Introduction:

Steve Jobs spends an hour talking about what’s next for his computer company and why it’s needed. He chooses to focus on operational productivity and share some of his learnings and mistakes. He references the work of Paul Strassman to make his point.

The Business Value of Computers:

Jobs cites a book by Paul Strassman, the CIO of the Pentagon, called “The Business Value of Computers.” Strassman found that companies, irrespective of their success levels, spend about 2% of their revenue on information technology. The difference lies in how they allocate that spending. Successful companies invest in operational productivity, while less successful ones focus more on management productivity.

Shift to Operational Productivity:

Jobs notes that early computing solutions, like PCs and Macs, targeted management productivity but did not adequately address operational productivity. Strassman’s research suggests that this is where the real business value lies. Jobs reflects that only now are companies starting to realize the need for operational productivity through custom operational applications.

Evolution of Computing for Operations:

Historically, mainframes and minicomputers were used for backroom applications and did not make significant inroads into operational productivity. The front offices in corporations have recently taken initiatives to run servers with standard databases and write custom operational applications, which have proven to be mission-critical.

Next’s Competitive Advantage:

Jobs introduces Next Step, a software that allows the creation of applications five to ten times faster than competitors. This speed allows companies to gain a significant competitive advantage by deploying operational applications much faster. Jobs compares this to how desktop publishing became the compelling advantage for Macs, despite it not being anticipated originally.

Conclusion:

Steve Jobs believes the next revolution in desktop computing will focus on operational productivity. By leveraging faster and more efficient software solutions like Next Step, companies can gain a significant competitive advantage. Jobs calls for a shift in focus and resources towards this emerging paradigm, drawing parallels to how desktop publishing unexpectedly became the killer app for the Macintosh.

Target Audience and Initial Success:

Steve Jobs talks about the creation of NextStep, a revolutionary object-oriented software. The initial focus was to help PC software developers like Lotus and Adobe create applications five to ten times faster than before. This strategy worked, resulting in a variety of leading applications in different categories.

Unintended Market Realization:

By early 1991, larger companies approached Jobs, pointing out that NextStep’s capabilities were solving a bigger problem: speeding up the development of in-house, mission-critical applications. Jobs admits it took them three months to realize this new avenue for their technology.

Shift in Strategy:

NextStep then changed its sales and marketing focus to cater to this broader need. This pivot resulted in significant growth, quadrupling the business in one year and allowing them to engage with customers they had only dreamed of talking to previously.

Software vs. Hardware:

Jobs contrasts the ephemeral advantage hardware offers with the more sustainable edge provided by software. He notes that hardware evolves rapidly, making it difficult to maintain a competitive advantage. On the other hand, software takes much longer to be replicated, citing Microsoft’s long struggle to match the Mac OS as an example.

Future Growth Plan:

Jobs believes they have a window of three to four years to grow before facing significant competition. This period will allow them to scale up enough to compete with larger companies in terms of resources.

Value of Long-Term Ownership:

Responding to a question about consultants, Jobs criticizes the practice of making recommendations without taking long-term ownership. He argues that one can only truly understand a problem by seeing it through all stages, thus accumulating valuable experience and knowledge.

The Three-Dimensional Experience:

Jobs uses the metaphor of a ‘two-dimensional picture of a banana’ to explain the shallow experience that consultants gain. According to him, without the experience of ownership, one never gets a ‘three-dimensional’ understanding of the challenges and complexities involved.

Software Expansion:

Steve Jobs discusses the extension of Next Step to non-proprietary hardware, notably Intel’s 486 platform. The software will be identical in functionality, and the plan is to offer it at $9.95. He also mentions OEM deals with other companies. Next Step’s expansion is backed by prominent industry players like Intel and Novell, mainly due to its potential to offer an alternative to Microsoft’s growing influence.

