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    Corporate Disasters: Management and Leadership Failures
    Corporate Disasters: Management and Leadership Failures
    Corporate Disasters: Management and Leadership Failures
    Ebook194 pages3 hours

    Corporate Disasters: Management and Leadership Failures

    By Gale and Cengage

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    About this ebook

    Corporate Disasters: What Went Wrong and Why profiles the biggest corporate mistakes or misdeeds throughout history -- covering the people, the times, the decisions made. This volume covers Management and Leadership Failures. Each essay puts the business and its operators in the context of its own time, explaining the market, social, and technology forces at play, and each explores the key make-or-break decisions that led to disaster.
    LanguageEnglish
    PublisherCengage Learning - Gale
    Release dateNov 3, 2013
    ISBN9781535821186
    Corporate Disasters: Management and Leadership Failures

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      Corporate Disasters - Gale

      Learning

      Apple Fires Steve Jobs

      The founding of Apple Computer (now Apple Inc.) by Steve Jobs and Steve Wozniak was extraordinary for several reasons. Jobs was only 21-years-old and had dropped out of college after only six months, and personal computers did not yet exist. Jobs is widely regarded as the visionary whose inspiration led to the development of the Macintosh, which was the first personal comupter with a graphical user interface. However, despite its technological achievements, the company was not doing well as its 10-year anniversary approached. The board decided that Jobs, who had a reputation as being brash and temperamental, was the problem and fired him.

      However, the company's financial problems continued to mount for another decade. Meanwhile, Jobs was experiencing little success with his new venture, NeXT Computer, Inc., but he returned to Apple when the company purchased NeXT. Jobs became the head of Apple once again and led the company to legendary success until his premature death in 2011.

      Jobs Cofounds Apple Computer

      Born in 1955, Steven Paul Jobs developed an interest in electronics while growing up in what would become Silicon Valley, the southern part of the San Francisco Bay Area in Northern California in the United States. According to a 1995 interview by the Smithsonian Institution, Jobs was bored in school and created a lot of mischief. Jobs stated, When I got out of fourth grade they tested me and they decided to put me in high school and my parents said ‘No.’ Thank God. After dropping out of Reed College in Oregon, Jobs began working as a game technician at Atari, Inc., in 1974.

      Steve Wozniak graduated from the same high school as Jobs but was four years his senior. With a semester left of college, Wozniak began working as an engineer at Hewlett-Packard Company. The pair became acquaintances as members of the Homebrew Computer Club, a small group of engineers and hobbyists that met in a garage. As a hobby, Wozniak created a microcomputer and showed it to Jobs.

      Jobs, Wozniak, and Ronald Wayne, a coworker of Jobs from Atari, cofounded Apple Computer in April. Jobs secured their first order with a local computer shop for 50 Apple I units priced at US$666 each. The pair began assembling the circuit boards in the garage of Jobs' parents. Wozniak left Hewlett-Packard to become Apple's vice president of research and development and began working on improvements to the Apple I. Wayne sold his stake in the company a few weeks later.

      Michel M. Scott, a former National Semiconductor executive, was brought in as the company's first president. Clifford Mike Markkula and Arthur Rock were two venture capitalists who arranged financing and helped the firm incorporate in January 1977. The Apple II computer launched during the year, featuring color graphics, expansion slots, and a case around the components. Jef Raskin, who is credited with creating the Apple Macintosh, joined the company's other 30 employees based in Cupertino, California.

      In 1979, Jobs visited Xerox's Palo Alto Research Center (PARC) and witnessed a graphical user interface on a prototype computer the engineers called Alto. The rudimentary drop-down menus, which were controlled by a mouse device connected to the computer, fascinated Jobs the most. PARC engineers had also developed Ethernet, so the company had several hundred Altos networked to servers. As head of the Apple Macintosh development team, Raskin began incorporating these ideas into the Macintosh design. Unlike other computer makers that were focused on powerful hardware, Raskin's approach was to design with the user in mind from the interface out. Although Raskin is credited with creating the Macintosh, he resigned two years before the computer's debut.

