Jobs made Apple great by ignoring profit

By Clayton Christensen
August 29, 2011

By Clayton Christensen and James Allworth
The opinions expressed are their own.

Steve Jobs retires as the CEO of Apple with a reputation that will place him amongst the pantheon of history’s great global business leaders. Many people have written about what makes Jobs and Apple special, but I think they’re missing what truly set him apart. Jobs has succeeded by eschewing the one thing that most people view as the raison d’être for companies — profit.

When I left the industry to come to academia 22 years ago, it was driven by a set of questions that had troubled me for some time. Why was it that the best run companies in the world — companies that have had incredibly smart leaders, following carefully detailed plans and with tremendous execution ability — reliably seem to come unstuck? The answer to this question is what has become known as the theory of disruption.

In a cruel twist of irony, the pursuit of profit — something that Wall Street pushes so hard — is what leaves companies open to being displaced. As they grow, their ability to find opportunities that are big enough to sustain their growth is reduced. They become myopic; they listen only to their best customers. They focus disproportionately on their most profitable products, and strive to improve these the fastest.

The American auto manufacturers have suffered at the hand of disruption in the past few decades; they focused on their most profitable vehicles, and abandoned less profitable markets when low-cost entrants emerged. The Japanese came along with their smaller, cheaper vehicles; the Big 3 retreated upmarket all the way to SUVs and trucks. It was not long before Toyota was winning the sales race. Now, the Japanese are going through the same process, fending off the Koreans.

In short, disruption describes how the incumbents move upmarket, and leave the bottom of the market completely open for scrappy upstarts to enter. It explains the rise and fall of many great companies.

But there has always been one company that doesn’t follow that pattern. At some point in my class every year, a student raises his or her hand and asks: “What about Apple? Aren’t they a high-end, upmarket player? Why haven’t they been disrupted?”

It’s a great question. Despite being perceived as a premium, high-end player, Apple under Job’s leadership has not simply managed to avoid being disrupted by others, it has disrupted entire industries — many of them. Even more impressive, it’s disrupting itself.

I have come to the conclusion that what has made Apple so different is that instead of having a profit motive at its core, it has something else entirely. Many big companies like to pretend this is the case — “we put our customers first” — but very few truly live by that mantra. When the pressure is on and the CEO of a big public company has to choose between doing what’s best for the customer or making the quarter’s numbers… most CEOs will choose the numbers.

Apple never has.

As paradoxical as it is that the pursuit of profit is what causes the long-term failure of companies, I believe that Apple’s lack of focus on profitability has actually made it one of the most successful companies in the history of capitalism.

The iPod was the first indication that they were, in fact, thinking different. Here was a personal computer company, used to selling $2,000 computers, willing to take a risk on a gadget that would sell for a fraction of that price. Most big companies would not invest the time and energy to develop a device that was not nearly as profitable as their existing products, in a market that did not even exist yet. This sort of endeavor is typically the domain of start-ups. If Apple had done what most big companies do: sit down, hire some consultants to do a profitability analysis, and relied on that to make the decision, I seriously doubt that the iPod would ever have been built.

Yet build it they did, and it was the first in a string of successes where Jobs tore up the usual management playbook that leads to companies losing to disruptive competitors.

But what may be most notable is how Apple is in the process of disrupting itself right now. You almost never see this happen. The iPad — Apple’s most recent success — is disrupting the PC industry, and by extension, its Mac business. The tablet computer is going to do to the PC what the PC did to the minicomputer. Most companies cannot bring themselves to make decisions that result in the market for their existing core products being completely destroyed. When they consider it from a financial perspective, it just doesn’t make sense to create new products at the risk of jeopardizing your profitable, existing products. Don’t do it. It’s exactly that fear that has led many great companies to leave themselves vulnerable to disruption from others.

But it hasn’t affected Apple because that’s not how the company sees the world. Profitability isn’t at the center of every decision. Apple’s focus is on making truly great products — products so great that its own employees want to use them. That philosophy has made Apple one of the most innovative companies in the world.

Steve Jobs’ legacy isn’t the Mac. It’s not the iPhone. Or the iPad. His legacy is in the creation of Apple itself, reminding us that profit is not the ultimate goal, but rather a consequence of something greater.

53 comments

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Excellent article. Hopefully some CEOs will read it and learn from it but probably not.

Posted by bcp1854 | Report as abusive

One of the best posts on Apple I’ve ever read. Bloggers have consistently accused Jobs and Apple of making profit motivated decisions such as the choice to nix Flash in the mobile devices. I’ve always known that the opposite was the truth. Great companies are motivated by a Purpose and strive to make products that will improve the lives of others in some way. It’s a rewarding endeavor. And the irony is, when they do that — focus on doing great things for people — the profits take care of themselves. This is at the core of what makes Apple great and what made Pixar great. And it’s at the core of what makes the vast majority of corporate America fleeting successes, if that.

Posted by itot | Report as abusive

[...] the original: Jobs made Apple great by ignoring profit | The Great Debate Comments [0]Digg [...]

Just like hierarchy is second to ideas at Apple, profit is secondary to making value for money products.

