Calculated Move: Apple Computer Tries To Achieve Stability But Remain Creative

Product Development Is Put Under Tighter Control Than in Steve Jobs Years

Still Needed: Spark of Genius

By Brenton R. Schlender, Staff Reporter
The Wall Street Journal

July 16, 1987

Cupertino, Calif. -- In its 10-year history, Apple Computer Inc.'s best products have sprung from unlikely cradles.

The Apple II personal computer, which in 1977 launched a whole new industry, was born in co-founder Steven P. Jobs's now-legendary two-car garage. And the Macintosh, currently the biggest-selling personal computer in the U.S., was the labor of love of a handful of renegade engineers who virtually seceded from the rest of Apple, rallying around the charismatic Mr. Jobs and a pirate flag.

Now, however, the garage and the Jolly Roger and even Mr. Jobs -- symbols of more romantic times at Apple -- are rarely mentioned. Instead, employees point to an imposing new symbol of a more business-like approach to research and development: a $15.5 million supercomputer. Humming away in an antiseptic lair at the end of a futuristic foyer bathed in eerie blue light, it is the centerpiece of efforts that this year alone will cost Apple $185 million and keep busy one-sixth of its 6,100 employees.

Apple's goal is similar to that of many high-technology companies: to institutionalize inventiveness to produce a steady stream of new products, without inhibiting the individual creativity that made the company a technological trailblazer in the first place. It is a rite of passage many high-tech start-ups fail to navigate as they try to grow into industry leaders.

"Most high-tech companies don't make that transition mainly because they can't overcome conflicts between the geniuses who come up with the ideas and the 'doers' -- the business people who actually run the company," says William Dowdy, the director of the Technology and Innovation Management Center at SRI International Inc., a think tank in Menlo Park, Calif.

Apple knows firsthand how such conflicts can paralyze product development. Before Mr. Jobs left the company in 1985, Apple's new-product strategy was what John Sculley, Apple's chairman and president, calls "a one-man show" that had left the company's "pipeline" of new products empty after the Macintosh had been introduced the year before. Apple's offbeat but inspired engineering "skunkworks" had run amok, as Mr. Jobs repeatedly clashed with engineers and other managers.

"That will never, ever happen again," Mr. Sculley vows. The executive, an architect by training, contends that the corporate renovation he drew up following Mr. Jobs's departure is enabling the passion and ideas for new products to "percolate freely from within" rather than be "dictated" from on high. As a result, "It's like spring," he asserts. "Apple is bubbling with new-product ideas."

Indeed, the new approach to product development has already borne fruit. Some new machines -- an improved Apple II and two souped-up Macintoshes -- clearly demonstrate that Apple now can quickly enhance existing products to make them appeal to much broader markets.

Customers' enthusiastic response to those products is the main reason Apple has surpassed even its own financial expectations. Earlier this week, the company reported that profit in its third quarter, ended June 26, surged 65% from a year earlier, to $53.5 million, or 40 cents a share. Revenue rose 42%, to $637.1 million.

Whether better-organized efforts can yield more breakthrough products remains to be seen, of course. "Reorganizing doesn't come up with great new products; people do," says Andrew Hertzfeld, a self-taught former Apple software engineer who helped design the original Macintosh. "And it doesn't just take talent; it takes a cantankerous personality that won't compromise. I don't know if a big company and large teams of engineers can do that."

Apple is betting that they can. And to that end, Mr. Sculley has done more than simply buy a supercomputer and double the research and development budget. He has consolidated development efforts of all Apple's product lines into a single group. His new managers have reined in unauthorized skunkworks and included marketing and manufacturing people early in the product-development process.

Moreover, while Apple has slashed its payroll, it has continued to hire engineers. Now, it employs more than 1,000 of them, including 110 working on more distant "advanced technologies" rather than on particular products.

And to make up for some of the passion and idealism that left with Mr. Jobs, the company has expanded its stable of highly paid Apple Fellows -- industry luminaries commissioned to "evangelize" both inside and outside the company, to recruit other top people and to brainstorm for new ideas. One Apple Fellow, for example, is studying how children learn, in hopes of finding ways to create truly intelligent artificial intelligence -- computers that learn as they go. Another is looking for ways to combine video devices and computers.

Apple is trying, in short, to replace Mr. Jobs's single-minded, often-impulsive passion to create a few revolutionary products with a more structured, collegial approach aimed at developing more coherent families of computer products.

