1970s – Change in strategy product – from Apple I to Apple II

1. What is causing the change? Forces initiating change

External
- The first computer kit was featured on the cover of Popular Electronics which represented
an exciting new development in a world of technology
- In the 1970s, the personal computer industry was totally new – no one knew what the
customer wanted or what the rules of the game were
- The release of the movie The Omen led to numerous phone calls questioning Apple I’s
significance
- The logo – Isaac Newton lost in thought under an apple tree – was reminiscent of the
underground press of the 1960s
Internal
- Manual was difficult to follow
- Apple I lacks a power supply, a monitor and a keyboard
2. Nature of change. Evolutionary and planned -> Adaptive
- Adaptive change allows management to have the discretion as to the timing and nature of
change and has time to undertake extensive negotiation with effective parties
- Apple I was updated to Apple II, which was the first computer to have a built-in, user-
friendly operating system, and documentation that could easily be understood by non-
technical users.
3. Who is responsible for the change? Change agent
Steve Jobs and Steve Wozniak (internal change agents)
a. Steve Jobs obtained credit, secured cheap parts, organized advertising and negotiated
sales
b. Wozniak worked on improving the machine

Regis McKenna Agency (external change agent)

- Helped in media attention for the company

Mike Markkula (internal change agent)
- Was marketing executive at Intel before being recruited by Jobs
- Changed the logo to a multi-colored apple with a bite (byte) taken out of it
- Developed a marketing that created an image of a $100 million company

4. What needs to be change?

Strategy
- Apple I did not appeal to the public as it “lacked a power supply, a monitor and a keyboard”
- In the :exciting new development in a world of technology, the company needs to
continuously change its strategy and innovate to ensure that it will not get left-behind.
5. Types of intervention: Planned vs Unplanned
Ongoing: Unfreeze -> Change
Since the company is functioning in a dynamic environment (i.e. technology) where new
products are constantly produced and innovation is key, ongoing change is vital to keep up.
Thus, the change process here omits the refreezing section to encourage continuous change.
 - There needs to be a consistent reward allocation system which meets participants’
expectations
- There needs to be continuous support of a sponsor, someone typically high in the
management hierarchy, to provide the change with legitimacy and charismatic leadership
- There needs to be effective transmission of information so that participants know what is
expected of them as a result of the change
- There needs to be group support as participants who become aware that others in their
group accept and sanction the change will become more comfortable with it
- There needs to be commitment to the change to lead to greater acceptance and
permanence
- There needs to be more diffusion in the change effort, whereby more units will be affected
and thus, the greater the legitimacy the effort will carry
- In an intervention tactic, change agents sell their change effort will carry

6. How will you implement the change? Unfreeze, change, refreeze

In an intervention tactic, change agents sell their change rationale to those who will be
affected. They argue that current performance is inadequate and that new standards
and procedures must be established
7. 6 silent killers
8. Recommendation
- Questionnaires on employees’ opinion to the change
- Suggestion box
- Customer satisfaction
- Employee turnover
- Performance review
- Profitability review
- Budgets review

Early 1980s

Cause of change Recruitment of John Sculley as President and CEO of Apple to change structure and
strategy

External

- Competition had increased due to low barriers to entry -> “new competitors had found it
relatively easy to enter the personal computer market: the technology was not particularly
sophisticated, capital was available, and distribution channels were expanding rapidly
- As a result, Apple had found itself squeezed on both sides: from both superior proprietary
technology and low priced Apple imitations
- Market(especially corporate customers) preferred IBM as a ready made netwoek existed
and IBM was well established

Internal

- Apple’s market share had dropped from 29 to 24 percent

 - Apple II was rapidly aging, too expensive for many home users and unable to meet the
needs of the professional and corporate segments
Nature of change: Revolutionary and planned -> Systemic
- Systemic change is organization-wide, emerges as management’s response to changes in the
environment, often undertaken only after extensive consultation among senior
management and external consultants

Who is responsible for the change

- Steve Jobs (internal change agent)

o He recruited Sculley to manage the company
- Sculley (internal change agent)
o After becoming President and CEO of Apple, he is responsible for changing the
strategy and structure of Apple to improve sales and beat the competition by acting
“as an alternative to IBM”

What needs to be changed

- Strategy
o Apple should adopt a focus strategy with a differentiation advantage to beat the
competition by targeting “the small business and education markets as an
alternative to IBM”
Jobs: “We’re not going to sell five million computers a year by being IBM
compatible. We’re going to do it making a second industry standard
- Structure
o Apple needed to decentralize its structure to allow for more autonomy and
innovation to take place among the divisions

Interventions: one-off: unfreeze -> Change -> Refreeze

How should the change be implemented

The intervention tactic should used

- Sculley should sell his change rationale to those who will be affected
- New standards and procedures must be established in a way that structures the
organization in line with the strategy
- Sculley should cite organisations with improving performance (such as IBM) to justify the
need for the change and then explicitly describe how current practices can be improved to
achieve their goals

Expert Power

- Woz has more engineering expertise holds this power over Jobs whose “engineering
expertise was non-existent”
- - Regis McKenna agency, “one of the best advertising agencies”, “specialized in start-up
companies”
 Referent Power

- Friends were called in to assemble the boards in Jobs’ family home

- Cajole Woz into improving the machine

Authority Power

- There is a hierarchy implying that power increases with hierarchy (i.e. Chairman Steve Jobs
has more power over the President and CEO Sculley)
- However, Sculley is above Jobs as Jobs is also the vice president of the Mac Division
- Sculley has the power to fire and hire people -> Almost half of the 15 member senior
management team was replaced and the workforce of 5300 was reduced to 46000
- Jobs had the authority to recruit Sculley into the organization

Expert Power

- Sculley was the President of Pepsi-Cola Co. Inc.

