Organizational Forces Ensuring Revival: Apple’s Beethoven Case Study

Executive Summary

Organizational behavior is important in shaping the strategy of the company. Company leadership has an essential impact on the marketing strategy, knowledge management, and innovation. The essential feature of a company lies on how a culture of innovation can bring about a change in organizational culture.

The founder and CEO of Apple Inc., Steve Jobs was creator, follower and leader of the culture of innovation in which Apple computers strived in. This company went to a near closure in 1997. Steve Jobs initiated a culture that brought about this turnaround of the company where there are many changes that have taken place in the company and the company has been identified as the brand to follow. The turnaround was with only product – iPod. This case analysis identifies, explains, and analyses the ideas that are present in the turnaround of Apple computers.

Introduction

Apple’s Beethoven presents the case of Apple computers and its rejuvenation from being completely erased from the highly competitive hardware and software industry to its present glory. Apple’s turn back is attributed to the company’s “innovative” culture and employee commitment. Leadership too had played a crucial role in case of Apple to help the organization climb back to the pinnacle of success. This study is based on the case of Apple Company and tries to understand the organizational forces that have ensured Apple’s revival. How an iconic product like iPod could be used to ensure turnaround of the company and if this model can be applied to other companies and under what circumstances.

Apple’s History

Apple Inc. was founded by Steve Jobs, Steve Wozniak, and Ronald Wayne. They wanted to design and manufacture consumer electronics and software products that would be used in those gadgets. It gained a share of the personal computer industry in the 1970s and reinvented it in the 1980s with Mackintosh. Despite its early success, Apple failed to retain its success and in 1997, it was in a verge of being questioned. At the end 1997, Steve Jobs was rehired and he revamped the company’s product line and created a fresh new image of Apple Inc. the immediate effects were seen to a decline in employee attrition from 33 percent to 15 percent annually, revenue from retail stores increased from 3 to 15 percent in the US, and its market share rose from 3 percent to 4 percent in a year (Flynn & Staw, 2004). Today Apple has an employee base of 32010 and a sales return of 15 percent (Apple Inc., 2008).

Apple’s Strategy

Apple had gained a strategic position in the personal computer industry, but with the fast track of innovativeness of the industry, it soon became an obsolete technology due to incompatibility problems with Windows an invention of Microsoft. Apple Inc. fired Steve Jobs was as a CEO. But he was brought back later. But this time Apple had taken a lot of wrong strategic decisions. Apple strategically positioned itself to provide customers with the best computing experience by innovating in hardware, software, and Internet offerings. The primary focus of Apple’s business model was to sell hardware.

Apple historically had an eye for innovations. But earlier Steve Job’s idea for innovation failed and he had been severely criticized:

“And Apple has paid a high price for its visions. Apple has to spend 10 percent on research and development while its competitors spend 2 percent, and it’s a fairly lonely position to be an innovator when everybody wants to be followers” (Markoff, 1993)

As a consequence, Apple seized most of its expenses for research to control its cost structure (Fisher, 1996) and innovation and deviated from the organizational vision.

Apple had undergone structural change in 1988 when CEO John Scully wanted to “decentralize decision-making and let the company grow faster” (Pollack, 1988). This was done to decentralize the decision making process that Steve jobs went through in the early days of the company. But the change in the entrepreneurial set up of the company did not do it too good.

Steve Jobs, a charismatic personality, has ensured that the company jumps back from its deplorable state in 1997. In 2008, Apple revealed its revolutionizing iPhone at Apple’s Macworld Expo consumer conference this past January was met with near-rapturous outpourings of desire for this new “it” device (Kenney, 2007).

The current strategy behind Apple’s success is it combination of a software as well hardware producer. Apple makes the computer themselves as well as makes the software that supports it. They thrive to make user friendly technologies which are easy as well as pleasant to use. The success of Apple lies in its effort to change with the changing organization.

