David Yoffie and Michael Cusumano spent almost 30 years studying Steve Jobs, Andy Grove and Bill Gates. Both have already written extensively about the technology industries. This book brings into perspective strategic rules having used of the three CEOs that have the most effects on the technology industry and business in general over the last few decades.
Technology industries, Steve Jobs, Andy Grove, Bill Gates, Five rules, Harvard Business School, MIT
The two authors, one based at Harvard Business School the other one at MIT, summarize their findings in five clear points. This includes the looking forward but reasoning backwards, making big bets but no bet on the company, building platforms and ecosystems rather than just products, using leverage and power and to some extend using the personality of the CEO to push the company forward.
According to the authors, strategy is not an innate skill. Rather, it is something that has to be learned. As such the authors are very open about the strengths, weaknesses and failures of Grove, Gates and Jobs. Indeed, there is a tendency to think today that everything they did succeeded – this is not the case. Jobs had many failure including the obsession for costly Lisa computer. Despite an excellent career, Grove incited Intel into investing $750 million into the Proshare video conferencing system. It was seen as a marvel by they press and the public. However, despite their admiration, they were not willing to put their hands in their pocket and actually buy it. After nearly a decade of investment Intel was forced to sell off the product for newt to nothing.
One of the key messages of the book is that strategy should be fundamentally forward looking. Too often, companies look at profits and assumed from them the company is doing well. Unfortunately profits by definition are looking at the past. Andy Grove in particular has come to understood that there is a need to learn from the past but vision also things requires understanding its limitations. The authors also point out that strategy requires a certain amount of courage there is a tendency when we look at case studies to assume that everything is clear and simple from the very beginning. This is absolutely false. Great strategies are never obvious they are often difficult and they also require going against what is the current public opinion. Clearly no one person can always get this right so leaders will have to deal with the fact that they are going to get big failures within their career as well.
Yoffie and Cusumano also underline that once a strategy has been designed the day to day and month to month decisions can be very difficult indeed. Often business leaders attempt to give the difficult decisions away to underlings. However, the best leaders they had seen are once they stay on the details and follow up consistently. Jobs, Gates and Grove have been known to do this with a zeal that drove employees crazy at times.
As a nice conclusion to the book, the authors discuss the current strategy of Facebook. Cusumano has long insisted on the need to create platforms rather than just products. The former gives competitive advantage whereas products can be easily replaced by new technical gadgets. Facebook, aware of this problem, it is currently trying to build up a platform. This is one of the reasons the company is spending for acquisitions such as WhatsApp and Instagram. Time will tell if Zuckerberg is as successful as Grove, Gates and Jobs. No doubts, the academics will have a new book so that they can than write about their subject.
Cusumano explains the five golden management rules of his book
“Bill Gates was Microsoft’s CEO from 1975 to 2000. Over that span, the company’s annual profit grew from practically zero to $11 billion. Andy Grove became Intel’s CEO in 1987. The prior year, Intel had lost $135 million. In 1997, Grove’s last full year on the job, Intel earned nearly $10 billion. In 1997, the year Steve Jobs returned to Apple, the company lost more than $400 million; in 2011, the year he resigned due to illness, Apple earned almost $34 billion.”
“After observing Gates, Grove and Jobs – for more than two decades – it is clear to us that mastery of strategy is not an innate skill. Most great CEOs learn how to become better strategic thinkers and organization leaders.”
“Few people could have imagined that a new cell phone called the iPhone would turn industry giants (Nokia and Blackberry) into virtually irrelevant players within just a few short years.”
“Strategy, however, is fundamentally forward-looking. It is about planning for the future. Understanding the lessons of the past is clearly important, but developing your playbook on the assumption that the future will be like the past is risky. As Andy Grove liked to say, quoting Einstein, “Visionary thought demands learning from the past while staying free of its limitations.”
“In 2001, Jobs told Macworld attendees that the Mac “can become the ‘digital hub’ of our new emerging digital lifestyle, with the ability to add tremendous value to these other digital devices.”
“You can’t just ask customers what they want and then try to give that to them. By the time you get it built, they’ll want something new.”
- Look forward, reason back
- Make big bets, without betting the company
- Build platforms and ecosystems – not just products
- Exploit leverage and power – play judo and sumo
- Shape the organization around your personal anchor
“Strategy is not for faint of heart. Great strategies do the non-obvious, the difficult, and the counterintuitive in order to alter the competitive landscape in their favour. Often this means making big bets, whether in the form of huge financial commitments or competitive gambits, such as an all-out attack on the leaders in the field.”
“Strategy is easy, but tactics – the day to day and month to month decisions required to manage a business – are hard. Some CEOs may be tempted to delegate this hard work to subordinates, but not Bill Gates, Andy Grove, and Steve Jobs. All three were intimately involved in day-to-day tactical decisions as well as long-term strategy. Gates loved to go deep into the Software code and challenge his engineers at the algorithm level, at least through the early 1990s. Grove liked to feel the weekly pulse of sales numbers and marketing campaigns as well as closely track the financial impact of manufacturing capacity decisions. And Jobs was famous for getting into the nitty-gritty of product design and manufacturing.”
“Being underestimated – in fact, encouraging underestimation – can give you a critical edge when entering a new market.”
“Grove often said, “You can’t write down everything in systems and procedures. You have to depend on people.” Vadasz added, “That is one of the biggest legacies and probably the most valuable one. At the end of the day, big organizations succeed or fail by their culture. No one man can keep track of everything.”
“As he explained at Apple’s 1997 Worldwide Developers Conference: “One of the things that I have always found is that you have got to start with your customer experience and work backwards on the technology. You can’t start with technology and try to figure out where you are going to try to sell it.”
“Zuckerberg also made bold, but controversially expensive moves to expand the Facebook Platform. In 2012, he paid $1 billion for the photo-sharing Instagram platform, which then had 30 million users and no revenues ($33 per user). In October 2014, he acquired the smartphone messaging company WhatsApp and its 600 million users and modest revenues (roughly $20 million) for the extraordinary price of approximately $22 billion in cash and stock ($37 per user).”
David Yoffie discuss legal changes within Google and how its business is going to be affected
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