Competition Fears:

Companies are aligning with Next Step as they see it as a potential challenger to Microsoft, which holds considerable power in system software. Companies like Intel and Novell are assisting Next Step’s development because they are worried about Microsoft’s dominance and want to maintain a competitive landscape.

Customer Requests & Dilemma with Sun:

Customers have asked for Next Step to be ported to Sun platforms as well. Sun, however, has shown resistance to this idea. Jobs is considering whether porting or not porting would be more detrimental to Sun, but leans towards fulfilling customer requests.

Role of Hardware:

Jobs addresses the question of whether they should exclusively become a software company. His answer is no; they plan to be both a software and a hardware company. He argues that expanding software to other platforms will likely increase overall hardware sales. Their hardware division’s goal is to make the best Next Step hardware, which may not necessarily be the cheapest.

Sales Strategy:

The company employs a direct sales force focused on selling Next Step software, which consequently also promotes the hardware. Jobs argues that the current distribution channels in the computer industry have lost their ability to create demand for innovative products. Therefore, a direct sales force is essential for educating the market about revolutionary products.

Limited Possibility for Software-Only Model:

Jobs argues that a software-only company wouldn’t have the financial capability to maintain a direct sales force, given the lower average selling price of software. Therefore, he contends that being a hardware company is crucial to their software business’s success.

Competitors:

According to Jobs, their primary competitors are SunSolaris, Microsoft, and Talagent. He dismisses Sun’s software as falling behind and notes that Microsoft’s NT is mainly an improved operating system with a poor development environment, limiting its potential in mission-critical applications.

On Competition with Taligent:

Steve Jobs acknowledges Taligent as the first true competitor to his company. He believes Taligent aims to ship a product by 1995, and if they execute well, they could reach the company’s current capabilities by the mid-’90s. Jobs considers Taligent as a company to be taken seriously, especially since they have significant resources.

Impact of Object-Oriented Programming:

Jobs mentions that Taligent’s focus on object-oriented programming has indirectly validated his own company’s direction. Currently, his company is the only player in the market with object-oriented capabilities, and he believes this gives them a competitive advantage for the next few years.

Next Step: Operating Environment vs Operating System:

In response to a question about the operating system market, Jobs clarifies that he views Next Step more as an ‘operating environment’ than an operating system. He indicates that Unix is just 10% of Next Step, emphasizing that Next Step offers a rich set of pre-built objects to expedite development.

Software Development Efficiency:

Jobs makes an interesting point about code efficiency in Next Step, stating that although you don’t write code faster, you write about 20% of the code you would in other environments. He attributes this efficiency to the availability of pre-written objects, leading to less code that needs to be written and maintained.

Future of Software Development:

He predicts a ‘fracturing’ or ‘transition’ in software, similar to what occurred when the Mac came out. He believes that object-oriented environments like Next Step offer benefits beyond rapid development, including richer user experiences.

Outsourcing and Development:

Jobs tackles a question about the implications of outsourcing development. He acknowledges that a lack of developers could be a potential bottleneck but notes the growth in in-house Information Systems (IS) departments and third-party companies focused on development as a positive trend.

In summary, Steve Jobs provides a comprehensive overview of his perspectives on Next Step’s capabilities, its positioning against competitors like Taligent, and the broader shifts he anticipates in software development and deployment.

On Leaving Apple:

Steve Jobs reflects on his exit from Apple, noting that everyone involved “lost” something. Despite the setbacks, Jobs mentions his happiness whenever Apple launches a new product, emphasizing the need to move forward.

Identity Crisis at Apple:

Jobs describes Apple’s struggle with its corporate identity. He identifies two internal camps: one aiming to be a serious computing company, and the other aspiring to be the “Sony of computers.” The latter, focused on consumer-friendly products, has won out, shaping the company’s current direction.

Product Strategy:

Jobs critiques Apple’s focus on portable and consumer electronics at the expense of power users and high-end desktop solutions. He comments that although Apple’s PowerBooks are good, their high-end products like Quadras are falling behind.