Posted by JonathanJK | Report as abusive

[...] Jobs made Apple great by ignoring profit | Clayton Christensen. pretty excited that I’ll get to see Christensen speak at a conference in October. [...]

Apple: Relevant for the last 4 years.

Posted by gowejifw | Report as abusive

How is profit not a factor if they chose to assemble products where labor is cheapest?

Posted by gowejifw | Report as abusive

what a juvenile analysis in this article.This is why journalists should stick to reporting news instead of opining on things that they know nothing about. Allow me to destroy all the arguments in this article.
Back in the late 90s, when Steve Jobs came back to Apple, Microsoft had a full and absolute strangehold on the market. Anything that Apple do didn’t matter.Remember those psychedelic looking Mac computers ? yeah those didn’t matter either. So Apple had to come up with something. It’s not like Apple exactly had any “profitable” line of products at that time. And they came up a good idea… the idea of integrating IPod media players with Music store. It was the matter of their survival as a company. With the trendy marketing campaign of iPods and iTunes they turned around the public perception of Apple. To the absolutely Jibberish argument that profits don’t matter… do you guys even know how much profit margin Apple charges on it’s devices? It’s the HIGHEST in the industry. If they really don’t care about profits, their devices wouldn’t be this costly.
Also, this implication that other companies make crappy products (because they value profits so much) is based on absolute jibberish.

Posted by MarioMano | Report as abusive

[...] Clay “Innovator’s Dilemma” Christensen penned a very interesting piece in Reuters (thanks to Chetan Sharma for pointing it out to me): “Jobs made Apple great by ignoring profit.” [...]

[...] Jobs made Apple great by ignoring profitReuters Blogs (blog)In short, disruption describes how the incumbents move upmarket, and leave the bottom of the market completely open for scrappy upstarts to enter. It explains the rise and fall of many great companies. But there has always been one company that doesn't …and more » [...]

Look around you – find a ‘real’ entrepreneur. Ask them how much money they’re making. If their newer business is part of the 10% that’s been successful over a period of time, they may be making a tidy sum (or maybe not, but). Now ask how many hours it takes (currently) to make that kind of money and you’ll find that the great majority will reveal that you can make more on a per hour basis working as a manager in almost any Fortune 500 shop. Now if you want a real shock, ask them how many hours (or perhaps years would be the better time frame) that they had to work for subsistence wages in order for their enterprise to become semi-established.

Simple fact is – there is a name for people that do it just for the money. Those folks are called MERCENARIES (as well as at least one another name we tend to avoid using in mixed company) and the great bulk of successful entrepreneurs (not just Steve jobs) are not part of the mercenary demographic. And – neither are most teachers or people that manage or work for charitable organizations or people that spend their lives developing medicine for the body or the mind. The great majority of these folks do what they do because they believe that what they’re doing is something that really needs to get done. (Many times it’s just because they want to make their ‘better way of doing something’ even better and share it with other people.)

There is a pragmatic role for money of course, and this is where stellar figures like Steve Jobs are differentiated for the more pedestrian entrepreneurs. Folks like Jobs don’t just have passion – they have more passion than any one person could possibly stand to have without sharing it with every other person they can think of, and maybe every other person on the planet. And they know that in order to do that, they’re going to have to hire a lot of mercenaries to make it happen. Money then (actually business processes in general, of which cash flow is a significant part) becomes the vehicle by which the passion to share on a grander scale than would otherwise be possible.

I know that the mercenaries out there (and I know – there are a LOT of them out there – and they read Forbes and Reuters assiduously) are collectively shaking their heads at this, thinking that this is an insane proposition – and I won’t argue with you – it probably IS insane to forgo the rewards of a more mechanistic existence in exchange for lots of hard work and an unreasonably high chance at bankruptcy early (and perhaps many times) in life. What can I say to that except that it’s nice (for all of us) to live in a place where insane choices like this remain available as an option.

Posted by Decisionscience | Report as abusive

[...] about what makes Jobs and Apple special, but I think they’re missing what truly set him … – Bing News Advertisement //interstitial ad clicksor_enable_inter = true; clicksor_maxad = -1; [...]

[...] Jobs made Apple great by ignoring profit | The Great Debate. This entry was posted in Apple, Business, Technology. Bookmark the permalink. ← [...]

Interesting take – but only partially true.

When Jobs came back to Apple, actually everything he did was about getting the business back into profit.

He slashed the R&D budget, dramatically reduced the number of product lines [bye bye Newton, adios cloning the OS], and hacked away at the cost base.

His big hire at the time was not Jonathan Ive who was already there, but his now successor Tim Cook, who as COO sorted out the supply chain.

When the company got back to profit – it was on the back of falling revenues. Had they not have had this very short term focus on profit, they would have frankly gone out of business before they got to launch the great [and profitable] products that we all know [and in some cases, love].

Sed themselves so yes, they have disrupted themselves, but to say they haven’t focussed on profit actually undermines the enormity of Jobs’ achievement.

