Context
In fiscal 1997 Apple posted a net loss of $1.045 billion. The company sold dozens of computer models, printers and other devices, and buyers struggled to tell one model from another. In September 1997 Steve Jobs, back at Apple after the NeXT acquisition, became interim chief executive.
Symptom
Revenue was falling, products competed with each other, and the team's resources were spread across a large number of projects. Each project could be defended on its own, but together they did not give the company a strong product in any segment.
Cause
The company had no rule for deciding what not to do. Without such a rule every new proposal was added to the portfolio, and complexity grew faster than revenue.
The fork
Keep releasing models for every request from the market, or keep a few products and put everything into them.
Decision
Jobs drew a grid of four cells: consumer and professional, desktop and portable. Each cell was to keep one strong product. According to published accounts, the product line was cut by roughly 70 percent.
Execution
Projects that did not fit the grid were cancelled, including devices the market already knew. Development teams were focused on the new models. In August 1998 the iMac shipped, the first product of the new logic.
Outcome
In fiscal 1998 Apple posted net income of $309 million. The company's later products, from the iPod in 2001 to the iPhone in 2007, were built on the same discipline: few products, each one finished properly.
What it means for you
Cutting works when the company has a rule for choosing. Without a rule, the projects you removed come back six months later under new names.
- How many of your business lines justify the money and time put into them?
- Which projects do you keep funding only because you have already started?
- By what rule does your company say no to something new?
We would start by checking the profitability of each business line after shared costs are allocated. That calculation usually shows what carries the company and what lives off it.
Key dates
| Year | Event |
|---|---|
| 1996 | Apple announces the acquisition of NeXT; Jobs returns to the company as an adviser |
| 1997 | Jobs becomes interim chief executive; net loss for the year of $1.045 billion |
| 1998 | The four-product grid; the iMac ships; net income of $309 million |
| 2001 | iPod |
| 2007 | iPhone |
Sources
- Apple Inc. Annual report (Form 10-K) for fiscal 1998: Source
- Apple Inc. Annual report (Form 10-K) for fiscal 1999: Source
- Walter Isaacson. *Steve Jobs*. Simon & Schuster, 2011 (the chapter on the return to Apple and the four-product grid).
Next case analysis: Wells Fargo. Metrics that started managing people instead of results →