      Jobs Loses His Job

      When Apple went public in 1980, the company had revenues of US$117 million. Wozniak suffered some temporary memory loss after being in a private plane crash in February 1981. Although Wozniak returned to Apple's product development team in 1983, he would not resume a leadership role and would leave permanently two years later. Scott was fired, and Markkula took his place as president in 1981. Markkula had recruited Michael Spindler to help run Apple Europe's marketing department the year before.

      In 1983 Jobs recruited PepsiCo's CEO John Sculley with the now famous line, Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world? Sculley recounted this during the documentary Triumph of the Nerds which aired in June 1996 on PBS. Sculley became the president and CEO of Apple. According to a 2011 interview with Sculley by CNN Money, he was hired for his marketing expertise to generate enough cash flow over the next three years to keep the company going until the Macintosh was ready. At the time, the Apple II was outsold by Atari and Commodore each by two-to-one.

      The Macintosh was launched in January 1984 with a commercial during the Super Bowl that highlighted how different the user-friendly Macintosh was from IBM computers. Unfortunately, the computer was not powerful enough to do the things Jobs envisioned. At this point, the two leaders disagreed on the direction of the company. In the interview with CNN Money, Sculley said he wanted to continue focusing on the Apple II, while Jobs wanted to drop the price of the Macintosh. The board sided with Sculley and asked Jobs to step down as head of the Macintosh division in April 1985.

      Jobs later revealed his feelings at the time he was fired in a 2005 commencement speech at Stanford University. He said, As Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our board of directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

      Jobs Founds a New Computer Company

      Jobs and five members of his Macintosh team resigned from Apple on September 13, 1985. Jobs sold US$14 million of his Apple stock and invested it in his new company. H. Ross Perot, founder of Electronic Data Systems, invested US$20 million. The company, which became known as NeXT Computer Inc., was headquartered in Palo Alto, California.

      On November 4, Apple sued NeXT. In the settlement, NeXT agreed not to release any products that would directly compete with any of Apple's products released prior to the formation of NeXT. This restricted NeXT to targeting the high-end computer market. NeXT released the NeXTcube in 1988 and the NeXTstation in 1990, both of which ran the object-oriented NeXTSTEP operating system. However, the company only sold about 50,000 units in all. In 1993, Jobs decided to switch gears and focus on licensing its NeXTStep software. The company was renamed NeXT Software Inc.

      Macintosh Dominates Desktop Publishing

      Sculley embarked on a company-wide restructuring upon Jobs' departure. Rather than have the company divided into two factions (one that wanted to focus on the Macintosh and another that favored development of another personal computer, Lisa, also known as Apple III), the company was reorganized by function. Jean-Louis Gassée became head of Apple's product development. He had started Apple's French subsidiary in 1982 and now relocated to Apple's headquarters in Cupertino, California, with the new job title. Delbert Yocum, who had been at Apple since 1979, was promoted to COO.

      A turning point for Apple was the release of Aldus Corporation's PageMaker software in July 1985, which used the Apple LaserWriter PostScript laser printer. Although PageMaker for the IBM PC was released the following year, Macintosh had already become the standard for desktop publishing. By 1987, Apple's net income had doubled from two years previous, and Sculley was being lauded in the press for Apple's turnaround. The restructuring plan had worked and Sculley had succeeded in changing Apple's image from a consumer education company to a business computer company.

      Although Microsoft Windows 1.0 had been released at the end of 1985, Apple did not perceive it as a threat to the Macintosh's user interface. The release of Microsoft Windows 2.0 in November 1987, however, offered overlapping windows and other key improvements that more closely resembled Macintosh's graphical user interface. Apple filed a lawsuit against Microsoft on March 17, 1988, which it lost in August of the following year.

      Apple Struggles Without Its Visionary

      Apple’s fortunes deteriorated further when Sculley made several personnel changes in 1988. First was the promotion of Allan Loren to president of Apple USA. Loren had previously managed the mainframe computer operation at Cigna Insurance and lacked the background to run the domestic sales and marketing operations of a personal computer maker. Yocum was demoted from COO to head of Apple Pacific. While Apple USA floundered, Apple Europe's sales soared under Spindler's leadership. Sculley promoted him to COO over Loren and Gassée in January 1990. Loren's East Coast style did not suit Apple's corporate culture, and financial analysts blamed sagging sales and profits on ineffective marketing. Loren resigned in January 1990 after the company announced pending layoffs due to plunging profits. After being passed over as COO, Gassée resigned in September.