BTW – I wrote all of this up in my book: Creative Disruption [http://bit.ly/creativedisruption  ]

Posted by simon_waldman | Report as abusive

A lot of thoughts and concepts in one blog, although not sure the anecdotes prove the conclusion. Without reviewing 25 years of Apple financial statements, I’d guess that, in fact, Apple’s profitability has not significantly strayed downward from the S&P average. I’d also suggest that a mantra for Apple you deem as customer-centric – granted, its products undoubtedly reflect heavy user testing – I’d call an unwavering focus on technological excellence, if not arrogance. For decades this strategy resulted in what Porter would call a niche, differentiated position – high-margin, yet somewhat limited audience. Jobs wouldn’t waver as the Wintel oligopoly reached the mass market with interoperability and non-proprietary supply chain for lower priced PCs. For $1,000-$2,500 products, Apple was stuck. Instead of cannibalizing its Mac though (at least consciously though), they found that the mass market would, in fact, ‘overpay’ for a better user experience in smaller price point markets: enter the iPod ($49-$199), the iPhone ($99-$499), and the iPad ($499-$729), must haves style symbols even for the middle class. Apple had found a new, more elastic demand curve, a larger market volume, and huge growth and profits. So, either Jobs was myopic on product innovation, or, in fact, he had some very smart economists in his finance department.

Posted by jshomaker | Report as abusive

This is a bit of revisionist history. I don’t think the authors understood the context into which the iPod was introduced — portable MP3 players existed before the iPod, and it wasn’t just Steve Jobs who noticed that it could be a potential growth industry. He didn’t decide to make the iPod just because he thought it’d be cool. This is a lovely example of an academic taking his namesake theory and attempting to apply it (inappropriately) to a popular current event.

Posted by gradstudent | Report as abusive

[...] Jobs made Apple great by ignoring profit [...]

When Internet begin, consumer satisfaction was the primary driver of AOL, Yahoo and many companies. But, larger organizations (picture the U.S. Government) get stultified, it happens every time, they begin to serve their own idea of what they should be. And ignore the idea they begin with …

Posted by Terryeo | Report as abusive

I’m a big fan of Dr. Christensen, but I’m a little disappointed with this article. Dr. Christensen has made a name for himself by being an incredibly deep thinker and noticing things others haven’t (e.g. the innovator’s dilemma). However, this article seems to be a little shortsighted. While Apple does fit nicely into the innovator’s dilemma paradigm, and has definitely been an incredible company that has changed the game in the mobile and music industry, Apple is far from proving that focusing on products as opposed to profit is what makes a great company. For every company that you could point out that has succeeded by focusing on products instead of profit, I can point out a dozen companies who have done just the opposite and have succeeded for a hundred years, compared to Apple’s mere few years of wild success. I could also point out companies who have likewise focused on cool, innovative products instead of profit and failed miserably.

Posted by Anmys | Report as abusive

I’ve always thought that Apple looks at profit much less than they look at competition.  Profit is assumed. Competition is blocked at every turn. Apple seems to me to have two brains: the business brain and the creative brain. In most companies the business stifles innovation. Jobs seemed to have a tremendous skill for balancing both-encouraging the talent of young developers and creative minds, while ensuring that their bread and butter business does not suffer. Other companies should learn from this model.

http://thebigapp.tumblr.com

Posted by Thebigapp | Report as abusive

[...] Christensen at Reuters claimed that the biggest lesson we should take from Jobs’s success is that more companies should pursue high-risk, disruptive product strategies at the expense of short-term p… “I believe that Apple’s lack of focus on profitability has actually made it one of the most [...]

Um no I can just as easily point to endless failures where profit was not the main focus but I have no doubt profit is the focus at Apple anyway. You only have to look at the overpriced products made in third world factories to see that they are chasing the almighty buck. I think where they outperformed the competition is in convincing so many people to buy their colourful toys for excessive prices. And line up in the rain for days to be the first to have it. That is the miracle here, these “iwhatever” things have not changed the world despite what worshippers think. The cellphone was invented decades ago (hint – Apple was not involved), the world changed then. Making it cool and adding apps did not change the world, just adding more time wasting activities to dull folks lives. Says more about the critical thinking skills of people than anything else, although it illustrates that you can never underestimate the intellect of the masses. But really I have had enough of this hero CEO worship now.

Posted by WithRespect | Report as abusive

in an interview in 2005 with All-Things-Digital, Steve Jobs synthesizes Apple’s focus in no uncertain terms: http://allthingsd.com/video/?video_id=14 098D2A-8586-483A-A1CE-8AB6721521D4

Posted by countlurpak | Report as abusive

[...] Christensen at Reuters claimed that the biggest lesson we should take from Jobs’s success is that more companies should pursue high-risk, disruptive product strategies at the expense of short-term p… “I believe that Apple’s lack of focus on profitability has actually made it one of the most [...]

Apple and Jobs did exactly the opposite from what the article implies. Apple at the beginning was a company as you’re writing in the article, focus on innovation and not profit, and it almost went bankrupt, until they focused on profit. Apple from a company that brings new ideas and new things, became a company going to ideas that others started and failed and having potential of extra cash flow from other uses(istores, itunes etc).IPod(Sony and other companies had mp3 players), IPhone (HTC and blackberry were in smart phones before apple), Ipad(Microsoft made a big project few years ago in making tablet PC and failed to it).As long as Apple can make new products to fuel it’s online stores, it will be successful. The problem of Apple is that the only new space to expand is the area that it has already failed Apple TV(were Microsoft, Apple and probably Google now ,have failed)

Posted by nikbeg | Report as abusive

It is true that many companies allow smaller, more-nimble competitors to “come up their tailpipe” and disrupt their businesses because they myopically focused on their current set of profitable customers rather than keeping an eye out for where things are heading (as their hungrier, smaller rivals must do), and Clayton covers this quite well in his excellent book The Innovator’s Dilemma.

