Posted by & filed under Apple, Business Intelligence, industry analysis.

Description: The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.

Source: www.forbes.com

Date: Nov 23, 2011

What’s interesting is that Steve Jobs lived long enough to show us at  Apple [AAPL], in the period 1997-2011: what would happen if the firm opted to keep playing offense and focus totally on adding value for customers?  The result? The firm makes tons and tons of money. In fact, much more money than the companies that are milking their cash cows and focused on making money. Other companies like Amazon [AMZN], Salesforce [CRM] and Intuit [INTU] have demonstrated the same phenomenon and shown us that it’s something that any firm can learn. It’s not rocket science. It’s called radical management.

Fifty years ago, “milking the cash cow” could go on for many decades. What’s different today is that globalization and the shift in power in the marketplace from buyer to seller is dramatically shortening the life expectancy of firms that are merely milking their cash cows. Half a century ago, the life expectancy of a firm in the Fortune 500 was around 75 years. Now it’s less than 15 years and declining even further.   READ REST OF STORY

Questions for discussion:

  1. What does Jobs think is the reason why tech companies decline over time?

2.  What is Jobs solution to ensure that Apple stays a long term creative company?

18 Responses to “Peggy Noonan On Steve Jobs And Why Big Companies Die”

  1. Ivette

    I think that companies like Apple are not only successful because they mainly focus on innovation and in the ways they reward engineers and product developers. They became successful when they found a balance between the way in which they rewarded salesman and accountants and at the same time motivated and rewarded designers. Both functions are important to any company and they are related to each other in that without new innovative products, salesmen would not have anything to do. It is important, like Steve Jobs said, to stop focusing on milking the cash cows that are profitable and beneficial to the company only for a while and to instead invest resources and time into developing new products. This product development, however, is challenging, especially when it comes to finding out the needs of customers and when companies try to satisfy those need in the best possible way. It is hard to please the public and companies have to invest a lot of effort into this. Problem is, that most of the time companies are not willing to go through this process and that is why they end up failing as a business. It is then in conclusion, important for business managers to find that balance between investing in research and development and rewarding employees for the work they are doing in selling and marketing already existent products. Once this balance is found, companies are very likely to grow a successful business.

  2. Meagan

    Steve Jobs think tech companies decline over time is because they get people who don’t know the product get more involved than they need to. Companies these days are more interested in decreasing costs than trying to make a good product that customers want. The accountants and marketers are trying to find ways to save money but in the end its killing the product because it’s downgrading the amount of money the company spends to make it. When the company lowers the cost, too many of the supplies are not as good as they could be, and the people/machines building the product are not as good as the ones the company could be using if the company were willing to spend a little bit more to make a better product that customers want. Customers don’t want the cheapest made product and pay way more than it’s worth. No customers will be willing to pay more on something they know cost more to produce and is going to last. When the company produces using less they products don’t last as long and you are wasting money on your warranties instead of just using that money to make the product better the first time. In the end its better to produce normally and charge more for that better product cause then the customer is getting what they need and what they want and the company is still making a profit.

  3. Matt B

    Right now in our society Apple has taken a huge jump in technology. They continue to bring in new products that are satisfying their customers. Jobs solution to ensure that Apple stays a long term creative company is continuing to play offense. Apple has stayed so successful because they are creating innovations constantly that value the customer. They aren’t focused on cutting back costs on the product, because that tends to make the merchandise’s quality worse. As long as they keep moving forward and don’t start playing defence they will stay a successful company. He did a good job on keeping a happy medium with everyone in the company. He didn’t lean more towards the sales people so they can generate more revenues. He still focused on the product engineers and designers to show that the quality of the product was very important. The engineers and designers are the “white hot center” of the company’s daily life. Jobs believed the reason why tech companies declined over time was because companies continue to find ways to cut expenses to allow more profit towards the company. But really in the long run its hurting the company because they are making their products with less quality and customers start leaning towards other companies.

  4. Ellen H

    Jobs solution to ensuring that Apple stays a long term creative company is to focus on adding value for the customer. This is much more expensive to do than simply cutting costs, but he has proved with Apple that companies who do this will earn the profits they desire. By focusing on adding value to the customer, Jobs got everyone in the company working toward a common goal that made everyone feel equally important. The cutting costs method creates a negative work environment, where eventually the quality of the product declines to the point where customers are no longer interested in purchasing. By focusing on the customer, you also make them feel important to you. Without customers, businesses would all fail. They truly are the core of any business and yet, too often companies seem to treat customers the way they might treat suppliers or employees, inferring that in fact the customers work for them. Jobs created a technology that is very multi-functional, is constantly growing and improving, and is versatile or compatible across all products offered. The iPhone, the iPad, the iPod, were all designed with the customer in mind and has created a loyalty base which has resulted in millions of dollars in sales for Apple.