- Sculley had a degree in architectural design from Brown University and an MBA from
Wharton School at the University of Pennsylvania

Information Power

As chairman and founder of Apple, Jobs would know more about the organization compared to
the other staff

Budgets and Equipment

Sculley has the power to allocate the budget -> the generous profit sharing scheme was
suspended and the marketing budget jumped to 80m from 12m in two years

Second dimension of power: process

- Sculley has sidelined resistance by centralizing reporting relationships: “15 general

managers who had previously reported to group vice-presidents now reported directly to
him” and replacing “almost half of the 15 member senior management team” -> Sculley has
confined membership to safe participants.
- Steve Jobs is dismissive of Apple II division and excludes them from the meeting and only
talked about mac products. “
- An the annual meeting, Mac team was in the front row seats listening to Steve Jobs
announce mainly Mac products. Apple II employees watched on closed circuit TV from
another room while virtually nothing was said about Apple II computers or the people who
had made it a top selling product for nearly seven years.

Third dimension: use meaning to prevent conflict

- Jobs played with meaning when recruiting Sculley: “you can sell sugared water to children
the rest of your career or you can change the world a little”

Authority power
- Jobs has more authority over Del Yocam, who found it difficult to compete with a manager
who had 12 percent of Apple’s ahres
- After Jobs left, Sculley has the ultimate power to make decisions and implement his
strategies, with an aim to “reduce duplication and ensure a lower breakeven point”
- Sculley has the authority to fire staff -> Sculley also laid off one-third of the 6000 workers,
including part of fiel sales force that had recently been fired, and closed three of its six
factories

Coercive Power

- Sculley told directors that he was asking Steve to relinguish control of the Mac division if the
Board would not back him, he would resign

Group support

- Sculley had the support of the Board in proposing that steve jobs relinguish control of the
mac division
- The board decided unanimously to ask jobs to step down as executive vice president

Second dimension of power

By delegating the power to the board to vote on the removal of steve jobs as executive vice
president, as well as threatening them that he would resign if they were not to support him,
sculley has effectively sidelined resistance by confining the decision making process to safe
participants

Authority power

- Job’s formal position is higher than everybody else, as CEO of the organization

Affiliation power

As steve jobs is the founder of both NeXT and Pixar, he is associated with many organisations
implying that he has connections with many people with whom he would have built business
relationships with

Information power

As one of the founders of apple, steve jobs would have information power over the other
s(particularly newer staff) as he would know the history and culture of the company

Communication

Functional approach:

- When Sculley decided to bring about a major organizational change to apple in order to
improve sales and regain market it is important that he designed communication that
focuses on the change.
- Some factors to take into consideration include incorporating face to face communication
works for initial information about the change and eventually works towards following up
with other channels (emails on support relationships and procedures)
-
- - Application of OB’s Macro Topics to the Apple Case Study - challenges faced by each in
relation to the new, yet still incoherent, strategies under Sculley’s organisational change. In
addition, they do not identify with the larger organisation but with their individual
departments, which makes it difficult for them to work together effectively. In order for a
researcher to determine whether the culture was differentiated, people in different parts of
the organisation, and perhaps even those outside the organisation, needs to be observed
and interviewed. But in doing so, the researcher needs to gain their trust so that they are
honest about the culture. Critical Theory 1. Describe the theory 2. What does this theory
identify and explain? 3. Who benefits from the culture? 4. How easy is it to resist this
culture? 5. What would happen if they did resist? 6. Why might people go along with this
culture? 7. What other forms of resistance are there? 8. On the other hand, some people
like to work at Apple. So why/when might such a culture benefit individuals? What does a
critical researcher have to do when studying culture? 9. What are the disadvantages of
working at Apple from an employee’s point of view? What type of people do you think
would find it hard to work at Apple? Why do you think that is? A critical theory of culture
focuses on how employees are affected by the culture and particularly on the issue of how
power is embedded in the culture. We can see that in the culture at Apple, most of the
power seems to lie with the Macintosh division, but more specifically with Steve Jobs, who
seem to use it for his own department’s purposes and, as a result, are not interested in the
accomplishments or problems facing employees in other departments. It can be
argued that benefits from the culture (e.g. increased employees’ motivation and
innovativeness) are not captured entirely by the whole organisation but rather benefits only
for those working under the Mac division, which ultimately acts to the detriment of the rest
of the organisation. An individual working under the Mac division may find it difficult to
resist the culture, as it is one that is fun, rewarding and attractive in nature. On the other
hand, other employees may feel pressured to conform or feel that they can’t speak/act out
against the parts of the culture that they don’t like due to peer pressure or for fear of losing
their job. In the end, other forms of resistance begin to surface as people withdraw from the
organisation. The fact that the Mac division’s, and therefore Steve Jobs’ power is part
of the culture is shown by Jobs’ dismissive attitude towards the Apple II division (despite its
performance), such as addressing its marketing staff as members of the dull and boring
product division and failure to say anything regarding the Apple II computers or the people
who had made it a top selling product. The lack of attention and differential treatment (e.g.
segregation of Mac vs Apple employees in the annual meeting) also helps to explain the low
morale and departure of a number of Apple’s key personnel because employees have
become dissatisfied with this process. A critical researcher needs to get beyond the
culture as espoused by both managers and employees when studying the culture, identify
whom the culture benefits and whom it disadvantages and finally avoid taking sides.