But in this case, as others have mentioned, I think he’s stretching a bit to claim that mastering the innovator’s dilemma is why Apple and Jobs have been successful. Rather, it’s been because Jobs and his team have mastered the art (and it IS an art) of making their devices easily and incredibly usable and useful. Sure, being willing to disrupt your current business before someone else does anyway, helps (and will surely kill your business if you aren’t willing to self-disrupt). But that alone does not come even close to explaining how and why Apple has succeeded to the extent it has.

Posted by Randy549 | Report as abusive

I thought I might get some greater insight than “Steve Jobs rocks!” from the world’s foremost expert on innovation and growth. Oh well.

Posted by maestrobobcobb | Report as abusive

Thanks for all the great comments. From the top:

gowejifw: “How is profit not a factor if they chose to assemble products where labor is cheapest?”
Great question. I think they’re realistic enough to know that if you make a great product but the price is too high, nobody is going to use it. It can only be a great product relative to the price you charge for it, right?

Posted by jamesallworth | Report as abusive

marioMano: “do you guys even know how much profit margin Apple charges on it’s devices? It’s the HIGHEST in the industry.”
That’s the point, Mario! If they set out to try to charge with the greatest margins in the industry, they would have failed. Instead, they’ve created a string of products that provide the best experience… and as a result of that, the margins are high. it’s the order in which you set out. those margins enable them to do things like launch the retail stores, research new products, and so on. Most companies set out to go for the margins, and that’s why they don’t end up getting them.

Cheers

– james

Posted by jamesallworth | Report as abusive

simon_walden: “When Jobs came back to Apple, actually everything he did was about getting the business back into profit.
He slashed the R&D budget, dramatically reduced the number of product lines [bye bye Newton, adios cloning the OS], and hacked away at the cost base.”

Absolutely true. You can’t have a business if you don’t have any money. If you’re about to go bankrupt, it’s very hard to focus on making great products.

I think what we describe is more an evolution, rather than “Jobs arrived and this is how it is”.

Cheers!

– james

Posted by jamesallworth | Report as abusive

gradstudent: “portable MP3 players existed before the iPod, and it wasn’t just Steve Jobs who noticed that it could be a potential growth industry”

I think you’re missing the point – it was the iPod that was successful. The others should have won; but Apple came along, doing what they do best – which is to make a device that they themselves wanted to use, rather than going after the market “because it was a big opportunity”. That difference in mindset is part of what makes Apple so different.

Cheers

– james

Posted by jamesallworth | Report as abusive

Interesting analysis. Perhaps it helps explain why there are so few great companies in the world as they stifle creativity and the pursuit of being the best for the sole pursuit of the buck. But this alone does not explain such incompetent dinosaurs for instance like BP. The pursuit of immediate profits has imposed a very short range vision usually no more than a year at many companies just enough to get the stock price up and for the CEO and major players to cash out. We can thank Wall Street for this myopia.

Posted by seattlesh | Report as abusive

The article makes a good point, but as others have pointed out, focusing on love instead of profit was running the company into the ground. However, keep in mind that Apple fired Steve Jobs at one point, which is when they became very conservative and almost failed completely. Jobs _came_back_ and immediately started slashing pet projects, laying off huge numbers of people, and focusing on the “masses before classes” by introducing the iMac.

His genius is not derived from inattention to profit, it’s derived from minimalism and austerity. Sometimes, their software is so simple that it doesn’t even give you everything you need! Same for hardware (lack of USB ports, etc). But in the end it always gets the job done because it makes you focus on what’s truly important. Big fat rich bloated companies (and their leaders) simply do not have the self-discipline to focus. They don’t have the discipline to do what they really believe in. Jobs’ passion lies in simplifying the world – the complex world of computers, software, and the internet. In a world that’s one big giant tangled mess, simplicity is the better mousetrap, and the world clearly beat a path to Cupertino. All because of Jobs’ personality – his personal focus on minimalism and simplicity, trying to tame a sometimes messy and complex life… and turning that personal drive into a corporate philosophy that has changed the world.

But to go back to the original point, all of this wouldn’t be possible without the money. Simplicity was the product, derived from his personal philosophy, and he realized – when looking at that tangled confused world – that people would pay for something that would make their world simpler and easier.

Posted by Nullcorp | Report as abusive

“…reminding us that profit is not the ultimate goal, but rather a consequence of something greater.”

Well if profit were not the goal wouldn’t Apple be selling its products at cost? Wouldn’t Apple be using that $75 billion in cash for something other than simply hording it? I’m sorry but any credibility this article might have had was completely tossed out the window when the writes says something akin to, “you aren’t wet, now stop standing in the ocean.”