  5. Destiny S

    Steve Jobs intention with his giant Apple corporation was to build a business where employees would be motivated to make phenomenal products. Without doubt, the company has achieved this through their high quality computers, iPods, iPads, and other equipment. This article talks about how companies such as Apple strategize to make the most amount of money in the most efficient way. They discuss outsourcing, quality of components, employee benefits and pensions and investigate each financial aspect to determine the most appropriate route to generating the maximum profit. Steve Jobs utilized what the article terms “radical management” to create his giant, world-leading computer company which arguably may control the computer and technology market one day soon. Jobs suggested staying on the ‘positive’ side of things and not becoming stale, and always producing quality products for the consumer as they expect to purchase superior products.

  6. Breanne Marton

    Jobs feels that company’s decline over time because the first few years of the company’s life they put all their energy into creativity of technology and creating a new innovative product for the company. But as their business life goes on they forget about the need to satisfy the customer and focus instead on creating revenue through sales. In this way they no longer create new products or improve existing products for the consumer because their entire focus is on the salesman and on creating higher revenue through them. As such the IT departments feel that they are no longer valued and don’t feel the need to work hard any longer resulting in less productive work as well as a lower quality of new inventions if any at all. This will cause the company to decline overall as the consumer, regardless of customer service, will eventually change companies as they will be more interested in going to the retailer that has greater and newer amounts of products than the company that simply specializes in customer service. Today’s consumer demands both qualities to be considered of value. People are looking for brands that sell the most innovative products while providing excellent customer service at the same time.

  7. Erin

    The idea of adding value to the customer does not seem to be that difficult. The customer is the one that brings revenue to the company. It is funny that so many companies struggle with this basic problem that Jobs so clearly addressed. Adding value to the customer will help to ensure that a company will always have a customer, because as they continually come out with new products or services, consumers will continue to purchase, supporting the company. Apple adds value by continually innovating and having new products for consumers to consume. This keep them competitive in the global market. While costs are necessary to consider for any company, it is difficult to make them your primary focus and still make money. Serving the customer always has to be the main focus, whether it be through innovation, low cost products, or really building a relationship with each customer.

  8. Brad

    Jobs believes that the reason why prosperous tech companies, which at one point or another were in control of the market, decline is because of the lack of emphasis on the finished product. Jobs describes the fall of many companies in due part to putting the individuals who can push the product in charge, and they lose focus and light on the actual product that got their companies to where they are. Furthermore, the look at how accountants look to cut costs and to show short term profits, which makes the company play on the defensive side, will only hurt the company as they are not able to focus on the product for the consumers.

    The solution for Apple is that Jobs created a company that is able to endure all these faults that other company’s have made, and in turn focus completely on the product at hand and the wants of the consumers. If this is what the focus is, they will be able to continue to grow and show futures growth potential as well, while making profits.

  9. Pulkit Arora

    The reason that Jobs thinks that tech companies decline over time because most companies are focused on the wrong type of personnel like salesmen over accounts or designers and engineers. Yes although the salesmen are the ones that are interacting with the consumer which in turn gives them money, without the accountant or the designers and engineers, there would be no product to sell for the sales staff. In Apple, Jobs kept all staff members at the same level instead of giving priority to a certain department. His solution to keep Apple a long term company is that keep the consumer as your top priority since they are the ones buying the product and generating revenues. Everyone that works at Apple each has a specific job that results in the final product to be sold so therefore everyone should be treated equally. As stated in the article, the salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products. This clearly states how important every department is in making a final product rather than just the salesmen selling the product.

  10. B Schnell3

    The strategies of a company playing defence as explained in this article, are frustrating to say the least. I feel like the actions of a company who’s focus turns blindly to the bottom line, and only the bottom line relate to a systemic problem, and a problem that is being protested on wall street and around america. Capitalism is great, but everything in moderation right?? I believe the government needs to take a long hard look at the limits and restrictions they have on private enterprise. With that im getting a bit off topic, but I will agree with what Jobs has said, a focus on quality to the customer is a superior long term strategy.

  11. Wale Obateru

    Steve Jobs was a great sales man and CEO that made tremendous achievements and success during his time at Apple Inc. The impact he has made in this company is a legacy that will continue to live on for a very long time. One of the major reasons why Steve Jobs thinks tech companies decline overtime is the fact that most of these companies tend to focus more on the sales and marketing aspect of their company thereby neglecting the core aspects which actually led to the creation of these products in which the sales people market. Customer satisfaction is very important and to ensure this, products have to be of high quality to maintain customer loyalty. This is the reason why proper attention should be paid to Engineers and Designers who are the backbones of these innovations. There is need for companies to let these people know how important or key they are to the success and continous growth of the company which in turn will keep generating revenue for the company and increase their life expectancy back to or near the 75 years it used to be half a century ago. This, Steve Jobs referred to as “radical management”. He also noted that that executives who pay more attention to sales rather than innovation find it difficult to add value to their customers.