Revenue Challenges:

He discusses the difficulties of achieving high sales volumes in consumer electronics, pointing out that even if Apple manages to sell a product at high volumes, they still need to find a source for the rest of their revenue.

State of the Industry:

Jobs observes that not just Apple but the entire industry, including the PC and Windows world, is focused on portability rather than power. He notes the failure of much-hyped operating systems like System 7 and OS/2 to deliver on their promises, leaving power users wanting for more.

Final Thoughts:

Jobs does not outright say Apple is doomed or will fail; he suggests that the company is just heading in a different direction. The conversation leaves open-ended the question of what might have happened had Jobs not left Apple.

Leadership Changes:

Steve Jobs highlights significant leadership appointments at Next. Mike Slade, former Microsoft executive, is now Next’s VP of Marketing. Marcel Ghani, from Intel, is the new CFO. Recently, Peter van Kylenburg was hired as the COO. Jobs emphasizes the quality of these hires, stating that attracting top talent often takes a year or more.

Organizational Restructuring:

Next consolidated its hardware design, manufacturing, worldwide distribution, and hardware service into one division, improving efficiency and responsibility tracking. A similar software division is in formation. This structure aims to make two independent yet cooperative businesses successful under the same roof.

Strategic Focus:

Mike Slade, the VP of Marketing, has been instrumental in redefining the company’s marketing strategy. The focus has shifted to meet the needs of large companies requiring mission-critical custom applications.

The Importance of Not Settling:

Jobs talks about the rigor involved in hiring decisions. He mentions how it takes time to find the perfect candidate and that compromising for second-best is never an option. He feels this approach has benefitted the company in running more efficiently than ever before.

Self-Assessment:

Jobs acknowledges that while the company has made mistakes, it is now running better than ever, thanks to key leadership hires and structural changes. He suggests that these changes are setting the stage for future growth.

Concept of Technology Windows:

Steve Jobs discusses the idea of “technology windows,” which are periods when disparate technological advancements converge to enable quantum leaps in product development. These windows don’t just appear; they are evident in R&D labs and academic settings like MIT’s Media Lab. A technology window ‘opens up’ when these advancements make a new product or service barely possible.

Five-Year Development Cycle:

According to Jobs, it takes approximately five years to develop a commercial product that takes advantage of a technology window. Drawing on his experience with products like the Apple II and the Mac, Jobs describes the process as often challenging and expensive, sometimes requiring course corrections like transitioning from Lisa to Macintosh.

Market Exploitation Phase:

Once a product is developed, it takes an additional five years to fully exploit the technology in the marketplace. The lifecycle of products like the Apple II, DOS, and Mac indicates that these technologies often last for a decade or more. This longevity is not due to convenience or economics but because developing groundbreaking technology is inherently difficult.

Current and Future Technologies:

Steve Jobs mentions that Next Step, the company he was discussing, is poised to take advantage of the currently open technology window. The core technologies are already in place, and they are working on integrating upcoming advancements in areas like video and security. He also mentions that products are becoming smaller, faster, and more portable.

Object-Oriented Technology:

Jobs concludes by stating that object-oriented technology is the most significant technological breakthrough he has seen since the early ’80s introduction of graphical user interfaces. He predicts that its impact will be even more substantial over time. Next Step aims to be a tool to help build products that exploit this breakthrough.

Apps vs Tools:

Steve Jobs discusses the strategic dilemma for software companies: whether to focus on developing applications like Word or Excel or to create objects and tools that other developers can use to build apps. He asserts that the traditional software market, dominated by companies like Microsoft, makes it challenging for new entrants to make a significant impact. According to him, unless you have significant capital for marketing—around $50 million—it’s difficult to make your product known. Therefore, Jobs suggests the future lies in developing objects and tools, essentially going where the competition is not.