Please, Apple has always been about profit… Apple has no internal foundation for philanthropic activity, it doesn’t even bother to match employees giving to non-profit organizations like 99% of other Fortune 500 companies…. If Scrooge were alive he would envy Apple for its miserly ways….

Clearly the writer is a worshiper of Apple and can’t see the truth smacking him across the head…

Posted by Yirmin | Report as abusive

Don’t really agree with this at all. Wasn’t Steve who once said “True artists ship”. It’s not about making a point, it’s about making a profit. Especially true from a company that hasn’t paid a dividend in how long.

You mention the iPod was such a progressive leap forward. What was the profit margin on that? As far as I know, iPads and iPhones have the best profit margins in the industry. Perhaps you have to sell 10 phones instead of 2 computers, but if the margin is favorable, does it matter?

Looking only at absolute profit instead of profit margin seems very amateurish.

Posted by Andao | Report as abusive

We can try to say all the words we can to hype Apple such as “the best experience” etc etc, repeating what we’ve heard others say and not using our own minds. There are some PC makers that give you a great experience also. Now I admit, I am an Apple fan, always have been for many many years and they make great products hands down. I use PC also, although my preference is Mac. But to say that Apple is not interested in profit is to be naive to the highest extent. Anyone who owns a business knows that if you can get cheap labor, it will allow you to mark up your product regardless of what it might be, to maximize profit. Apple makes money under the cloak of “cool” and great marketing and advertising which is key. You will NEVER see a Macbook Air at 599.99, ever …lol. We pay for the construction and parts and time, but not the labor. Do you think that any of the money from the high costs of the products go back to the laborers overseas?? No, it goes in Apples “pockets”. No we pay for “cool” because this product is “cool”. If you do your homework, alot of this technology is not new. Asia had alot of this technology in “motion” before Apple, it just never made US shores, so of course how would we know. When Apple first introduced the iPhone, folks were in a frenzy to buy them. Some buying two at one time. Then the bomb was laid: a cheaper, faster iPhone. So the same people that brought the first one, put them on Ebay, and went and brought the other…Apple made a pretty penny. Same happens with the laptops. Example: One version in January, then the same laptop, just tweaked with addition specs, released in April…everyone buys it. This tweaked version could have be released in the beginning. This is America folks, its always about money. I don’t care how you disguise it, money is the bottom line, not concern for people or giving people the “best experience” lol…capitalism at its best and Apple is no exception to the game, and they are smart, even though i love Apple. Again, im not beating on Apple, but this is the real world, real business, it is what it is. For me, if this isn’t about profit, then it will have to be proved one day. I want to walk in the Apple store and buy an Air for 499.99 or a macbook pro 17″ unibody for 799.99, or 27″ inch iMac for 1100.00, yes slashed, PC prices. Then i will say I had “the best experience”. Until then, its Capitalistic “cool” business as usual.

Posted by Dahc | Report as abusive

Best Business article I’ve ever read. Now, if a large portion of American businesses put this thinking into practice our stalled economy would be in high gear in no time. Fat chance though as every consulting firm will advise them to go in the opposite direction.

Posted by GLK | Report as abusive

The worst thing a technology company can have is a non-engineering finance-geek becoming the CEO. From that day on, all the innovations in the company start to stop. Only one this such a CEO has in mind. Make profit and profit using tools like outsourcing, layoffs, degrade quality, etc.

Posted by vze | Report as abusive

[...] Many people have written about what makes Steve Jobs special, but they’re missing what truly sets him apart. Jobs has succeeded by eschewing the one thing that most people view as the raison d’etre for companies – profit.  ary [...]

If Apple ignored profits then why does it have $70 billion in the bank? And Apple has ignored markets. There is no mid range Mac. Sorry I can’t count the iMac that forces you to accept a glossy screen and also ties processor speed to screen size. I’ve used Macs for 18 years, never bought a PC. I really need to get a newer computer and would like to stay with Apple. but I want a computer that offers features that place it between the mini and the Mac Pro and Apple refuses to enter that market. I’m close to walking away from Apple because it is all about profit and it refuses to go after the less profitable mid range market.

Posted by BenVincent | Report as abusive

The company’s support that has driven me to the point of suing them is Apple. Obviously Mr. Christiensen never tried to deal with Apple from a large organization perspective. I’ll spare you the details, but Apple’s marketing of features for enterprise networks was clearly dishonest.

When the center of gravity of computing was the enterprise, Microsoft was ascendant. Since 2000 the center of gravity has moved back to the individual customer. Jobs deserves credit for taking advantage of this shift and populating an organization with people with complementary skills.

Posted by BondBore | Report as abusive

Interesting that the author spends a lot of time exalting Apple’s eschewing of profit, yet fails to include the one statistic that might prove (or disprove) his point: The percentage of price markup of Apple products versus those of other manufacturers. My guess is that Apples percentage of profit on all of their products is significantly higher than everyone else.

What Apple truly excels at is effective marketing.

Posted by SilentBoy741 | Report as abusive

Ignoring profit?

