Apple’s Brain Drain
One of the many great strengths of Apple CEO Steve Jobs has been his ability to surround himself with incredibly brilliant people. Over the past decade Jobs has assembled one of the best executive teams in any industry, comprised of men—and yes, they are all men—who are not just very good at what they do but also extremely loyal to Jobs.
But in recent months two top lieutenants have left the company, and while it is way too early to say that Apple is in trouble, it seems we may be seeing a changing of the guard at the company, one that will mark the end of an era that began in 1996, when Jobs returned to the company he co-founded and launched the most remarkable turnaround in corporate history.
The latest defector is retail chief Ron Johnson, who announced yesterday he would be leaving to become CEO of retail giant J.C. Penney.
In March, Apple lost Bertrand Serlet, a revered software engineer who oversaw development of operating-system software for Macintosh computers. Serlet had been working with Jobs since the days of NeXT, the computer company Jobs founded in the 1980s after being tossed out of Apple.
Jobs has been out of the loop since January, when he announced he was going on yet another medical leave.
He has suffered from pancreatic cancer and received a liver transplant, and reportedly has been receiving treatment for cancer again. He has appeared on stage at two Apple events, including one earlier this month. On both occasions he received rousing ovations, and he seemed cheered by the applause, though he looked frightfully gaunt.
Analysts say the loss of of Johnson is not a disaster, but make no mistake—this is not good news for Apple.
For one thing, Johnson is a retailing genius, a guy who joined Apple in 2000 after 15 years at Target, and oversaw Apple’s massively successful campaign to build all those gleaming, hugely profitable Apple stores around the world.
More significant is what Johnson’s departure says about Jobs. My guess is that the departure of Johnson indicates that a) Jobs is not returning to Apple from his medical leave; and b) Tim Cook, Apple’s chief operating officer, who has been running the company during Jobs’s absence, has locked up the CEO job.
Apple put out the following statement about Johnson’s departure: “Ron is excited about this opportunity and we hope it goes well for him. We’ve got a great retail team in place and are actively recruiting for his replacement.”
Johnson, for his part, said in a press release that he joined J.C. Penney because he’s always wanted to be CEO of a major retailer.
Interestingly enough, a J.C. Penney spokeswoman says the company first approached Johnson several years ago but that Johnson felt “it was not the right time then.”
Now, apparently, it is the right time. Charles Wolf, analyst with Needham and Co., says in his opinion Johnson was a better candidate to become CEO of Apple than Tim Cook, and that “The only message I got out of Ron's departure is that he either had no chance to become Apple's CEO or may not have wanted the job if it were offered.”
The latter, Wolf says, is entirely possible, because “retail is what Ron loves, and he’s out to prove he can match the best of the merchants.” Also, Wolf says, “Ron relishes impossible challenges,” and that includes “turning around a crappy department store chain.”
The risk, however, is that other members of Apple’s management team also might start to wander away in search of new challenges—not necessarily because they wanted to be CEO and got passed over, but because they’ve made a fortune at Apple, and the company is doing well, so why not try something new?
Also because working at Apple might not be as interesting if Jobs is no longer in charge. Though Cook is a capable leader and said to be respected by the rest of the executive team, the low-key veteran of IBM and Compaq doesn’t have the charisma and personal magnetism that can keep top talent around, the way Jobs has done.
For example: Jon Ive, Apple’s design guru, is one of Jobs’s dearest friends. The two are so close that people at Apple sometimes call them by a single nickname—Jives. Ive also happens to be a bit of a car nut. What happens if an automaker offers him the chance to reinvent an iconic marque?
Johnson earned $400 million during his 11 years at Apple, and cemented his reputation as a visionary retailer.
He came to Apple from Target. A lot of pundits scoffed when Apple opened its first retail stores in 2001, when the economy was hurting and other computer makers, like Gateway, were closing retail stores. In an article titled, "Sorry Steve: Here's Why Apple Stores Won't Work," Businessweek famously predicted the effort would flop, quoting an analyst who said, "I give them two years before they're turning out the lights on a very painful and expensive mistake."
But the Apple stores were a huge smash hit, and by 2009 Apple's Fifth Avenue store in New York was generating more dollars per square foot than Tiffany's.
That success was due largely to Johnson, who envisioned a new kind of retail store with lots of white space and clean, uncluttered displays where people could get their hands on Apple's products. Johnson also created the idea of the "Genius Bar," where you can go for customer service.
Tim Bajarin, president of Creative Strategies, a consultancy in Campbell, California, and a longtime Apple watcher, says Johnson has groomed his people so well that he can leave the company and there won’t be a hiccup. “Johnson is one of those guys who from the very beginning was working himself out of a job,” Bajarin says. “He has been training an incredibly elite staff to drive their retail business. Ron was their visionary, but the strategy is so entrenched now that his team won’t even miss a beat.”
Jean-Louis Gassee, a former top executive at Apple who still follows the company closely, speculates that Johnson simply wanted to be a CEO and knew that this wouldn’t happen for him at Apple.
Will others also be lured away? That’s what happened at Microsoft after Bill Gates stepped down as CEO. A lot of guys who were loyal to him decided they could have more fun elsewhere. If or when Jobs decides not to come back, it would not be surprising to see the same thing happen at Apple.