Further Steve Jobs saw the essence of strategic market alliances. First in the row came with Windows, to make Apple computers compatible with the operating system. Then once they entered the market for digital music and online music, they signed contracts with Disney, Hollywood big banners to be able to showcase their songs through iTunes. Again giving iPod the compatibility through iTunes, they were able to make it compatible to all the formats.

To sum up the company’s strategy is to aim for nothing short of a revolution, whether in personal computing or digital media distribution (AOL, 2008). Apple is expected to introduce desktop and laptop computers all of which will have operating system, OS X. this OS is supposed to be in Apple’s Mac mini, iMac and MacBook too, to tap the education market. Appel is expect to introduce a high end version of MacBook called the Mac Pro and MacBook Pro which is expected to serve for high-end consumers and professionals involved in designing and digital book publishing (AOL). Apple was a great success with its digital music players (iPod) and online music store (iTunes) (Schlender, 2005; Robbins & Judge, 2005). Other products that Apple have launched to capture a good share of the market are “mobile phones (iPhone), servers (Xserve), wireless networking equipment (Airport), and publishing and multimedia software” (AOL, 2008). Given this brief background of Apple, we want to assess how Apple ensured organizational turnaround and how Steve Jobs facilitated the revival.

Organizational Commitment

Meyer and Allen defined commitment as “psychological state that (a) characterizes the employee’s relationship with the organization, and (b) has implications for the decision to continue membership in the organization” (Meyer & Allen, 1991, p.67). Thus, they emphasized on there being different foci of commitment and presented their Three-component model of organizational commitment. In this model, they described three forms of organizational commitment. All these have implications for employee’s continuous participation in the organization. First is affective commitment, which refers to the psychological attachment of an employee to the organization. This commitment means that individuals stay with the organization because they want to imply that organizational commitment is voluntary. Continuance commitment refers to the associated costs an individual undergoes if he has to leave the organization i.e. the opportunity cost of leaving an organization. Here the implication is commitment is ingrained in need of the individual. Normative commitment refers to the individual employee’s perceived obligation to remain in the organization. Here the employee is morally obligated to remain attached with the organization.

These commitments are said to be components of commitment as an individual employee’s relation with an origination may reflect all three in varying degrees (Meyer & Allen, 1991). So they propose that an employee’s relationship with the employer should be analyzed considering the strength of the all three components.

If we see Steve Jobs on the basis of the three-component model, we see that he had all three components in his commitment towards Apple computer. Apple always prided itself for its innovativeness in product, ideas, and customer services. Given this ideal the culture of the organization was also drown on the same line. This idea of innovation was also promulgated by the company leadership i.e. Steve Jobs who believed that innovation could bring Apple back into competition.

Steve Jobs was one of the founding members of Apple computers. As he was the founder of the organization, he is expected to have more of affective commitment than continuance. This is so because he was the founder and felt that it was his own company. Further being one of the co-founders of Apple, he felt that there was a moral obligation that kept him attached to the company. That is why even after he was fired by the board of directors as CEO, he did not hesitate to join back when Steve was brought back after Apple’s takeover of NeXt. Meyer and Allen showed that job satisfaction was increased when there was higher level of affective and normative commitment (Meyer & Allen, 1997). They further showed that commitment was related to career and job and not to professionalism. This shows that Steve was committed to the job he was there to do, to the organization he was working for, and the career. This implies that as he was himself committed to the job and to Apple he promulgated that to his followers. Thus, his leadership too helped to spread commitment to the employees. Consequently the change that is absolutely important for any “learning organization” (Senge, 2006) is to embrace “change”: “It encompasses commitment to changes needed in the larger world and to seeing our organizations as vehicles for bringing about such change.” (Kofman & Senge, 1995, p.17). This is what Steve was committed to at the most. He was committed to the change that the technology industry was going through and being a part of it and change the organization accordingly.