The Role of Higher Education:

Steve Jobs also talks about the role of higher education in the technology sector, particularly from a marketing perspective. He mentions that initially focusing solely on higher education might have been a mistake, but adds that educational institutions provide valuable feedback and serve as a talent pool. He emphasizes that companies should heavily discount their products for higher education not only for the immediate market but also for the long-term benefits. He states that their strategy has been effective, as their workstations are the number one sellers across U.S. campuses, and are especially popular at institutions like MIT and Stanford.

Future Marketing in Academic Institutions:

When questioned about the specific strategies for penetrating the academic market, Jobs highlights their existing success. He mentions their broad campus presence and high sales rates, effectively making them the number two selling computer at prestigious institutions. Jobs argues that focusing on educational institutions helps companies refine their products and also create a pipeline of qualified talent that can be hired upon graduation.

Project Athena’s Limitations:

Steve Jobs discusses why projects like MIT’s Project Athena fail to materialize into successful commercial products. He explains that the people who pioneer these research ideas are not the same people needed to commercialize them. The projects may have good prototypes, but ultimately the ideas are picked up and made into real products by others in the industry.

Academic vs Commercial Environments:

Jobs argues that trying to develop commercial software within an academic setting is a mismatch. The focus of academic research differs from what is required to make a commercial product succeed. Hence, he suggests that projects like Athena should have a definite beginning, middle, and end.

Industry Trends in Higher Education:

He observes that the computer industry has advanced enough that universities now have intricate, campus-wide networks. Public access labs equipped with modern computers are becoming the norm, making former cutting-edge projects less relevant.

Leadership and Team Building:

Jobs shares that he has learned to take a long-term view of his team. Instead of focusing on immediately solving problems, he thinks about how to help his team learn and grow. This approach, he admits, is sometimes challenging to implement.

Conflict Resolution and Decision Making:

Steve Jobs describes his approach to management, emphasizing the importance of consensus. He suggests that the key decision-makers should talk through a situation until they reach agreement. He believes in paying people not just to perform tasks, but to contribute valuable insights and ideas to the company.

Product Development and Market Trends:

Jobs explains that the tech industry is bifurcating, with one segment focusing on portability and another requiring high-speed, non-portable solutions. He outlines the limitations of current portable technology and suggests that his focus is on optimizing power for mission-critical applications.

Technology’s Double-Edged Sword:

While advancements in technology like lightweight portables serve one market, Jobs notes they may not fulfill the needs of users who require speed, storage, and high-quality displays. This creates a challenge in product development, where achieving one feature often conflicts with another.

Automated Manufacturing:

Jobs briefly touches on the role of automation in keeping costs down. Their automated factory allows them to compete on price, even while offering premium features.

Overall, Steve Jobs provides a comprehensive look into the intricacies of turning academic projects into commercial products, the importance of the right team and management style, and the trade-offs involved in tech product development.

Introduction to Manufacturing:

Steve Jobs began the presentation by identifying the background of his audience in manufacturing. He emphasized his own passion for the industry and mentioned that the topic had been crucial during his time at both Apple and Next.

The Mac Factory: An Initial Success with Mistakes:

Jobs recounted his experience building the Mac factory during his time at Apple. He stated that despite it being a “breakthrough” in the industry, they made significant mistakes.

Challenges of Warehousing:

One key mistake was the use of warehouses, which Jobs labeled as problematic. He elaborated that warehouses often lead to issues with inventory management. If an item is defective, it can be hard to identify quickly, delaying necessary improvements and adding to costs.

The Philosophy of JIT (Just-In-Time):

Jobs discussed the concept of Just-In-Time (JIT) manufacturing. In this model, materials are delivered directly to the factory floor as they are needed, eliminating the need for warehouses and improving efficiency and product quality.

High-Tech Warehouses: A Pitfall:

Jobs noted that even automated systems in the Mac factory essentially functioned as high-tech warehouses, which clashed with the JIT philosophy. This revelation influenced the design of the Next factory to be a “true JIT factory,” where everything from incoming to outgoing materials is made more efficient.

