Libor Kubín Today's excerpt from the book The Steve Jobs Journey by Jay Elliot is the last one. We'll learn about the journey from the Motorola ROKR to developing your own iPhone, dealing with AT&T, and why sometimes it's necessary to go back to the beginning and change direction.
13. ACHIEVING THE DEFINITION OF A "SENSION": "That's what Apple is for"
There is nothing more sensational in the world of business than creating a product that millions of people immediately want to have, and many of those who don't have it are jealous of the more fortunate - its owner.
There is also nothing more sensational than being the person who can imagine such a product.
Add one more element: the creation of a series of these sensational products not as separate and independent attempts, but as part of an important high-level concept.
Finding an important topic
Steve's 2001 Macworld keynote brought thousands to the Moscone Center in San Francisco and engaged countless satellite TV listeners from around the world. It was a complete surprise for me. He laid out a vision that contained the focus of Apple's development over the next five years or more, and I could see where it would lead—to a media center you can hold in your hand. Many people saw this strategy as a perfect view of where the world was likely to be headed. What I heard, however, was an extension of the same vision he had introduced me to twenty years earlier after visiting Xerox PARC.
At the time of his speech in 2001, the computer industry was plummeting. Pessimists screamed that the industry was nearing the edge of a cliff. An industry-wide concern, shared by the press, was that personal computers would become obsolete, while devices such as MP3 players, digital cameras, PDAs and DVD players would rapidly disappear from shelves. Although Steve's bosses at Dell and Gateway bought into this line of thinking, he didn't.
He began his speech by giving a brief history of technology. He called the 1980s, the golden age of personal computers, the age of productivity, the 1990s the age of the Internet. The first decade of the twenty-first century will be the age of the "digital lifestyle", a period whose rhythm will be determined by the explosion of digital devices: cameras, DVD players... and mobile phones. He called them "Digital Hub". And at the center of it, of course, is the Macintosh—controlling, interacting with, and adding value to all other devices. (You can see this portion of Steve's speech on YouTube by searching for "Steve Jobs introduces the Digital Hub strategy".)
Steve recognized that only a personal computer was smart enough to manage complex operations. Its large monitor provides users with a wide view, and its cheap data storage goes well beyond what either of these devices can offer on its own. Then Steve explained Apple's plans.
Any of his competitors could have imitated them. No one did, which gave Apple a head start for years: the Mac as a Digital Hub - the core of the cell, a powerful computer capable of integrating a range of devices from TVs to phones so that they became an integral part of our daily lives.
Steve wasn't the only one to use the term "digital lifestyle". Around the same time, Bill Gates was talking about the digital lifestyle, but with no indication that he had any idea where it was going or what to do with it. It was Steve's absolute belief that if we can imagine something, we can make it happen. He linked the next few years of Apple with this vision.
Have two functions
Is it possible to be the captain of one team and a player in another at the same time? In 2006, the Walt Disney Co. bought Pixar. Steve Jobs joined Disney's board of directors and received half of the $7,6 billion purchase price, much of it in the form of Disney stock. Enough to make him the company's largest shareholder.
Steve has once again proven himself as a leader showing what is possible. Many thought he would be an invisible ghost at Disney because of his devotion to Apple. But it wasn't like that. As he moved forward with the development of as-yet-unrevealed future sensational products, he was as excited as a child opening presents at Christmas when developing new Disney-Apple projects. "We talked about a lot of things," he told the pro BusinessWeek not long after the trade was announced. "Looking ahead over the next five years, we see a very exciting world ahead."
Change of direction: expensive but sometimes necessary
As Steve was thinking about the stepping stones to the Digital Hub, he began to notice that people everywhere were fiddling with their handheld computers all the time. Some were encumbered with a cell phone in one pocket or case, a PDA in another, and perhaps an iPod. And almost every one of these devices was a winner in the "ugly" category. Besides, you practically had to sign up for an evening class at your local college to learn how to use them. Few have mastered more than the most basic, necessary functions.
He may not have known how the Digital Hub could support the phone or our digital lifestyle with the Mac's ability, but he knew that personal contact was important. Such a product was right in front of him, everywhere he looked, and that product cried out for innovation. The market was vast and Steve saw that the potential was global and limitless. One thing Steve Jobs loves is loves is to take a product category and come up with something new that blows away the competition. And that's exactly what we saw him do now.
Even better, it was a product category ripe for innovation. It is certain that mobile phones have come a long way since the first models. Elvis Presley had one of the first that slid into his briefcase. He was so heavy that one employee did nothing but keep walking behind him carrying a briefcase. When mobile phones shrunk to the size of a man's ankle boot, this was seen as a great advantage, but still required two hands to hold to the ear. Once they finally got big enough to fit in a pocket or purse, they started selling like crazy.