BAHAHAHAHAHAHAHAHAHAH

Have you seen just how much Apple marks up their profits? They charge an insane amount of money for basic hardware, slap a logo and a trendy design on it, and claim that it’s “forward.”
Look up a comparison of the cost of hardware (even for end-comsumers, not just bulk-buyers) vs. the cost to buy a typical PC vs. the cost to buy a Mac with essentially the same hardware.

Posted by Nope_ | Report as abusive

I prefer to believe Steve Jobs and Apple exemplify the followng. “New product and new types of service are generated, not by asking the consumer, but by knowledge, imagination, innovation, risk, trial and error on the part of the producer, backed by enough capital to develop the product or service and to stay in business during the lean months of introduction.” W. Edwards Deming

Posted by DemingFan | Report as abusive

Did everybody forget that Jobs rescued Apple from the $%^&*() from Pepsi?
Look at what has happened at H-P after Bill and Dave left and a bunch of B-school fools took over!

Posted by oldtechie | Report as abusive

((What Apple truly excels at is effective marketing.))

Actually, Apple “truly” excels in designing devices that feel sublimely luxurious to hold in your hands. That’s what everyone else is missing.

Posted by Anonymous | Report as abusive

Mario Mano makes some truly ill informed points.

Firstly lets get it straight, Apple has been a hugely successful (read profitable) because they understand innovation.
Secondly, if Apple didn’t have a profitable line of products before they diversified into iPods etc how have they survived with just computers for 20 years?
Next, he complains about Apples high prices yet it seems that the rest of the world seems to think they are okay as they have no problem in buying.
And finally it comes as no surprise that Apple has been a much more successful company than Microsoft. Market Cap Apple $361B, Market Cap MS $219B.

Posted by terryh2c | Report as abusive

[...] Jobs made Apple great by ignoring profit [...]

[...] testimonial for Apple. Jobs made Apple great by ignoring profit | The Great Debate. But Apple’s “core” capability, beside innovation, is/was Steve Job’s [...]

It is well known that an Apple iMac almost always costs around twice as much as a factory-assembled Windows PC. The ratio is even higher when comparing to a self-built Windows PC. Apple products have always been ridiculously expensive for the service they provide. They haven’t eschewed profits at all; they’re simply good marketers.

Posted by flyingsphinxter | Report as abusive

IBM had the original monopoly folks and they decided to let others play. They don’t do that and nothing is as we see it today, absolutely nothing. From Apple to Microsoft and all points in between there would have only been Big Blue. Comprehend.

Posted by poeg | Report as abusive

Thanks again for all the great comments. Seems we have a few sceptics lurking about the forums; for more definitive proof of what it is we’re talking about in the article, I’d encourage you to jump over here and have a read:
http://tech.fortune.cnn.com/tag/steve-jo bs-resigns/

“… and only one person, the chief financial officer, has a “P&L,” or responsibility for costs and expenses that lead to profits or losses. It’s a radical example of Apple’s different course: Most companies view the P&L as the ultimate proof of a manager’s accountability; Apple turns that dictum on its head by labeling P&L a distraction only the finance chief needs to consider.”

A lot of people have raised margins. It’s important to understand that we’ve never said they’re running the company as a not-for-profit. What we’re trying to say is that the profit isn’t what drives their decisions – and this is what sets them apart. I’ll let Jobs himself explain:
“Apple’s goal isn’t to make money. Our goal is to design and develop and bring to market good products… We trust as a consequence of that, people will like them, and as another consequence, we’ll make some money. But we’re really clear about what our goals are.”

Cheers everyone – thanks again for all the great commentary!

– james

Posted by jamesallworth | Report as abusive

By reading these comments, a lot of you don’t get the jest of the article and others have your facts wrong. Apple did not almost fail under Steve Jobs. It almost failed under Sculley. Apple almost failed because it was working on too many projects at once and lacked focus. They became a different company when Jobs returned. Cost cutting was of course necessary. The article is not suggesting that Jobs has no interest in profits,, quite the opposite. Apple puts out what it perceives to be premium products. Some of these products sell at a premium, others at market prices. Apple ignores profit in the sense that they do not compromise quality to increase sales volume. They put out products at a margin that works for them. They refused to put out a $500.00 netbook as they don’t believe in the product. Even though they recently reported record mac sales, they only sold 4 million computers last quarter. That’s 16 million a year whereas companies like Dell will sell in excess of 40 million per year. Apple might have a higher profit margin but they sell far fewer units. Look at Iphone, high margin. Android has a higher market share because Apple wont put out a cheaper product,,, has fewer models and fewer carriers. Apple is not compromising their business model. They want all of their users to have a consistent experience and are able to do that by controlling the hardware. They aren’t after the biggest market share, just the best products. They don’t sell the largest amount of phones yet they makes the highest profits,,, why is that? It is because they focus on user experience. Many companies focus on volume and cost. They would rather make $100.00 dollars a phone on 1 million units than $200.00 a phone on half a million units. Apple focuses on selling what they feel are the best quality products and will not compromise that belief to increase volume. What the author is suggesting is focus on the top line and the bottom line will take care of itself. Of course the company wants to make money. This isn’t a charity. Remember that Jobs has no business training. He is a college drop out. He had a vision and passion. Tim Cook keeps the company lean and profitable. Jobs ignores the lessons of traditional business and focuses strictly on the consumer. This concept is obviously working very well for Apple, but makes a lot of people who don’t get it angry. The tech guy feels Apple users are snobs and fools because they pay more for a computer. They can’t see spending $1,500.00 for a laptop when you can buy a non apple brand with similar specs for $900.00 . These are the same people who think this article is suggesting the apple doesn’t want to make a profit. Again, the article is stating that profits come because Apple focuses on the consumer first

Posted by gregb11 | Report as abusive

I agree with this article’s point of view. Jobs did not start the project by counting profit but ending the projects by counting profit instead.