"Steve's bizarre way of thinking and managing product development was perfect in an industry where nothing was known," says Alan Kay, an Apple Fellow who is one of several Apple computer scientists who pioneered the idea of a personal computer at Xerox Corp.'s Palo Alto Research Center in the late 1960s and 1970s. "But he isn't nearly as effective in an established industry."

By the early 1980s, personal computers already were a multibillion-dollar business, and the needs of the marketplace, as much as new technology, had come to shape the industry. Even so, Apple, under Mr. Jobs, tried to use brute technology to change the ways people used computers.

First, the Lisa, an ambitious but overpriced office-automation computer, failed miserably. Then, the Macintosh, which packed many of the Lisa's novel features into a smaller, cheaper package, also missed its mark at first; it was perceived as only an expensive toy. For one thing, it had barely enough memory to contain, say, a word-processing program and more than a single document at once.

Besides misreading the market, Apple's product development under Mr. Jobs had other problems. Mr. Jobs, who now heads another start-up computer company called Next Inc., kept some of his favorite projects secret from the rest of Apple management. Enzo N. Torresi, the senior vice president of product and strategic planning for Businessland Corp., one of Apple's leading retailers, recalls that Mr. Jobs, when still at Apple, "would sometimes call for feedback on a product idea and would tell me that 'John {Sculley} didn't even know about this one.'"

The Macintosh itself was developed largely in secret. Mr. Kay says it wasn't shown to other executives or product engineers outside the Macintosh team until the final design was settled, although Mr. Jobs did give folk singer Joan Baez a peek.

But Mr. Jobs has his defenders. "It took somebody like Steve who was willing to write his own book," says Mr. Hertzfeld, who left Apple in 1984. "The Macintosh is a great machine because it came from the heart, not from the pocketbook."

Even Jean-Louis Gassee, an ebullient Frenchman brought in by Mr. Sculley in 1985 to manage the revamped product-development efforts, still defends the "fundamental rightness" of the original Macintosh idea, especially its playful graphics. Even so, within days of arriving at Cupertino, Mr. Gassee told engineers that within 18 months he wanted two all-new versions of the Macintosh.

The first was what turned out to be the Macintosh SE, which spruced up the original Macintosh to make it easier to customize with add-ons that could, say, let it mimic an International Business Machines Corp. PC XT personal computer. The other, to be called the Macintosh II, was a full redesign of the Macintosh, giving it a color display and making it completely "open," so that users ranging from engineers to typesetters to business executives to artists could outfit the machine to handle their special needs.

"The Mac II wasn't only a machine; it was a prototype of the more formalized product-development process," says Ronald Hochsprung, the lead hardware engineer for the project.

Though initially suspicious of the more formal approach, Mr. Hochsprung credits the rigorous schedule of product-review meetings with speeding things up rather than bogging things down in bureaucracy. "In the past, you'd get your project done in a back room, show it to the marketing and management people and they would say, 'That's not what we want,' and cancel it or send you back," he recalls. "Now, we get those people in on the process early" to avoid so many false starts.

The Macintosh II also illustrates Apple's attempts to hedge its bets with parallel competitive projects. In the beginning, the Macintosh II, then code-named Little Big Mac, was one of three competing designs. And even after the final architecture was set, parallel engineering teams competed to develop certain crucial features, such as the "bus" that routes instructions and data around the machine.

Although Mr. Gassee implemented the unwieldy-sounding "cross-functional review groups" that pulled manufacturing and marketing people into the design process, he contends that the Macintosh II also benefited from "serendipitous things we didn't institutionalize." Some came about "simply because the project slipped" behind schedule, allowing time to experiment with more advanced features than originally planned, he says.

For example, members of the advanced-development group had been tinkering on their own with snazzier sound and graphics systems, without any particular product in mind. Largely because of the new openness in the product and advanced-development groups, however, the Macintosh II team knew of their work and was able to incorporate their designs when the original plans faltered.

"I had been working on my video chip three years ago, and back then nobody even knew I had it," recalls Toby Farrand, a curly-haired 26-year-old credited with making fast, full-color graphics possible on the Macintosh II. "Even though it worked, they never would have used it" under the old, more secretive system, he asserts.