Leadership Theories

Steven Jobs, the co-founder of Apple Computer, was later fired from the company when it started prosing bad financial results. He again returned to and Apple as CEO in 1997 when the company continued to fail (Schlender, 2005).

Three theories of leadership are reviewed briefly. The theories reviewed are charismatic leadership (House, 1976) and transformational leadership (Bass, 1985).

Charismatic leadership theory is deeply linked to the personality of the leader. It believes that leaders have certain traits which are exclusive to an individual and cannot be learned. Charisma is one such trait that makes a leader widely accepted and followed. These charismatic leaders are said to be administering through a vision, a vision that they believe in and one that they think they can achieve (House, 1976). These visions are said to be “situation-specific, appropriate, and yet unique in the industry” and they encourage “high degree of participation in the implementation of the vision” (House, p.353). Steve Jobs was a charismatic leader. He had a vision and gave it to all Apple employees. He linked the vision to specific tasks and goals. Further, the vision is not arbitrary, but has a thorough underpinning in the intended market, product, and strategy. Apple’s vision as shown by Steve Jobs was strictly, what the market conditions demanded. The drive for innovation was the need of the technology driven market. Continuous innovation could sustain a company through an industry which was in a contiguous process of flux. Steve Jobs created this vision for the company and his followers. Steve Job’s charisma as a leader is expressed through his building a mission for his followers and not quantifying what needs to be done (Conger, 1991). So as a leader Steve Jobs was able to show that “Apple embodies the opposite qualities of an IBM. It must be a quick-to-market, entrepreneurial, and freer-thinking organization. These play on the core cultural values of the organization itself heightening the potency of their meaning.” (Conger, 1991, p.36) Further Steve Job’s charisma was able to guide the company through troubled times in 1997 after his return (Flynn & Staw, 2004). Further, it is charismatic leadership that persuades all to pursuit a common goal. Moreover, it is believed that charismatic leadership has the capability to take risks (Kirkpatrick & Locke, 1996).

The concept of a leader who transforms the organization was first developed by James Burns who defined transforming leadership as, “a relationship of mutual stimulation and elevation that converts followers into leaders and may convert leaders into moral agents” (Burns, 1978, p.7). Burns further elaborate the definition as:

“[Transforming leadership] occurs when one or more persons engage with others in such a way that leaders and followers raise one another to higher levels of motivation and morality…” (Burns, p.45)

Taking Burn’s theory further, Bass formed the theory of transformational leadership (Bass, 1985). The basic potent of the theory lies in the leader’s capability of truly transform followers. According to Bass the role of ‘transformational leaders’ is to

• enlarge a follower’s range of needs
• bring about a change of the follower’s self-interest
• increase the confidence of followers
• raise followers’ expectations
• heighten the value of the leader’s intended outcomes for the follower
• promote behavioral change
• Motivate followers to achieve higher levels of self achievement (Maslow’s ‘self-actualization’).

All the above characters were ingrained in Steve Jobs who saw his followers as partners to the organization. His philosophy that employees are supposed to learn and innovate for the organization was the key to the innovative culture of Apple. Apple’s success and turnaround from a complete disaster was done by Jobs through his desire to make more customer friendly technology. It was Steve Job’s leadership that helped Apple to achieve a leadership role in the market:

“As we’ll see, software wizardry is how Steve brought Apple back from oblivion and even breathed new life into the Mac, which turned 20 years old the day we sat down to talk”. (Schlender, 2005)

Steve Jobs was the spearhead of transformation for Apple which seemed to have lost all reason for existence in the 1990s. He singlehandedly turned Apple from a hardware company to a software company. His leadership rejuvenated the culture of Apple to become what it is today. He has focused on a strategy that runs throughout the organization: customer friendly products.