There is one analogy I draw after reading the story.
Option A: Is it better to sell high-end products, with high profit margin, but getting little customers to buy. Option B: sell low-end products with low profit margin, but get lots of customers to buy. Simple analysis may say that B choice will bring in more profit cause low-end product has low cost in R&D while can sell in large quantity. Despite concerns of expensive R&D and failure to expand market concentration, Apple proceeds with plan A. It innovates at the risk of high cost in R&D, and risks of reaching only a small pool of customers. The message is : Don’t sacrifice innovating at the fear of losing money/fear of not being able to get your investment back. It is worth taking the risk cause at the end you will make more money by over)charging high price for innovative high end product.

Posted by LianSom | Report as abusive

There is actually nothing “great” about Apple. The company is neither particularly innovative (non of the “i”s revolutionized the world like internet, TV, PC, phone, car, cell phone etc. did) nor successful. The real success is actually the last 5 years. The overpriced stock price mostly reflects Fed’s monetary policy and has nothing to do with Apple. The company is indeed very good at marketing playing nicely on white Americans’ newly-discovered insecurities of increasing class divide. It helped that the Apple management (Steve Jobs) had a real story behind their marketing (enhanced by his health condition). All in all, it is a very successful company. But you know what? There has always been some successful companies! Always! And we always make the mistake of explaining this success as something unique and extrapolating companies’ short term success infinitely to the future. My guess: in 10 years time Apple will be what HP is now.

Posted by tk2 | Report as abusive

I can’t help but reply to the last comment, which is wrong all around. The fact that you feel the stock is overpriced shows you have zero business experience. How do you define overpriced? Is because its $390.00 dollars a share? The stock trades at 11 times earning which is a discounted to the S&P. You will have to research what that means. Its nothing to do with fed policy. Apple isn’t innovative,,, if they aren’t who is? They did invent one of the first PCs so yes they did revolutionize the world. The government invented the internet, but Apple made it easily accessible via an easy to use intuitive interface. Innovation isn’t just about invention but also making the existing world around you easier to navigate. The company doesn’t even have a huge budget for marketing considering its size. So many can’t grasp the concept that Apple is just a successful company that fulfills consumers needs. They must come up with excuses as to why Apple is successful, any excuse except the fact that the company is just run well and putts out great products in an innovative way. It cant be that, the company must be number one in revenues by mistake,,, that’s it

Posted by gregb11 | Report as abusive

Some of the ideals I would not agree.It is true that everything will meet a failure one day.Apple had done aserels of right measure at the right time.But everyone will make a wrong step.

Posted by purplelove | Report as abusive

Apple is not a perfect company. They experienced years of miss-steps, failed products and near bankruptcy. Jobs philosophies on business did not create an overnight success. Its last 10 yeas are its most successful. Apples learned from its mistakes. Jobs created his own vision of management and it took years and years to refine his style into something that works. They are now in a strong position. They have plenty of cash on hand. It would really take a stupid bad move to affect their growth. The question is whether Jobs style of management carry on in his absence. Me sense is yes, I believe he was able to instill his style in Apples culture. It doesn’t mean Tim Cook or anyone else will mimic Jobs, but it does mean the thought process that got the company where it is,,,,, is instilled in the company.

Posted by gregb11 | Report as abusive

One of the comments above said that “an Apple iMac almost always costs around twice as much as a factory-assembled Windows PC.” But, as the many comments in this article show, profit and price are not the same. Apple machines cost more because they’re made of metal… because they last longer… because the company invests huge amounts into R&D so that their materials and manufacturing methods will set their devices apart from the flood of cheap plastic “me too” devices. Watch the documentary “Objectified” for some insight. Subjectively I feel that any additional cost is fully justified, you can’t compare a Dell to an Apple because there’s more to the machine than the technical specs.

Posted by Nullcorp | Report as abusive

I completely agree. So many are merely focussed on tech specs and ignore build quality and components used to create the unique products they put out.

Apple may set a price but its the market that dictates whether price is justified or not. Very simple,, if its priced right, it will sell, if its not, it won’t. Windows people don’t get it, people who buy by and love their products do. No, they aren’t under a magic spell that Apple put out and no, they aren’t handcuffed using inferior technology in an effort to be cool. Just maybe, and this is a hard concept to get,,, but just maybe, the products fulfill their needs.

Wow, what a concept.

To close, it goes back to the windows/Apple argument, Windows people are concerned with features, whether or not they actually need them, Apple focuses on less features but superior user experience.