Manufacturers have done a great job of using more powerful memory chips, better antennas and so on, but they have failed in coming up with a user interface. Too many buttons, sometimes without an explanatory label on them. And they were clumsy, but Steve loved clumsiness because it gave him the opportunity to make something better. If everyone hates some kind of product, that means an opportunity for every Steve.
Overcoming bad decisions
The decision to make a mobile phone may have been easy, but the realization of the project was not easy. Palm has already taken the first step to gain a foothold in the market with its sensational Treo 600, combining BlackBerry and mobile phone. The first recipients snapped them up right away.
Steve wanted to reduce time to market, but hit a snag on the first try. His choice seemed reasonable enough, but it violated his own principle, which I referred to as the theory of a holistic approach to the product. Instead of maintaining control over all aspects of the project, he settled for the rules established in the field of mobile phones. Apple stuck to providing music download software from the iTunes stores, while Motorola built the hardware and implemented the operating system software.
What emerged from this concoction was a combination mobile phone-music player with the ill-conceived name ROKR. Steve controlled his distaste when he introduced it in 2005 as an "iPod shuffle in a phone". He already knew the ROKR was a piece of crap, and when the device showed up, even Steve's most ardent fans didn't think of it as anything more than a corpse. Magazine Wired joked with the tongue-in-cheek remark: "The design screams, 'I was made by a committee.'" The issue was emblazoned on the cover with the inscription: "THAT YOU SAY THE PHONE OF THE FUTURE?'
Worse, the ROKR wasn't pretty - a particularly bitter pill to swallow for a man who cared so much about beautiful design.
But Steve had a high card up his sleeve. Realizing that ROKR was going to fail, months before its launch, he convened his trio of team leaders, Ruby, Jonathan, and Avia, and told them they had a new task: Build me a brand new cell phone—from scratch.
Meanwhile, he set to work on the other important half of the equation, finding a cell phone service provider to partner with.
To lead, rewrite the rules
How do you get companies to let you rewrite the rules of their industry when those rules are set in granite?
From the very beginnings of the mobile phone industry, operators had the upper hand. With crowds of people buying mobile phones and pouring huge and ever-increasing streams of cash into carriers every month, carriers were put in a position where they had to decide the rules of the game. Buying phones from manufacturers and selling them at a discount to customers was a way to secure a buyer, usually with a two-year contract. Phone service providers like Nextel, Sprint, and Cingular made so much money from airtime minutes that they could afford to subsidize the price of the phones, which meant they were in the driver's seat and able to dictate to manufacturers what features the phones should offer and how they should work.
Then the crazy Steve Jobs came and started discussing with the executives of various mobile phone companies. Sometimes dealing with Steve requires patience as he tells you what he thinks is wrong with your company or industry.
He went around the companies, talking to the most senior people about the fact that they sell commodities and have no awareness of how people relate to their music, computers and entertainment. But Apple is different. Apple is understanding. And then he announced that Apple would enter their market, but with new rules - p by Steve's rules. Most executives didn't care. They won't let anyone shake their wagon, not even Steve Jobs. One by one they politely asked him to take a walk.
In the Christmas season of 2004 – months before the launch of ROKR – Steve had yet to find a mobile phone service provider willing to contract with him on his terms. Two months later, in February, Steve flew to New York and met in a Manhattan hotel suite with executives from the phone service provider Cingular (later bought by AT&T). He dealt with them according to the rules of the Jobsian power struggle. He told them that the Apple phone would be light years ahead of any other mobile phone. If he doesn't get the contract he's asking for, Apple will enter a competitive battle with them. Under the contract, it will buy airtime in bulk and provide carrier services directly to customers - as several smaller companies already do. (Note that he never goes to a presentation or meeting with a PowerPoint presentation or a stack of thick explanatory leaflets or reams of notes. He has all the facts in his head and, just like at Macworld, is increasingly persuasive because he keeps everyone fully focused on what what is he saying.)
As for Cingular, he entered into an agreement with them that authorized Steve as the phone manufacturer to dictate the terms of the contract. Cilgular looked like it was "losing its store" unless Apple sold huge numbers of phones and brought in lots of new customers who would bring Cingular tons of airtime minutes a month. It was a really big gamble. However, Steve's confidence and persuasiveness brought success again.
The idea of forming a separate team and keeping it isolated from the distractions and interference of the rest of the company worked so well for the Macintosh that Steve used this approach for all of his later major products. When developing the iPhone, Steve was very concerned about the security of information, making sure that no aspect of the design or technology was learned in advance by competitors. Therefore, he took the idea of isolation to an extreme. All teams working on the iPhone were separated from the others.