  12. Alejandro Valderrabano

    Because they stop to focus on innovating and creating new products that appeal and please costumersand instead they focus on selling the product, regardless of quality and pleasing costumers, as well as finding ways through accounting to cut costs and keep making money but at the same time to the detriment of the company’s core.
    The key to apple lasting over time would be to continously innovate, to focus on the costumer, to add value to costumers and in that way the product will sell itself, it would not be about pushing the product but actually of costumers pulling for the product.

  13. brett pudwell

    This article has a lot of interesting points in it. First of apple is so successful because of steve jobs and his innovations. It will be very interesting to see how Apple performs without him. In all reality, they have their computers which are a step above the rest, the iPod, iPhone, and iPad. They remain so dominant over the competition because they offer hands down the best products on the market compared to other firms. Now that they have lost their chief innovator, will they continue to excel as they have recently? It is very hard to tell. The article talks about milking cash cows until it eventually kills a company and I believe this to be very true. It is much harder to be innovative and constantly striving to blaze a trail for new products. Not only is this unbelievably difficult, but a company must have at least one or two very talented individuals capable of thinking up such products, and as you can imagine these individuals do not come around everyday. I think mist companies milk their cows to death because they do not possess these individuals and have no way of staying where they are. I think what is killing them is their inability to remain innovative, which most of the time they cannot help.

  14. Yanmei Sun

    The reason that Jobs think tech companies decline over time is when a company innovates and becomes a monopoly or close to it in some field, it then starts to attach importance to others more than quality of the product and the value of the customers. When the company put the salesmen in charge but ignore product engineers and designers, it would make the product engineers and designers feel demoted. They would not work as hard as before because they think they are treated unfairly.Engineers and designers are the backbones of the innovations for those companies and they need to be paid more attention.Also,customer satisfaction is another important reason.Add value to customers and make customers satisfied is very important which will make the company live longer.However, when the company stops playing offense and frustrate its customers,it then starts to die.All in all,according to this article, Jobs solution to ensure that Apple stays a long term creative company is that the firm should keep playing offense and focus totally on adding value for customers.

  15. Mark

    Steve Jobs believes that tech companies decline over time because once they have landed their baby project that is the new cutting edge product, they begin to capatilize on it. They capitalize on it in such a way that corporate strategy begins to be developed around possible revenue streams of that product, including: cutting costs, pushing sales, and focuses on beneficial accounting techniques.

    The problem is that strategy becomes so focused on the product of the moment and operations of the moment that a lot of companies lose focus on the development of the next “buzz” product. Companies that want to be on the top of the tech scheme of business need to constantly be looking for ways to innovate products that will help sustain their competitive edge.

    Apple’s success is directly related to constant innovation. To maintain their competitive adavantage they must always be focused on new ways to wow their customer as well as provide a range of products that are both technologically advanced and fashionable. Apple has very sleek designs with top quality technology on all their devices. They must always look for ways to imporove and expand on their tecnology, as well as making constant improvement to operater interfaces.

  16. Brett z

    Steve Jobs believes that tech companies decline over time by milking their cows to make the accountants papers look great. However, Apple has chosen to not go down this road, by creating innovative products which are appealing to the youth of today. Examples include their constant developments through the iPhone 4S, MacBook Pro, Air, and iMac. To be completely honest, Apple is excelling like no other tech company. Even here at the University, the majority of products you see, whether it be of staff, faculty, or students is Apple. Job’s solution, which is right on the money, is to not forget the money men. What Jobs’ means by this is that the business shouldn’t be just evolved around the salesman, rather the creators, product engineers, designers. It is these employees of Apple who continue to make the products for the new tech consumers.

  17. Kelsey K

    I do think that managers are a huge part of a company’s success. And I do agree that if faulty and wrong I think it could have a large effect on a company falling apart. I think a leader of a company is responsible for just that—-leading. It is important that a manager of a company is enthusiastic and informed about the products of which his/her company thrives on. And, I think that the main success of a company can be contributed to good customer service and team work—which involves having respect for your employees. Employees make a company; one person cannot run the entire thing. If employees are treated properly and fairly by their superior within the company it is more likely they will put more into the company. Our society is so innovative that new things are always being introduced, and thus it is harder for current large companies, such as Apple in this case, to continue to always pull in high products.

  18. Mallory

    According to Jobs, the reason why so many big corporation companies are declining is because at the start of the emergence of a company the technical employees are an important part to ensure that the quality of the product is at it’s highest. THen once the company starts doing well the quality slowly starts to decline because the company starts valuing the sales people more due to their great ability to sell their product. Once the sales people are put on a pedestal the technical engineers begin to feel demoted and therefore the quality of the product beings to fall short of expectations. The one thing that customers look for in a product is the quality of it, well that is what I look for in a product and once that quality isn’t as great as it use to consumers will start looking somewhere else for a better substitute that has a high quality. Consumers is what keeps a company going and without that support the company will eventually disappear. Not only is it the consumers that keep the company alive but managing their resources in an effective way so that the company doesn’t go under while providing the highest quality of products is another reason for companys disappearing.

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