Apple Computer, Inc. 18 Apple Computer of Cupertino, California, is an Amer- college to help with his family's finances. His talent .was ican company whose brief history has become a busi- leading creative people, not administration. Sculley ness legend. Apple was founded in 1977 by Steven Jobs . came from PepsiCo with no experience in the computer and Stephen Wozniak, who built their first computer in industry, but he had plenty of experience competing as the garage of Jobs' parents. Twelve years later, Apple "Number 2" in the soft drink industry. Jobs hoped had approached $3 billion in sales and was ranked Sculley would act as a mentor on managerial issues among America's largest companies. The story of while helping Apple to compete within the IBM- Apple's success has been told many times to illustrate dominated computer industry. the value of creative thinking and the importance of Apple unveiled the Macintosh computer via a entrepreneurship. Apple's more recent history illus- sensational Super Bowl commercial in January 1984. But trates other lessons about the structure of organizations. despite Jobs' and Sculley's espoused strategy of taking Apple was most celebrated for its organic structural on IBM in the lucrative business computer market, sales design, particularly in its Macintosh division. When the of the Mac. were disappointing-Business-customers "Mac" team was first assembled, Jobs freed the members regarded Apple computers as lacking hardware that from any constraints on their creativity and charged could be taken seriously, and sales of the Macintosh fell them with a special mission to design a personal well short of company projections. Apple posted its first computer that would change the world by bringing the net loss of $17.2 million in the first quarter of 1985 and power of computing to individuals. The creative, but laid off 1,200 of its employees. quirky and arrogant style that Jobs brought to his Jobs and Sculley struggled for control of Apple, and company rubbed off on Mac team members. They Sculley ultimately ousted Jobs from the company he had" approached their task of computer design with the founded. For Sculley, the "victory was bittersweet." emotion of artists and the irreverence of children, Speaking of Jobs, Sculley said, ignoring most established rules of doing business. For example, the Macintosh was to be developed without When I joined Apple, I believed that the blithe spirit in regard for development costs. Jobs' spent millions on fading jeans and Velcro sneakers was one of the important spur-of-the-moment decisions and appointed people figures in our country during this century, I was going to with no experience to leadership positions on the team. help him succeed. I never imagined that I would run the The overall corporate environment was informal, to say company by myself someday. Now that was the reality and our friendship was over." the least, from the casual dress of all employees to the absence of financial controls. In time, Sculley pulled Apple out of its financial In 1983, Jobs hired John Sculley to help manage the difficulties and aimed the company's products more booming company. Jobs felt the need for someone with directly, at the business market. In contrast to the more traditional managerial experience to teach him iconoclastic philosophy of the past, Sculley stressed how to manage the growing business. Jobs, after all, had compatibility with the products of IBM, DEC, and other no formal business education, having dropped out of manufacturers, which enabled Apple to enter the officemarket with products that could work with existing Sharp and Sony, to make digital notebooks and elec- systems. tronic organizers. In addition to these new alliances, Sculley implemented several organizational changes Sculley established four new divisions: MacIntosh at Apple, In 1983, Apple was divided into four separate Hardware, MacIntosh Software Architecture, Enterprise product divisions: Apple I, Apple III, Lisa, and Macin- -Systems, and Personal Interactive Electronics. Sculley tosh. Each division functioned autonomously, and instructed each division to think and act like an somewhat chaotically. By 1985, Sculley had rolled the independent company, hungry forsales and profits."22 divisions into one and added an executive team. He also instituted rules and financial controls, required formal reporting procedures, and implemented tough product- development deadlines. These moves reduced the break-even point and allowed Apple to post record profits in the fourth quarter of 1985, just months after Jobs left the company. Apple's sales and profits contin- ued to grow at a rate of about 40 percent each year through the 1980s, earning Sculley accolades for turning the chaotic environment that Jobs created into a major profitable business. While Apple's structure definitely changed, the company retained much of the informality of its early days. There was a wistful reluctance to give up the old, fun ways of doing things. This was most noticeable in Research and Development, which was still the "wild and crazy" place it always was, according to a former employee. The difference was that this creative arm of the company interfaced with the growing bureaucracy. It meant that there was a limit to the number of engineers that could walk directly into Sculley's office to discuss new product ideas. The 1990s brought more change to Apple. Sculley assessed Apple's environment in the 1990s as a "cold shower."20 He was concerned about Apple's ability to sustain its business in an industry beset by falling prices and "copycat competition." To meet such challenges, Sculley launched a diversification strategy that would lead Apple into multiple businesses, including con- sumer electronics, telecommunications, and media and publishing. To implement that strategy, Sculley once red Apple In 1991 Apple and IBM announced that the two firms would cooperate in the development of new operating systems that would work on both IBM and Apple computers. Sculley described the pact as a "renaissance . in technological innovation."21 Apple also formed alli- ances with consumer electronics companies, including