitome of inventory management. It meant they had no inventory. Its operations were so lean that customers were practically buying the product as it was coming off the assembly line. The company’s overall inventory would rise again with the addition of new products and the opening of its own retail stores, but even then inventory levels stayed at significantly lower levels than its competitors’ by a wide margin. Cook called himself the “Attila the Hun of inventory.”
“It’s not exciting to me to improve by five percent,” Cook had said. “Now double or triple it, that’s exciting.”
Cook’s way of dealing with suppliers was to be “aggressive and unreasonable.” In his world, being reasonable meant compromise. Once when Motorola was having trouble delivering enough processors, Cook spent all day poring over spreadsheets, going through every step of the supply chain down to the sub-supplier. A colleague compared him to a moray eel. Once he clamped on, he didn’t let go.
Cook was well liked and respected on the executive team, where his calm and rational approach was a welcome contrast to Jobs’s tirades. But he was tough on those under him. Working for Cook required a thick skin and a shared sense of perfectionism. Cook was never satisfied with the status quo, and he rarely doled out praise.
Some thrived in this unforgiving environment. Jeff Williams, the head of worldwide procurement hired from IBM, could have been a clone of Cook, down to his height and gray hair. A graduate of North Carolina State University with an MBA from Duke, he was just as much of an overachiever. When Williams first arrived, he worked so hard that he slept in his office rather than go home. If there was a problem in the supply chain, he flew to Asia to sort it out. Like Cook, he was an intense perfectionist. He soon became a trusted deputy, rising to vice president of operations. He was also frugal, driving the
same old Toyota Camry he owned when he first joined Apple.
Another manager who flourished was Tony Blevins, on the procurement team. A southerner like Williams and Cook, he was also a thrifty IBM alum. Blevins didn’t have the same commanding presence, but he embodied Cook’s principles. He was so tough in negotiations that suppliers called him “the Blevinator.” His basic stance was that suppliers should be paying Apple for the privilege of its business. When one of his subordinates declared an expensive gift certificate from a supplier one year for Christmas, Blevins remarked on how they clearly hadn’t squeezed enough out of that company.
Others found the unrelenting environment intolerable. One of them, Sheila Odle, was hired in early 2000 to manage product lines for some of the computers. Odle, who came from a storage device company called Adaptec, was an experienced and competent planner. Yet another southerner, she felt as if she understood Cook when she interviewed with him. But when she arrived at Apple, she had trouble adjusting to the severe culture.
“How can you even think that that’s okay?” Odle remembered Cook saying when a team member reported on an issue. “You’re an idiot!”
Odle left Apple after a few months.
“I’m not from the school of berating and bullying to get what you need,” she said.
Cook’s operations mercilessness was generating results. Four years after he started working at Apple, he was given control of the sales team. From there, he consolidated his power by gradually taking over noncreative roles like customer support and the Mac hardware business. In 2005, Jobs promoted him to chief operating officer.
The move surprised no one. By then, Cook had been working side by side with Jobs for seven years. No matter where he was traveling in the world, he never missed Jobs’s Monday morning executive team meetings. He and the CEO were like yin and yang, interconnected and interdependent.
Haunted Empire: Apple After Steve Jobs Page 7