Another benefit from the new approach is reduced fear of grave consequences if a project fails to become a product. "The ability to fail is very important to a hightech company," says Allan Alcorn, an Apple Fellow best known for taking Atari Corp. founder Nolan Bushnell's idea for the first video game and turning it into Pong. "In fact, you can measure a company's creativity by its failures better than anything else."

Finally, there is less of the favoritism fostered by what some engineers call "the hero system" of the past. "In the old environment, hero worship made certain people feel they were too important," says John Medica, the 28-year-old product manager who coordinated the Macintosh II effort-and whose business cards facetiously list his title as "Big Shot."

The changes have improved morale and hence increased the flow of new products. Although Apple won't disclose what products it is working on or which have been discarded, Mr. Sculley has said Apple will announce more new products in 1987 alone than in its entire history prior to this year. Analysts speculate that in the next 18 months, it will introduce a portable Macintosh, a less expensive color version of the Macintosh, at least two printers, an upgraded Macintosh operating system that will allow several programs to run simultaneously, and other accessories and addons.

Still, the more collegial approach doesn't please everybody. "Apple is very est-like," says Thomas Jennings, a former software engineer, referring to the tendency at the company to spout New Age homilies to lend a moral fervor to design work. And, he asserts, "There's a pseudo-informality. It's all a kind of background noise that can be very distracting to those who simply want to do their work."

Moreover, the reorganization of the product-development group has created more mundane complications. Office space is so short that most hardware designers work on one side of a six-lane thoroughfare that cuts through Cupertino, while software designers are on the other side. Two programmers have been struck by cars while trying to dodge traffic on their way to meetings with hardware designers. Neither was hurt seriously.

In any event, to keep coming up with truly innovative products always takes more than bigger budgets, supercomputers and sweeping reorganizations; it also takes brilliant individuals. And even Apple sometimes finds itself short of them.

When it came time to demonstrate the audio and visual powers of the Macintosh II at its introductory bash in Los Angeles last March, for example, Apple didn't rely on the Cray supercomputer or even its own software engineers. Instead, it hired Steven Capps, a member of the original Macintosh development team who had left the company in 1986. In less than two weeks, he wrote several programs that took the new machine through its paces, including a breathtaking animated image of the sun rising over an idyllic valley that brought the audience to its feet.

Asked why Apple turned to him instead of its own employees for such crucial software, Mr. Capps, who left to learn French and pursue projects on his own, shrugs and says, "I guess they needed something really good, really fast."

              Apple's Chronology of New Products

                                              Annual R&D

                     Product                Expenditures

                     Introduced           (Product being

   Year              (initial price)          developed)

   1977               Apple II              $100,000

   June               $1,295                Apple II

   1978               Apple Disk            $600,000

   June               Drive                 Apple II

   1979               Apple II Plus         $3,600,000

   June               $1,195                Apple III/Lisa

   1980               Apple III             $7,300,000

   Sept.              $3,495                Apple III/Lisa

   1981               IBM P.C.              $21,000,000

   Aug.               Introduced            Lisa/Macintosh

   1982                                     $37,979,000

                                            Lisa/Macintosh

   1983               Apple IIe             $60,040,000

   Jan.               $1,395                Macintosh/

                                            Apple IIc

   Jan.               Lisa

                      $9,995

   June               Millionth

                      Apple II sold

   Dec.               Apple III Plus

                      $2,995

   1984               Macintosh 128k        $71,136,000

   Jan.               $2,495                No major new

                                            products under

way

   April              Apple IIc

                      Portable

                      $1,295

   April              Apple III

                      Discontinued

   Sept.              Macintosh 512k

                      $3,195

   1985               LaserWriter           $72,526,000

   Jan.               Printer               MacII, Mac SE,

                                            Apple IIgs,

                                            AppleShare

                                            Network

   Jan.               Lisa renamed

                      Macintosh XL

   April              Macintosh XL

                      discontinued

   1986               Macintosh Plus        $127,758,000

   Jan.               $2,559                Mac II, Mac SE,

                                            ShareApple

                                            Network

   Sept.              Apple IIgs

                      $999

   1987               AppleShare            $185,000,000*

   Jan.               Network               Mac II, Mac SE,

                      $799                  Portable Mac

   Mar.               Macintosh SE

                      $2,898

   Mar.               Macintosh II

                      $4,799

   *Estimated

Source Apple Computer, Inc.