Posted by gregb11 | Report as abusive

This article is laughable… Not even worth a reply, but here I am… Oh, by the way, Steve. Now that you have billions, could you spare a penny in dividend? NO ! But, alas, it is not about profit, is it? Oh, and certainly not about stock options… LOL.. What a crock this writer has churned out for cyberspace !

Posted by gambler69 | Report as abusive

[...] Jobs made Apple great by ignoring profit by Clayton Christensen and James Allworth – “When the pressure is on and the CEO of a big public company has to choose between doing what’s best for the customer or making the quarter’s numbers… most CEOs will choose the numbers. Apple never has.” [...]

[...] found this story about Apple intriguing. Rather than profits first, will profits follow if companies concentrate on great [...]

[...] value , does not make their decisions with their eyes focused on making a profit. The message in this article is relevant for companies of any size. If you’re in business just to make money, it is [...]

[...] morning I read this beautiful reflection on the legacy of Steve Jobs – how he made Apple great by ignoring profits. Steve Jobs, like countless entrepreneurs, are [...]

[...] think about creating or exchanging value, or expressing our love or passion.This morning I read this beautiful reflection on the legacy of Steve Jobs – how he made Apple great by ignoring profits. Steve Jobs, like countless entrepreneurs, are [...]

[...] morning I read this beautiful reflection on the legacy of Steve Jobs – how he made Apple great by ignoring profits. Steve Jobs, like countless entrepreneurs, are [...]

[...] morning I read this beautiful reflection on the legacy of Steve Jobs – how he made Apple great by ignoring profits. Steve Jobs, like countless entrepreneurs, are [...]

[...] under Jobs’ leadership. Others have commented on the secret to Jobs’ success (see Clay Christensen in Reuters) but after the roll that Apple has been on, I don’t know that I agree with [...]

Well, the only thing I do not agree in this article is when they say about their own employees want to use it. What employees? The development ones right? Because in China where the products are made they are totally out of the blue, no social life, just slaves shift of 12 hours job 7 days a week.And don’t tell is not true, I’ve been there I saw and many of them are committing suicide. Nonetheless, Yes Apple is a Great Brand and for sure a good Company to work for.

Posted by rinacio | Report as abusive

[...] of Steve Jobs- to him, making a profit was a happy side-effect of product development. To him, profit simply didn’t matter all that much. Jobs and his executives put the customers first by casting themselves as customers- [...]

[...] products out with proper research and development. R&D is a crucial part of Apple’s success. Steve Jobs loved the research process, which helped make innovative design Apple’s [...]

[...] Jobs made Apple great by ignoring profit [...]

[...] Opinión de Publimetro – Lima se refiere a  el blog de Clayton M. Christensen The Great Debate donde expone como principal razón del éxito de Apple algo que a simple vista [...]

In my humble opinion I wish to point out what has made me in my own small way both succesfull and very happy. I believe that what the authors were trying to get accross is well summed up in the old adage – What came first, the chicken or the egg? Most , if not all the people around me seem to live for money or profit at the expense of passion or lifestyle. With Steve Jobs it seems that passion, not money or profit came first. This does not mean that money or profit did not exist, but that simply, it is pushed into second place. His focus was passion and product first, profit secondary. An article I read recently on the
“Lifestyle Entrepeneur” summed up my outlook on life. At any stage in life, one can choose a certain way to live, with dreams, goals and a lifestyle. Then work hard to earn the required funds necessary to live that chosen lifestyle or passion. Most people I know seem to let the pursuit of money and profit dictate their lifestyle, goals, passions and dreams and relegate these into second place to the extent of ignoring them. Therefore in conclusion, it is not whether profit, money, passion or dreams is what makes us exist, like it made Steve Jobs exist,
or work towards, but the way we prioritize them. Passion and dreams should always trump money and profit…

Posted by timeormoney | Report as abusive

[...] It has a history of saying, “No, that’s not who we are; it’s not what we’re about.” Apple prides itself on caring more about making great stuff than about making easy money. Apple has passed up opportunities to make more money by expanding its focus or by being more [...]

Amazon never has.

You will see the rise of AMZN in the next decade.

Posted by sinzone | Report as abusive

[...] Christensen’s “Jobs made Apple great by ignoring profit” has a simple point: “the pursuit of profit – something that Wall Street pushes so [...]

I agree this is so hard to do. Apple grew into this in the big, iPod, iPhone, and iPad, but in many small ways dumping the Mini-iPod for solid state Nano-iPod, dumping the floppy drive in iMacs, dumping ADB for USB, dumping SCSI for Firewire, dumping ethernet for WiFi [remember Apple first Airport was 5X cheaper than competitors], dumping CD/DVD drive for MacBook Air, not jumping on Blueray, etc.

In other words, in a host of small ways Apple made the choice to disrupt itself – this helped build the culture. When you look at Apple’s competitors, they never never make that leap. Whether in a big or small way and then later try mimic Apple or in the case own SAMSUNG be a quick follower, but even there they can’t make the break, stylus on a fat cell phone?

Where I run into a problem is understanding the job to be done that Apple consciously or unconsciously does. Is it “build the stuff we want” the way to think about jobs to be done in a practical sense?

Posted by gprovida | Report as abusive