Lewin’s three step model of Organizational change

Apple underwent an organizational change in its strategy and outlook in 1997 when Steve Jobs took over the company as its CEO. A classic model by Kurt Lewin suggested that there are three stages of organizational change: unfreezing, freezing, and refreezing (Lewin, 1946). He stated that when an organization undergoes a change, it must act as the motivational engine to change, and then develop new answers based on new information and then stabilize and integrate the changes. Lewin proposed that change evolves in a developmental process. Why a change is necessary? According to Lewin when the organizational system shows resistance to the present structure, a change is necessary. Further, when the external environment provides inputs that the organizational machinery is not in place with the external environment, it must undergo a change to ensure that there is congruence between the internal and the external system. To quote Lewin:

The ‘unfreezing of the present level may involve quite different problems in different cases. Allport… has described the ‘catharsis’ which seems necessary before prejudice can be removed. To break open the shell of complacency and self-righteousness it is sometimes necessary to bring about an emotional stir up. (Lewin, 1946, p.229)

In case on Apple computers, this change was necessary in 1997. In 1997, the company’s stock prices had hit a historic low when Steve Jobs rejoined the company as its CEO. He realized that the main problem that Apple was facing was that of compatibility. Apple’s hardware was not compatible with the popular software that the market craved for, and there were none that Apple had to support its own hardware. Further, there was an emerging market for software. So he decided to partner with erstwhile rival Bill Gates to make his Windows to become compatible with Mac. Further, he also made gates a significant shareholder in his company so that they do not remain “rivals” in strict sense (Robbins & Judge, 2005). Apart from this move, he also started to inculcate a culture that will thrive in innovation and will bring in innovation.

Figure 1 shows the historic share prices of Apple Inc. It demonstrates that the share prices were very low in from 1994 but had reached the lowest in and around 1997. This was when Apple Inc. bought NeXt and Steve Jobs was brought back as the CEO of the company. Steve knew that the key to win market share was to provide a technological innovation and that was in software. Software market was larger than the hardware market and was a recurring business. But given Apple’s core in hardware developing software was difficult as well as time consuming. So in order to pull the company back to shape it has to make software and do it fast. So he made changes in the organization in order to inculcate a culture that fostered innovation and flexibility. Moreover, the image of Apple as a hardware company that made Macintosh had to change.

This brought Apple to the verge of innovating a few of the most successful software. The company saw a growing business in digital music and quickly turned itself from hardware, personal computer making company to a software making company and made iTunes which was an internet digitalized music store. And clearly, it was a success. From the 2000, the share prices of Apple have been increasing and so has the revenue earning of the company (figure 2).

Apple – A Learning Organization

Apple computer was founded with the premise of making personal computer that be user friendly. That personal computer is still popular among brand loyal customers (Kofman & Senge, 1995). The computer though has evolved through the ages. When customer feedback told the company that Apple computers were expensive they quickly responded by introducing many lower cost models, unlike many competitors of the company who failed to respond to customer demand. Even though people skills do not enhance learning directly, they off course help in increasing the company’s chances of increasing the possibility of the company to learn.

Further Apple propagates a corporate culture which instills experimentations and learning as a part of corporate ethic (Kofman & Senge, 1995). Learning is said to assume a new meaning in a learning organization. What apple has done is in the true sense been able to create a leadership through Steve Jobs which has helped the organization to form a team of leaders who can innovate with the ever changing market for technology. What traditional leadership is believed to do is block the formation of self-motivated teams but organizations who can break this convention is the true learner (Kofman & Senge, 1995). Apple has done this. Steve Jobs is an exceptional leader who has been hailed for his charismatic and driving leadership. But he has assumed the role of a leader who is democratic and accepts the innovations of his subordinates and hails it. His leadership has helped in forming the innovative teams in Apple who strive to find something new every day.

Once iTunes were making raves in the internet digital music sale, Job realized that only being able to store music in the computer was not enough, it had to become portable:

Even before iTunes was out the door, Jobs, a music nut himself (he favors Dylan and the Beatles), recognized that although storing and playing music on a computer was pretty cool, wouldn’t it be even cooler if there was a portable, Walkman-like player that could hold all your digital music so that you could listen to it anywhere? (Schlender, 2005)

This realization of the leader gave birth to iPod. This shows another instance where the leadership and the employees willingly come together to show their commitment to the market changes and market need. This has ensured that Apple remains flexible and sensitive towards market demands.

