The Tale of Two Steves📕
The Tale of Two Steves📕
Can a CEO change the whole trajectory of a business? Yes! The history is full of examples.
Recently, I got asked more often about how to evaluate management.
Well, there is no easy way for this and when you get serious about that, you will start to think most managers are alike and it’s really the business economics that determine the success.
Put a mediocre management team to run a great business, it does great; put a mediocre team to run a mediocre business, it goes bankrupt.
This is why I think trying to evaluate largely mediocre management doesn’t pay off.
Instead, I preferred to train my eyes to be able to spot leaders.
Best way to do it? Just read. Read the lives of great people and you will see. Today, I am gonna talk about how much different it makes to have a leader, instead of a manager.
I don’t remember where but once I read a sentence about leadership that I have never forgotten and actually shaped all my later views about leadership.
“Managers can execute but it takes a leader to chart the course.”
This was perhaps the most clear way to distinguish a leader from a manager I have ever seen in my life, and I truly believe it.
Today, I am going to tell you two quick stories about two men who led the two of the biggest companies in the world around the same time. Only one difference: One was 1/20 of the other company when the guy took over and it was bigger than the other when he gave up the reins.
This is the story of two Steve’s: Steve Jobs and Steve Ballmer.
Steve Jobs got ousted from Apple in 1985.
He got ousted, because he was an iconoclast.
He wasn’t satisfied with where Apple was. He wanted to make great products, not a lot of money. This was embedded in his nature.
He was a counterculture guy, a hippie. He didn’t have any respect for authority. He has always respected artists and rebels; and detested managers and bureaucracy.
He revolutionized the computer industry.
He saw the user graphic interface for the first time in the Xerox Parc, Silicon Valley. Nobody gave a damn shit. But he took and used it in Macintosh, making computers easily usable for those who don’t know the computer language.
He wanted to keep experimenting to make great products, but professional managers in Apple thought they had to squeeze the business for profits. They fired Steve Jobs.
At the time, Microsoft was still a relatively small company, generating significant part of its revenue from Macintosh software.
In the absence of a product visionary like Jobs, Apple stagnated and Microsoft, though they spent much effort and resources, managed to create a graphical interface comparable to that of Macintosh, and it took over the market.
Steve Jobs, on the other hand, acquired Lucasfilm’s graphic computing division, with a view to perfect the graphical operating system. But there, he found two artists, named John Lasseter and Ed Catmull. They were obsessed with making complete animated movies on computers.
They changed the name of the company to “Pixar.”
It wasn’t a profitable company, it was generating little revenue from hardware sales but it was making a short animated movie every year. Cost of those movies was like $300,000 per movie. As the company wasn’t profitable, Steve Jobs funded those movies from his own pocket, on one condition: “Make it great.”
They made a short animated movie called “Tin Toy” in 1988, which went on to win an Oscar for the best animated short film.
In 1994, Pixar got into a distribution agreement with Disney to make complete animated movies on computers. The first of those movies was “Toy Story.”
It didn’t just win an Oscar for the best animation, it also revolutionized the industry. It was the first long animation, made completely on computer. It proved it could be done.
Do you think it's a coincidence that it was Steve Jobs’ company that did it? First Macintosh, then Toy Story..
No, because it didn’t end there.
In 1997, Apple was on the edge of bankruptcy. In a last attempt to survive, it acquired Steve Jobs’ computer company, called Next with a view to integrate its software to Apple’s products.
With the acquisition, Jobs also returned to the Apple board. A few months later, the board fired the CEO Gil Amelio and appointed Jobs as the CEO again.
Do you know what was the first thing he did as the CEO? He cut 80% of the products in the pipeline. He said, “We are going to make a few things, but we will make them great.”
The first product he launched was iMac.
It was a standalone desktop computer with an advanced graphical interface and a futuristic design.
It had what other computers lacked: Beautiful design.
It was a standalone box, you could carry it with you and it was, above all, friendly.
It revolutionized the industry all over again and proved that computers could be beautiful.
This was his calling. He revolutionized industries in a way that they looked like all new industries.
The next? Music industry.
Music players at the time were ugly, heavy and they took just a few tracks.
He loved music. One of his greatest idols in life was Bob Dylan. But he didn’t like the devices. He wanted to make a device that he would like to use.
Result was just another revolution:
Just a year before Apple launched the iPod, Steve Ballmer took over as the CEO of Microsoft.
When this happened, Microsoft’s market cap was more than 20 times of Apple’s.
He was the complete opposite of Steve Jobs. He wasn’t a product guy, he was a salesman. However, his sales strategy couldn’t also be more different than that of Jobs’.
Steve Jobs believed in making beautiful products and selling them to people who could appreciate it. This was the first television ad Apple published after Jobs took over:
Ballmer, on the other hand, could do anything to push a Microsoft device into every house in the United States.
Ballmer, on the other hand, could do anything to push a Microsoft device into all the houses in the world. This is how hard Ballmer tried to sell:
He just yelled at people to get them to buy their products, he could also make a fortune as a car dealer.
This difference in vision manifested itself publicly when Apple launched the most revolutionary consumer device in history: iPhone.
Jobs knew it was a revolution; Ballmer, competing with it aside, couldn’t even understand it.
He thought it wouldn’t appeal to business customers because it didn’t have a keyboard. Jobs, on the other hand, knew this was the revolution itself.
Result?
Apple was 1/20 of Microsoft when Jobs took over in 1997; it was bigger than Microsoft when he resigned for health issues in 2011.
Under Steve Ballmer’s reign, Microsoft stock slipped 36%.
When he announced his retirement, Microsoft stock shut up 7%.
Steve Jobs saw this when he was alive. He told his biographer Walter Isaacson: “The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of product becomes less important. The company starts valuing the great salesmen, because they’re the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. When the sales guys run the company, the product guys don’t matter so much…it happened when Ballmer took over Microsoft.”
How true?
🏁Conclusion
Steve Ballmer was not a bad manager. He was probably at the top of the mediocracy scale, but he was still mediocre.
However, Microsoft’s business economics was so powerful and exceptional that it tripled the revenue even under Ballmer’s lead, despite the stagnant stock price.
Steve Jobs, on the other hand, was a true leader.
Apple was 6 months away from bankruptcy when he took over. Yet, the company he left ruled the world.
My point is that as long as you are looking at a mediocre management, which is most of them, it doesn’t matter much whether they are a bit better or worse than their peers. They rise or die on the business fundamentals.
But leaders can make a great deal of change. They can transform a weak business into a strong one.
This is why I suggest you don’t spend much time comparing mediocre managements. Look better at the business fundamentals and train your eye to see leaders. Transformational leaders.
How can you do that? There is no clear formula but I suggest you read the lives of others, the ones like Jobs.
It really helps.
I’ve always admired Steve Jobs. Such an ambitious character with no incentive besides his passion it seemed. There’s that one quote from him: “I don’t strive to be the richest person in the graveyard,” which I absolutely love. Great post Oguz, enjoyed reading!
Microsoft stock was such an underperformer for almost two decades it's mind-blowing. Its then-CEO was more focused on M&A than on reinventing the company. Well, now we have Mr. Nadella who understands the concept of reinvention better.