Organizational Dynamics

GROUP ASSIGNMENT [2]

ORGANIZATIONAL LIFE CYCLE

Report Submitted to:

Instructor: Prof. Ernesto Noronha

Academic Associate: Ms. Rachita Agarwal

by:

Group 02, Section E

Seema Ghosh
Aman Kumar Vig
Ashish Yadav
Arunkumar B.
Krishna Murari
Naresh Gavara

On
29nd October 2010
INTRODUCTION
If innovation is synonymous with a company, then it has to be Apple Inc.
(previously Apple Computer, Inc.), which has relentlessly worked on bringing out
innovative products such as Macintosh , the iPod, the iPhone and the iPad. Innovation
and creativity are embedded in Apple’s genes. An American multinational corporation
that designs and markets consumer electronics, computer software, and personal
computers, Apple’s 30-year history is full of highs and lows, which is expected in a
highly innovative company. They evolved throughout the years into an organization
that is very much a representation of its leader, Steven Jobs. They have also completely
fallen on their face on several occasions. They struggled mightily while Jobs was not a
part of the organization. Apple reached a point where many thought they would not
survive.

ENTREPRENEURSHIP & ORGANIZATIONAL BIRTH

Apple was established on April 1st, 1976 by Steve Jobs, Steve Wozniak and Ronald
Wayne. Steve Jobs and Steve Wozniak had been friends since their mutual friend, Bill
Fernandez, introduced 21-year-old Wozniak to 16-year-old Jobs in 1971. Jobs managed
to induce Wozniak in assembling a machine and selling it.
Before starting Apple, Steve Wozniak was comfortable earning $24,000 annually
from his job in the calculator division at Hewlett-Packard. Wozniak began designing a
computer around the MOS Technology 6502 microprocessor. Instead of using eight
front-panel toggle witches to enter data, as on the Altair, Wozniak designed his
computer to use a standard QWERTY keyboard. Ever the dutiful employee, Wozniak
approached his employer and tried to convince HP to consider making microcomputers,
but his suggestion was turned down. He didn’t share Jobs’ vision of a huge personal
computer marketplace, nor did he have the ambition to build his own company to
exploit it. Steve Jobs was the consummate salesperson and visionary while Wozniak was
the inquisitive technical genius.
Turned down by HP, Jobs and Wozniak approached Jobs’ employer Atari. Though
Atari felt Apple I was great thing, they couldn’t take the offer, as their hands were full
after the success of home pong game. Turned down by both of their employers, Jobs
convinced Wozniak of going with the idea of their own start-up. They took with them
Ronald Wayne from Atari, as another partner, basically to resolve any differences in
opinion. Apple's first headquarter was the Jobs' parents’ garage where Jobs and his
friends designed their first computer kit: the Apple I. It was box wood-made with a
basic motherboard inside.

The birth of Apple is typical of organizations which implement innovative ideas. Usually
these ideas are first implemented on a small scale and based on the success they are
scaled up. In case of Apple, the product on offer was a desktop computer which could be
produced at reasonably lower costs. The entrepreneurs did not have access to resources
like capital, space, raw materials but they had the capability to manufacture the product
by themselves. They did not have access to good quality supplies but they were
resourceful in arranging them from alternate sources like scrap items. At the time of
inception there was no formal business plan or objective by Apple. Also there is no
indication that a formal SWOT analysis and strategy was laid down. They started off
with a product they knew they could sell and started improving based on the initial
success of the venture.

Liability of Newness

Apple Computers was the first one to truly launch usable desktop computers: Apple II,
first launched in 1977. The product was a bit differentiated from the other products in
the market. The venture could survive the ‘Liability of Newness’ phase because of
following factors:
1. Expertise of the founders in the manufacturing of the product
2. No requirements of additional labor
3. No additional machinery or manufacturing unit requirements
4. Resourcefulness of founders in arranging the raw materials
5. Innovative product offering which led to immediate sales

Survival strategies:

The four major survival strategies are given below:

Generalist Specialist Strategy

Strategy
R-Strategy R – Generalist R – Specialist
 K-Strategy K – Generalist K – Specialist

Apple started off with a R-Specialist strategy. It was one of the earliest manufactures of
the desktop computers. They catered to this niche segment of customers for desktop
computers. They became more generalist in their approach at later stages. They
invested in R&D and developed supplementary products/softwares for their computers.