      When Apple introduced the lightweight PowerBook in October 1991, it was a huge improvement over the Mac Portable, and sales increased accordingly. But the handheld Apple Newton pen-based computer, released two years later, had poor handwriting recognition. After the company reported a quarterly loss of US$188 million in June 1993, Spindler was selected to replace Sculley as CEO. For the fiscal year, the company's revenues increased 13 percent to nearly US$8 billion, but earnings dropped from more than one-half billion dollars in 1992 to just US$86.6 million. Sculley resigned as chairman and Markkula took on the role. As the personal computer price war waged, Apple experienced diminished per unit earnings.

      In the 1995 interview by the Smithsonian Institution, Jobs attributed Apple's lack of success to Sculley's leadership. He said, John Sculley ruined Apple and he ruined it by bringing a set of values to the top of Apple which were corrupt and corrupted some of the top people who were there, drove out some of the ones who were not corruptible, and brought in more corrupt ones and paid themselves collectively tens of millions of dollars and cared more about their own glory and wealth than they did about what built Apple in the first place—which was making great computers for people to use. Sculley admitted in the CNNMoney interview, I clearly was not skilled in being able to build technology products, so I had to surround myself with others. And the reality was there was no one ever as good as Steve. Essentially, the technology vision had evaporated when Jobs left.

      Jobs Returns to Apple

      Although NeXT was struggling, Jobs was doing fine financially, thanks to his purchase of the computer graphics division of Lucasfilm Ltd. in 1986. Renamed Pixar Animation Studios Inc., the company had secured a three-movie production deal with Disney in 1991. Pixar released the movie Toy Story in November 1995, which was the first feature-length movie made entirely with computer animation. At the time, Pixar had US$10 million in annual revenue and was facing mounting debt of US$4 million. However, Pixar's initial public offering occurred 10 days later, and the movie's success made Jobs a billionaire.

      Gil Amelio became Apple's president and CEO on February 2, 1996. He had joined Apple's board of directors two years earlier as the CEO of National Semiconductor. On December 20, Apple acquired NeXT for US$429 million, bringing Jobs back into the company that had fired him. Jobs received 1.5 million shares of Apple stock in the deal. Apple wanted to use the NeXTSTEP codebase to develop Mac OS X that would allow the Macintosh to compete better with Microsoft Windows. Amelio disagreed with Apple's decision to abandon the strategy of making Macintosh clones and was ousted after just 17 months at the helm. Jobs agreed to be the interim CEO, citing his obligations with Pixar among the reasons he could not run the company permanently.

      Apple's Success Under Jobs' Leadership

      One of the first moves Jobs made at Apple was to partner with Microsoft in 1997. Microsoft agreed to release Microsoft Office 98 for the Macintosh and continue new releases at the same time as it released Office for Windows. Apple, in turn, agreed to make Internet Explorer the default browser on the Macintosh. Microsoft's US$150 million investment in nonvoting shares of Apple stock at the same time also helped the company's finances tremendously. At this time, Apple had only a 4 percent share of the personal computer market and was unprofitable.

      Apple released the iMac in 1998, which led to the company's financial recovery by the time Jobs became the official CEO in 2000. Apple launched the iPod mobile music device and opened its first Apple Stores in 2001. Sales of the iPod accelerated with the launch of the iTunes Music Store in 2003. The release of the iPhone in 2007 and the iPad in 2010 made Apple the dominant player in the mobile device market. The support of developers, who had created more than 425,000 applications (apps) available through the iTunes Store as of 2011, were instrumental in Apple's success.

      In 2003, Jobs was diagnosed with a rare form of pancreatic cancer that was operable and possibly curable. However, after a liver transplant in 2009, Jobs' health began to deteriorate. He was forced to take a leave of absence in January 2011 and step down as CEO eight

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