Redefining strategy for uncertain times: Learning from Apple’s 1997 Turnaround

The Covid shock in the spring of 2020 shattered strategic plans. The continuing uncertainty, exacerbated two years later by the invasion of Ukraine, has led some executives to question the very possibility of having a strategy when everything keeps changing. Are we living in a post-strategy world? The short answer is no; we need strategy more than ever, but it depends on how you define strategy. The Apple turnaround in 1997 provides a useful lesson.

In 1996, Apple was broke. The company was a shadow of its former self, unable to release innovative products and with market share down to a trickle. It took a gamble by buying Next, a company created by Steve Jobs, co-founder of Apple twenty years earlier… and ruthlessly fired in 1986. It was the return of the prodigal son. The favorite game in Silicon Valley at the time was to play strategist and guess what Jobs’ strategy would be. Most predicted he would break into new markets with disruptive products. He didn’t.

Strategy is mostly defined in terms of markets: the first definition I was given when I became a (brief) strategy consultant was “choosing where to compete and how to compete. The problem with this definition is that it ignores the organization and talks only about the market and positioning. Richard Rumelt, a professor of strategy, offers another that I find much more interesting: “Strategy is about identifying the organization’s fundamental challenge and defining a set of policies and actions to solve it.” In late 1996, Apple’s fundamental challenge was financial: it had three months of cash on hand, so it had to find cash. Jobs did just that by signing an agreement with Microsoft, its archrival. Everyone was outraged, the strategists scoffed, but now Apple had money and regained credibility. Apple’s fundamental challenge now was to revive its sales. Jobs’ strategy was to make do with what he had, which was not much because his R&D was exhausted. He cobbled together a fluorescent Mac in a nice format as best he could; lipstick on a pig. The strategists scoffed again, but it worked. Sales were back on track, at least among fans of the brand; still, few believed he would make it, but with his base solidified, Jobs could move on to the next fundamental challenge: creating new products.

Rumelt had the opportunity to interview Jobs at the time. “What is your strategy now?” Answer: “I’m going to wait for the next big thing.” Wait? As a strategy? It was quite a shock to Rumelt, who was expecting a bold vision, a new target market, and a clear plan of action. But it worked! Partly by accident, Apple entered the music business with the iPod, an MP3 player that, despite the skepticism of pundits and strategists, turned out to be a huge success and marked the true renaissance of the brand. None of this could have been predicted or foreseen in 1997.

Strategy, defined as a vision with a plan, is not always necessary. In fact, it can be counterproductive because it is a static approach in a dynamic world. It is often nothing more than politically correct blather, general enough for everyone to understand. It is also a distraction for the management team, who spend more time developing this verbiage than doing their jobs. Yet most strategy is about doing your job well. 99% of an organization’s problems are operational and human. Do your job first, and if there’s time and a little brandy left over, you can do strategy, or what is commonly referred to as “strategy” among Cartesians in suits.

As always, seemingly incomprehensible but recurring behavior is the product of a mental model. In this case, the model separates the noble realm of thinking from the subordinate realm of execution. The organization is seen as a machine that executes the orders given by a leader, and everything depends on the leader’s ability to give the right orders, i.e., to have the right ideas, the “right strategy. But a strategy conceived in this way leads managers to distance themselves from the reality of their customers and employees. Distance is especially dangerous in times of uncertainty, when reality changes brutally, unexpectedly, and profoundly.

So we don’t live in a post-strategy world, provided that 1) you define strategy Rumelt-style as identifying your fundamental challenge and defining a set of policies and actions to solve it; 2) leaders understand that strategy means looking at the whole, not just the top; and 3) maintaining a healthy connection to reality is a top priority. By embracing this flexible and holistic approach to strategy, organizations can navigate uncertainty and thrive in an ever-changing landscape.

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🇫🇷 French version of this article here.