Stages of Companies’ View on Manufacturing:

Drawing on the work of a Stanford Business School professor, Jobs outlined that companies often exist on a spectrum when it comes to their views on manufacturing. Some companies see it as a “necessary evil,” while others fully integrate it into their strategy.

Quality Feedback and Continuous Improvement:

Jobs emphasized the importance of catching defects early in the manufacturing process, which allows for immediate corrections and prevents larger issues down the line.

Through this discourse, Jobs offered valuable insights into manufacturing strategies and pitfalls, drawing from his own experience and shedding light on how attitudes toward manufacturing can shape a company’s success or failure.

Manufacturing as a Competitive Advantage:

Steve Jobs described a five-stage spectrum that companies occupy regarding their view on manufacturing. The highest stage consists of those that see manufacturing as an avenue for competitive advantage, where faster time-to-market, lower costs, and higher quality are key drivers.

American vs. Japanese Manufacturing:

Jobs briefly touched upon the geographical differences in manufacturing philosophies, suggesting that while American companies had fallen behind, things were changing. New talent entering the field and better salaries are shifting the paradigm.

Computer Companies and Software:

Shifting to the software industry, Jobs categorized computer companies based on how they view software. He claimed that very few companies, namely Apple, Microsoft, and Next, use software as their starting point and work backwards.

Factory as a Software Problem:

One of Jobs’ most striking insights was treating the factory as a software problem. This involved hiring software engineers first to develop the manufacturing process. Their unique approach considered robots merely as “interesting I.O. devices” and aimed to solve problems through software.

Evolution of Robots and Software:

Initially, the factory used turnkey robots with pre-written software, which performed adequately but weren’t fully satisfactory. For the second generation, Next decided to write all the software in-house using object-oriented programming, providing greater control over the manufacturing process.

Integration of Object-Oriented Systems:

Jobs highlighted the factory’s current state, where the entire system operates on object-oriented software, encompassing “robot objects, quality objects,” and other features. This gives them immense control and adaptability in manufacturing.

By considering manufacturing as not just a mechanical operation but an integrated software problem, Jobs emphasized that companies can achieve a competitive edge. This multidisciplinary approach exemplifies how manufacturing and software can coexist to generate innovative solutions.

In-house Robotics:

Steve Jobs discusses his fascination with Japanese factories, where he noticed they weren’t afraid to build their own robots if they couldn’t buy one. Inspired by this, his company also started designing its own robots, finding the approach surprisingly cost-effective. These robots have been integrated into their manufacturing process, allowing computers to be assembled entirely without human intervention.

Time-to-Market and Integrated Development:

Jobs emphasizes the importance of time-to-market as a competitive advantage. By directly integrating data from computer-aided design (CAD) systems into the manufacturing process, his team can swiftly move from design to production. This has eliminated the need to build engineering prototypes separate from the manufacturing process, ensuring a smoother transition from design to product realization.

Interdisciplinary Collaboration:

Jobs highlights the close collaboration between engineering and manufacturing teams within his company. Both groups work off the same databases and processes, fostering parallel development and saving time. This relationship has been nurtured by hiring engineers for manufacturing roles, thus elevating the status of the manufacturing department within the company.

Supplier Relations and Quality Control:

When it comes to raw materials, Jobs shifts the responsibility to suppliers, emphasizing timely and defect-free deliveries. Their approach is not to command but to offer a partnership that benefits both parties. Key suppliers, such as Motorola, are provided with real-time quality statistics to improve the supply chain.

Future Technologies and Growth:

Finally, Jobs speculates on the future of technology. While he thinks Mac computers will continue to grow in certain segments, he foresees limitations in their capabilities for future demands, suggesting the need for new technologies to fill the gaps.

The overall message centers on the importance of innovation, interdisciplinary collaboration, and a well-coordinated supply chain as vital elements for achieving competitive advantages in manufacturing.