ORGANIZATIONAL GROWTH
Greiner’s Model of Organization growth is shown below. We could identify various
phases of the model in Apple’s life cycle.

Greiner’s Model of Organizational Growth

1. Growth through creativity (1976-77)

First few years of Apple’s growth were identified by innovative product
offerings. The proceeds from the sales were used for enhancing the product quality and
features. Once a customer base was established it setup R&D unit to maintain the focus
on innovation and quality. Some of the developments in this phase can be attributed to
Mimetic Isomorphism. All major computer technology firms had their R&D units hence
Apple followed the suit once it started generating cash. Apple also formed collaborated
with other companies to maintain its competitive advantage. The major events and
product launches in this phase of Apple are given below:
Apple I : 1976
Their business really started when Jobs had a deal with Byte Shop, a computer store
which bought fifty Apple I. At this time, as Wozniak and Wayne worked night and days
to assemble the Apple 1, Jobs tried to find money to pay the providers.
The machine had only a few notable features. TV was used as display system and
bootstrap code was used on ROM, which made the machine easier to start up. Wozniak
also designed a cassette interface for loading and saving programs, at the then-rapid
pace of 1200 bit/s. Although the machine was fairly simple, it was nevertheless a
masterpiece of design, using far fewer parts than anything in its class, and quickly
earning Wozniak a reputation as a master designer.

Apple II : 1977
Apple I’s features were limited due to cash constraint. But with the income from
Apple I sales, Wozniak constructed a greatly improved machine Apple II. Main
difference was completely redesigned TV interface, which included graphics as well as
colour. Building such a machine was going to be fiscally burdensome. Jobs started
looking for cash, but Wayne eventually dropped out of the company. Then Jobs and
Wozniak found their financier in Mike Markkula. With features like Visicalc, the
progenitor of the modern spreadsheet program, in Apple II, sales increased
dramatically.

2. Crisis of leadership and Growth through Direction: 1977-85

The rapid expansion at Apple resulted in the leadership crisis. Steve Jobs wanted to be
the president of Apple but lacked the marketing and sales knowhow. Mike Markkula
joined Apple in 1977 and grew the company with his seed money. The money for the
Apple II product had come from the investments of Mr. Markkula. He brought in
Michael Scott as CEO of the company due to inexperience of Jobs and Woznaik and to
put better practices in place. But in 1981 after the firing of half of the Apple II team he
was forced into a role with little power. Markkula took over from him. Jobs assumed the
role of Markulla as the chairman of the board of the directors. Steve Jobs wanted
someone who could fall in line with him, in the CEO’s position hence he enticed Mr.
Sculley of Pepsi to join Apple in 1983. They formed a good team with Sculley assuming
a role of Marketing and Management mentor and Jobs assuming the role of Technical
Mentor. Together the Duo introduced good practices and led the foundation of a
successful entity. The major products and events in this phase are given below:
Apple III: 1979
Thanks to the success of its software application, Apple Computer invested in a
production line and hired several computer designers. They also had a deal with the
Xerox PARC in Palo Alto, the computer R&D centre in the world at this time, to benefit
from its patents and its scientist staff. In May 1980 Apple III was unveiled to compete
with IBM.
Apple III did not have a fan; rather heat generated by the electronics was
dissipated through the chassis of the machine. Unfortunately, this resulted in
overheating of the machine and integrated circuit chip was disconnected from the
motherboard.
Thousands of Apple III computers were recalled and, although a new model was
introduced in 1983 to rectify the problems, the damage was already done.

Apple IPO: 1980

Apple IPO was launched in dec’1980. It generated more capital than any IPO
since Ford Motor company in 1956.