Apple learns from its mistakes, learns from outside world, learns from inside, learns from everywhere. It imbibes the knowledge and initiates a change in order to maintain an equilibrium state with the world. That is why Apple is unique. That is why brand Apple holds a tag with it i.e. it is innovation.

Recommendations

Given the state of Apple’s culture, we need to undertake the following changes in the organization:

1. First, Apple needs a learning culture. An organization that facilitates learning and development has to be developed which helps in deriving the organizational mission. The team structure should be around developing innovation. So employees need to be given free time to innovate.
2. Second, innovation occurs more rapidly through knowledge creation. So employees should be given an atmosphere that aids in creation and sharing of knowledge which will later help in innovation.
3. Third, motivation to the employees to innovate should be connected to the individual’s need for recognition. Thus, if an employee or a team builds a product they should be given that recognition.

Bredero Shaw Middle East Limited

Bredero Shaw is a technology based product innovator for the energy industry. They are global leader in pipe coating solutions for the oil, gas, and water industries (Bredoro Shaw, 2008). They were established in the 1930s, they have a large share of clientele in the energy industry around the world.

Presently the number of employees in the company is 1,500 of which 18 percent t are male and 19 percent female (Linked In, 2008). Mostly it has a huge base of multinational employees such as Canadians, Americans, British, Indians, Pakistanis, Filipinos, Bangladeshis, Nepalese, etc. So it is important to manage diversity. So in order to maintain a growing company like this it is important to have a leadership which has the ability to manage diversity in organizations. So it is important to develop the leadership who can infuse the concept of oneness among employees who will believe in the mission of the company.

Taking the example of Steve Jobs, we would like to understand what the organizational problems in the company are and how we can provide a solution in the light of Apple. What we would like to know is if the leadership ad organizational commitment as infused by Steve Jobs could be utilized in a setting like that of Bredero Shaw.

A leadership style like that of Steve Jobs will be beneficial for the company as it will infuse greater amount of trust and belief in company goal and make them more commitment to the organizational mission. Commitment will turn the company’s innovative atmosphere. As both Apple and Bredero are companies who are responsible to provide innovative products, they have to make new products to keep their mark in the industry. So a culture like will help them to identify the scopes of innovation, especially innovation which are commercially viable.

The recommendations provided for Apple if used in Bredero will be helpful because this will help in increasing innovation and product development. This will help the company offer new and better product to the customers all the time.

Conclusion

Innovation is strategy that drives an organization, a leader, teams, and employees. It is the driver of change and growth. In an industry which is in a constant state of flux an organization has to constantly evolve and innovate itself to reach equilibrium with the environment.

Apple inc. ahs undergone numerous ups and downs since it s inception. It has undergone restructuring processes, which has been beneficial as well as problematic for the organization. Its core belief that innovation is the way for the company to survive is the panacea for the company. Steve Jobs is the initiator and the maintainer of that belief. He with his transformational leadership qualities had helped transform Apple from a company which could barely survive, in 1997, to a new rave in the technology gizmo market. The turnaround is due to the new culture of innovation that has been endorsed and fostered by the leadership.

Apple is learning organization. It has learnt to become adaptive to market indications. One mistake that Apple did during its early years was it preferred to be a closed organization from the world. But post -1997 Apple epitomized flexibility sensing any clues from the market for commercial viability of a product which was yet to be innovated. Thus, it was in a constant state of learning. Moreover, it learnt from its past and avoid making the same mistakes.

Thus, the case shows the process of rejuvenation of Apple Inc. through the launch of iPods which revolutionized the digital music world and brought back Apple as the elite technology firm. It shows how a motivated and committed leader can change the way an organization works.

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