Steven Jobs and Stephen Wozniak formed Apple Computer in 1976. Under Jobs’ charismatic leadership, Apple Computer experienced six years of rapid growth before it encountered decline, which was followed by a period of changes in leadership, organization structure, and strategy. The resignation of A. C. Markkula and the designation of John Sculley as the CEO in 1983 were the first of several changes that would ultimately transform the Apple organization. Apple before Sculley From 1976-1983, Apple was a small to moderate-sized corporation that was driven by one primary goal, “one person – one computer. Jobs’ strategic focus was on effectiveness and differentiation – creating innovative, easy-to-use products for the masses. In other words, Apple used the prospector strategy –taking risks and seeking new opportunities in a dynamic environment. With fierce competition in the business market, Apple’s strategy became one of focused differentiation that targeted home and education markets. As a young, innovative company, the organization structure was organic and characterized by low formalization, high specialization, and a short, decentralized hierarchy of authority.
The culture comprised of competing product divisions and a visionary leader who managed all daily business operations. The external environment was unstable and uncertain, as competition was fierce and consumer demand was growing. To remain responsive in an uncertain environment and to retain in-depth expertise, Apple was a hybrid divisional organization, with five product divisions, four product support divisions, and three corporate administrative divisions. During this period of rapid growth, Apple transitioned very quickly from the entrepreneurial stage to the collectivity stage.
Though Jobs was a charismatic leader, Apple was growing too rapidly for Jobs to continue managing daily operations while still heavily involved in leading the Macintosh product team. Consequently, Jobs hired Sculley as CEO in 1983. Apple with Sculley Upon Sculley’s arrival at Apple, he immediately recognized several organizational issues, including high duplication of activities, conflicting interdepartmental relationships, and an unclear understanding of goals and strategies across the company.
Apple had transitioned into the formalization stage, which led to the first of Apple’s several reorganizations. To minimize the duplication of efforts, Sculley reduced the organization to two product divisions and one accessories division, each to be managed as independent centers. To increase the understanding of goals and strategies and to instill discipline on managers, Sculley tightened control. The organization was now more formalized, more bureaucratic, and with a taller, more centralized hierarchy of authority.
Two main product divisions now reported to Sculley. This reorganization successfully minimized the duplication of work and in addition, allowed other inherent organizational issues to surface. As Jobs remained Chairman of the Board of Directors of Apple, the goals and strategies at Apple did not change during this period. Jobs’ focus remained on effectiveness and differentiation. Jobs targeted the business market for the Macintosh. However, concerns with its image and its incompatibility with other manufacturers led to Apple’s first quarterly loss.
During this period, Jobs was missing delivery schedules, there was no direct sales force, conflict between the product divisions was heightened, and Jobs and Sculley disagreed over the marketing strategy. Sculley was losing control as information was not promptly conveyed to him and operating decisions were made without him. Sculley recognized that they were entering the blinded stage of organization decline – the decentralized management structure wasn’t appropriate in an uncertain environment where Sculley lacked knowledge in the personal computer industry. Sculley recognized the need for a second reorganization.