Lisa, first GUI based computer: 1983

In collaboration with Xerox, Apple released Lisa in January 1983 and it was
notable for being the first computer sold to the public that utilized a Graphic User
Interface (GUI). Unfortunately, the Lisa was not compatible with existing computers. At
$9,995 (over $21,000 in 2005 dollars), Lisa failed to penetrate target market.

The release of the Macintosh:1984

 Macintosh came bundled with two applications: MacWrite and MacPaint.
Existing text-mode and command-driven applications had to be redesigned and the
programming code rewritten as the machine was entirely designed around GUI.

Macintosh was breakthrough innovation in ease of use, industrial design and

technical performance. But, slow performance, high price and lack of compatible Mac
software resulted in decrease in net income by 17%.

3. Crisis of Autonomy: 1985

In 1985, a power struggle developed between Steve Jobs and CEO John Sculley, who was
hired in 1983. The Apple board of directors instructed Sculley to refrain Jobs from
launching expensive forays into untested products. Rather than submit to Sculley's
direction, Jobs attempted to overthrow Sculley from his leadership role at Apple. But,
Apple's board of directors backed Sculley and removed Jobs from his managerial duties.
Jobs resigned from Apple and founded NeXT Inc. the same year.

4. Growth through direction and Delegation, Era of John Sculley: 1985-

93

After Jobs left in 1985, sales of the Mac “exploded when Apple’s LaserWriter met Aldus
PageMaker.” Apple dominated the desktop publishing market for years to come. Under
Sculley, Apple grew from $600 million in annual sales to $8 billion in annual sales by
1993. Apple introduced Mac Portables in 1989 and the first PowerBooks in 1991. Its
low cost Policy with distribution and development partners and focus on high quality
software and peripherals, made Apple the leader in Desktop Publishing and Education
market.

5. Crisis of Control: 1993

Among blunders committed by Sculley was his focus on the Newton, the famously
flawed Apple’s introduction of the Personal Digital Assistant (PDA). Unfortunately, he
didn't have a technical background and was unable or unwilling to see the product's
limitations. He compounded problems when he appointed himself Chief Technology
Officer in 1990, further antagonizing company engineers. Additionally, Mr. Scully's
insistence that Apple maintain unrealistic gross profit margins. Apple maintained its
high gross margins, but did so by raising prices, which corroded market-share. At the
same time, a series of major product flops and missed deadlines sullied Apple's
reputation. Sculley resigned in 1993 and Michael Spindler replaced him.

The phase was characterized by the competition of top management with the functional
and corporate level managers. Some of the decisions by Sculley were intentionally
baised to increase his power and authority. This led to some unrest within the
organization which led to his replacement. But it also triggered a phase of decline since
the new CEO could not grow through collaboration or Coordination. The past decision
weighed upon heavily and the subsequent issues led to further decline.

6. Organizational Decline: 1993-97

The decline of Apple followed the trend identified by Weitzel and Jonsson. The decline
continued till the level of Crisis. The Blinded stage was characterized by the insensitivity
if the organization towards external environment. This could be attributed to the
limited technical know how of the licensing issues as well as lack of feedback related
with changing customer needs. The inaction stage is the investment in the Newton
project and Apple’s reluctance to stop the funding even when they realized that product
was not worthy of investment. After that Apple took corrective action by changing CEO
and focused on increasing profitability. Mr. Spindler spent most of his time and energies
on regaining profitability, with the end goal of finding a buyer for Apple. Over the next
several years, Spindler shopped Apple to Sun Microsystems, Eastman Kodak, AT&T, and
IBM. Meanwhile, Apple was unable to meet the growing demand for its products due to
supplier problems and faulty demand predictions. To add insult to injury, Microsoft
released Windows 95 with great fanfare in 1995. After significant quarterly losses in
1996, the board replaced Spindler with Dr. Gil Amelio, CEO of National Semiconductor.
Dr. Amelio tried to bring Apple back to basics, simplifying the product lines and
restructuring the company. One of Apple’s most pressing issues at the time was
releasing their next generation operating system (code named “Copland”) to compete
with Windows 95. Amelio and his technology officers found that Copland was so behind
schedule that they looked outside the company to purchase a new OS. Ultimately, and
somewhat ironically, they decided to purchase NeXT computer from Jobs. Naturally,
Apple welcomed Jobs back into the fold. The board became increasingly impatient with
Amelio due to sales not rebounding quickly enough. Apple bought out Amelio’s contract
after just 1 ½ years on the job.