It sounds unreasonable, it sounds impractical, but that's what he did. The people working on the antennas didn't know what buttons the phone would have. The people working on the materials that will be used for the screen and protective cover did not have access to any detail of the software, user interface, icons on the monitor and so on. And what about the whole board? You only knew what you needed to know to secure the part entrusted to you.
At Christmas 2005, the iPhone team faced the biggest challenge of their careers. The product wasn't finished yet, but Steve had already set a target launch date for the product. It was in four months. Everyone was very tired, people were under almost unbearable pressure, there were outbursts of anger and there were loud outbursts in the corridors. Employees would collapse under stress, go home and catch up on sleep, return after a few days and pick up where they left off.
The time remaining until the product launch was running out, so Steve called for a complete demo sample.
It didn't go well. The prototype just didn't work. Calls were dropping, batteries were charging incorrectly, apps were acting so crazy that they seemed only half-finished. Steve's reaction was mild and calm. It surprised the team, they were used to him letting off steam. They knew they had disappointed him, failed to live up to his expectations. They felt they deserved an explosion that didn't happen and saw it almost as something even worse. They knew what they had to do.
Just a few weeks later, with Macworld just around the corner, the planned launch of the iPhone just weeks away, and rumors of a secret new product swirling around the blogosphere and the web, Steve flew to Las Vegas to show off a prototype to AT&T Wireless, Apple's new iPhone partner, after the phone giant was bought by Cingular.
Miraculously, he was able to show the AT&T team a modern and beautifully functioning iPhone with a glowing glass display and tons of amazing apps. It was more than a phone in a way, it was exactly what it promised: the equivalent of a computer in the palm of a human hand. As AT&T senior Ralph de la Vega put it at the time, Steve later said, "It's the best device I've ever seen."
The deal Steve put together with AT&T somewhat unnerved the company's own executives. He made them spend several million to develop the "Visual Voicemail" feature. He demanded that they completely overhaul the annoying and complicated process a customer had to go through to receive service and a new phone, and replace it with a much faster process. The revenue stream was even more uncertain. AT&T received more than two hundred dollars every time a new customer signed a two-year iPhone contract, plus ten dollars monthly to Apple's coffers for every iPhone customer.
It has been standard practice in the mobile phone industry for each mobile phone to bear not only the name of the manufacturer but also the name of the service provider. Steve didn't admit it here, just like with Canon and LaserWriter years ago. The AT&T logo has been removed from the iPhone design. The company, a hundred-pound gorilla in the wireless business, had a hard time coming to terms with this, but like Canon, agreed.
It wasn't as unbalanced as it seemed when you remember that Steve was willing to give AT&T a lock on the iPhone market, the exclusive right to sell Apple phones for five years, until 2010.
Heads would probably still be rolling if the iPhone turned out to be a flop. The cost to AT&T would be huge, big enough to require some creative explaining to investors.
With the iPhone, Steve opened the door to outside suppliers more than it had ever been open at Apple. It was a way to get new technology into Apple products faster. The company committed to making the iPhone admitted that it had agreed to a lower price for Apple than its costs because it expected its supply volume to increase, which would lower its costs per unit and make a decent profit. The company was once again willing to bet on the success of Steve Jobs' project. I'm sure the iPhone sales volume is much higher than they expected or hoped for.
In early January 2007, some six years after the iPod's launch, an audience at San Francisco's Moscone Center heard James Taylor's high-energy performance of "I Feel Good." Steve then entered the stage to cheers and applause. He said: "Today we are making history."
That was his introduction to introducing the iPhone to the world.
Working with Steve's usual intense focus on even the smallest details, Ruby and Avie and their teams created what is arguably the most iconic and sought-after product in history. In its first three months on the market, the iPhone sold nearly 1,5 million units. It doesn't matter that a lot of people have complained about dropped calls and no signal. Again, this was the fault of AT&T's patchy network coverage.
By the middle of the year, Apple had sold an incredible 50 million iPhones.
The minute Steve stepped off the stage at Macworld, he knew what his next big announcement would be. He excitedly imagined a vision for Apple's next big thing, something completely unexpected. It will be a tablet PC. When the idea of producing a tablet first occurred to Steve, he immediately jumped at it and knew he would create it.
Here's a surprise: The iPad was conceived before the iPhone and had been in development for several years, but the technology wasn't ready. No batteries were available to power such a large device continuously for several hours. Performance was insufficient for browsing the Internet or playing movies.
One close associate and loyal admirer says: “There's one thing that's great about Apple and Steve - patience. He won't launch the product until the technology is ready. Patience is one of his truly admirable qualities.”
But when the time came, it was clear to everyone involved that the device would be unlike any other tablet computer. It will have all the features of an iPhone, but a little more. Apple, as usual, has created a new category: the handheld media center with an app store.
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Steve, we miss you!!!