Rebirth of Organization 1998–2010

On July 9, 1997, Gil Amelio was ousted by the board of directors after overseeing a
three-year record-low stock price and crippling financial losses. Jobs became the
interim CEO and began restructuring the company's product line. This phase can be
identified to be the start up phase where an organization does the SWOT analysis to
enter into the market. Jobs identified that main weakness of Apple was its high price,
switching costs, R&D costs, low design differentiation, non standard OS, few compatible
peripheral softwares and Build to Stock distribution model. He identified Strong brand,
Quality, loyal customers as the strengths. He then focused on the opportunities like the
advent of internet, multimedia generation and kept in mind the threats of windows98,
new build and order selling market.

On the basis of SWOT analysis Jobs charted a R-Generalist strategy for Apple’s growth.
The strategy involved an increase in R&D for the related products. Jobs also realized the
changing landscape of the market and consumer preferences. This was reflected in the
philosophy of Apple which was focused on Differentiation, Diversification, User friendly
philosophy and competitive costs. Apple focused on making its product like design
objects and status symbols, Plug and play devices which could cater to different
customer needs from professionals to home ones, achieve economies of scale by
offering products for masses at reasonable costs. Following steps were taken by Jobs:
 Restructured company’s product line, Reduced them from 15 to 3
 Joined hands with Microsoft to release new versions of MS Office for Mcintosh
 Introduced the new Apple Store for a build to order manufacturing strategy
 Identified the potential take over targets for the digital softwares
 Focus on Apple’s image of an innovator by introducing upgrades and new
products
 Ended Macintosh licensing to clones
 Repositioning of apple in the personal computer Industry
These strategies give a good example of the Coercive and Mimetic Isomorphism. Apple
had to mimic the model of Build to Order Manufacturing (Similar to Dell) to keep up
with the changing market scenario. The example of coercive isomorphism includes the
development of standard complained OS. Further developments in Apple are listed
below:

 On August 15, 1998, Apple introduced iMac, a new all-in-one computer

 In 1998, Purchased Macromedia's Final Cut software to enter into digital
video editing market.
 In 1999, Released two video editing products: iMovie for consumers, and Final
Cut Pro for professionals, latter was a real success with 800,000 registered users
in early 2007
 In 2001, Opened Retail Stores in Virginia and California
 In 2001, Introduced iPod the portable digital audio player
 In 2002, Purchased Nothing Real for digital compositing application and Emagic
for their music productivity software
 In 2003, Introduced iTunes Store for online music downloads
 In 2006, Apple started producing Intel based Mac Computers
 In 2007, Apple renamed itself Apple Inc. from Apple Computer Inc. and it also
introduced iPhone and Apple TV
 In 2008, Apple launched App Store to sell third party applications for the iPhone
 In 2010, Apple launced iPad, multitouch tablet computer

Apple now has yearly sales of 43 Billion dollars. The brand is known for its innovative
and quality products. These changes were possible because of the organic and flexible
structure of the organization. The employees are given the freedom to innovate. The
decision making at the highest level is a bit autocratic but at medium and lower levels
the decision making is participative which leads to the success of the organization.
References:
1. en.wikipedia.org
2. Apple Confidential 2.0: The Definitive History of the World's Most Colorful Company, Owen
Linzmayer
3. Apple Computer 1999, Re-Thinking different
How, after ’90s slump and four CEOs, Steve Jobs’s’98 strategy makes Apple “insanely great”again
By Vincenzo Cammarata,VeronikaKurucz, Valentina Maj, AleksandraPavlovic, KatherinePortmann
4. Apple Story, by Thomas Ezan, Enssat Lannion, November 2006
Appendix1: Apple Flowchart