Inside Apple: How America's Most Admired--and Secretive--Company Really Works

by Adam Lashinsky

  Its “Get a Mac” ad campaign, which ran from 2006 to 2009, stands out for its nastiness and brutality, a full-frontal assault on a competitor in an industry that typically stresses strengths over comparisons. If McDonald’s had attacked Burger King or Ford attacked Chrysler in such a way, audiences might have recoiled in horror, yet Apple was able to get away with this public ridicule.

  Prior to “Get a Mac,” Apple’s advertising traditionally followed three models: edgy (the 1984-inspired spots), warm and fuzzy (happy people doing fun things with Apple products), and hardware porn (a camera slowly rotating around a gorgeous device). This campaign, widely known as “Mac vs. PC,” set a new tone for Apple: mean-spirited, couched in warm and fuzzy.

  The campaign, created by Apple’s longtime agency, TBWAMedia Arts Lab, relentlessly sent the message that Macs were cool, hip, safe, simple to use, elegant, and otherwise delightful, while PCs were nerdy, old, virus-ridden, complicated, awkward, and generally a chore to use. With the famous line, “Hi, I’m a Mac,” the slim, genial actor Justin Long, boyfriend of child-star-turned-legit-adult-actress Drew Barrymore, portrayed all that was good about the Macintosh. To personify the PC, a proxy for Microsoft, which supplies the software, the ads turned to John Hodgman, the portly, nerdy, sloppily and unfashionably dressed, and hapless actor and comedian best known for his work on The Daily Show. In spot after spot, the cool Mac bested the pitiable PC. The PC got tied up in its own power cords; that wouldn’t happen on a Mac, which uses an elegant magnet system to connect. The PC needed a hazmat suit to protect itself from computer viruses; hackers didn’t attack Macs. Another added a faux Microsoft publicist to defend Vista, the dud of an iteration to Windows that Microsoft unveiled in 2007. The PR woman had “no comment” to Mac’s contention that Vista was causing PC users to switch to Macs.

  The taunting got so vicious that Microsoft had no choice but to respond. It hired the edgy ad agency Crispin Porter + Bogusky to create a campaign called “I’m a PC.” The goal was to remind PC users—there are about a billion of them—that Apple’s broadsides had become personal and that Microsoft wasn’t the only party that should be offended. “Over time it became clear they were beginning to insult some of our customers,” said David Webster, Microsoft’s general manager of brand and marketing strategy. “It’s okay to insult our products, but our customers said: ‘We’re not losers.’ ” After initially, and awkwardly, pairing Bill Gates with Jerry Seinfeld, Microsoft’s ads turned to real PC users, each of whom was easier on the eyes than John Hodgman. Microsoft later would claim that its counterattack forced Apple to abandon the assault. It’s just as likely Apple felt it was done making its devastating point—the schoolyard bully who stops when his arm gets tired of punching.

  As Apple has shifted from underdog to top dog, it hasn’t ameliorated its sharp edge. Tim Cook publicly threatened litigation against tiny Palm, then headed by ex–Apple hardware honcho Jon Rubinstein, when Palm debuted a new smartphone that had many of the best S ofagaincharacteristics of an iPhone. The episode was a blip because the Palm Pre flopped with consumers, and Palm quickly sold itself to HP. Yet the burst of pique offers a tiny window into Apple’s thin-skinned soul. Rubinstein was the rare ex–Apple executive with the audacity to come directly after Apple. The new smartphone enjoyed a moment in the sun when product reviewers praised some of its snazzier features, which not even the iPhone could best. By any objective measure Palm was never a threat to Apple. Yet Apple has a take-no-prisoners mind-set. It doesn’t tolerate mediocrity on the inside, and it fights viciously against perceived wrongs on the outside. In his calm-toned repartee, Cook showed his bite to be as sharp as Jobs’s.

  Copying Apple was certain to enrage Jobs, which was ironic to students of Silicon Valley history given Apple’s appropriation of inventions from the likes of Xerox PARC and others. Jobs was furious with Google after it began supplying its Android mobile operating system to cell phone makers. Near the end of his life he praised Microsoft’s latest mobile software offerings for being original. “At least they didn’t copy us the way Google did,” he said. He also famously attacked Adobe, a longtime Apple partner, by refusing to allow its Flash media player to run on iPads—and then saying publicly that Flash was an inferior product. We’ll never know if Apple truly found Flash technologically lacking or if Jobs considered the move payback for Adobe’s decision a decade earlier not to produce Macintosh versions of its key products. In 2011, Apple waged a multinational patent battle against Samsung over technology in the Korean company’s mobile devices. That Samsung supplies Apple with some of its critical semiconductors for iPhones and iPads seemed to be beside the point.

  It’s worth considering whether Apple gets away with its behavior because of the rarefied position it enjoys right now, or if there is some universal lesson for other businesses. Certainly Apple has demonstrated that despite its rhetoric, cooperation on one front shouldn’t be confused with conflict elsewhere. Apple thinks nothing of viciously attacking its most trusted partners—and then smilingly working with those same partners on other projects. Apple operates by the same rules as the traitorous capo regime Salvatore Tessio, in The Godfather: “Tell Mike it wasn’t personal, just business.”

  “Frenemies” is one of those annoying Silicon Valley buzzwords that has the virtue of accurately describing life in the technology industry. Oracle once conducted a brutal, personally vindictive, and public campaign against HP over top-level personnel issues even as the two companies continued to integrate their products with each other. Yet Apple operates on a plane of its own: Competitor-partners refrain from angering Apple even as Apple trashes them at will.

  There’s no escaping that Apple violates—or chooses to ignore—the Golden Rule, Do unto others as you would have them do unto you. Is it right for Apple to value its own time more highly than a partner company’s? Is it fair for Apple to demand adherence to its brand guidelines while ignoring those of the companies with which it does business? Will a strong dollop of schadenfreude be served up should Apple trip and suddenly look to the kindness of others? The answers seems obvious.

  In contrast to the way Apple runs roughshod over its partners and competitors is the subtle way it charms, then entraps its customers—even though they, too, must abide by strict rules in exchange for interacting wi Snted cth Apple. Retail discounts for Apple products don’t exist. (Corporate buyers do receive volume discounts, though they say Apple doesn’t budge much. Students also catch a small break in Apple stores.) iPhone batteries can’t be replaced by their users. New mobile software doesn’t work on older versions of the iPod Touch, forcing expensive upgrades to a newer device. And the list goes on.

  Little of this dampens the enthusiasm for those who worship at the altar of Apple. “This is not a store,” declared retailing expert Paco Underhill, author of the books Why We Buy What We Buy: The Science of Shopping and What Women Want: The Science of Female Shopping. “It is an exercise in evangelicalism.” The temple is a thing of beauty, whether it’s in a suburban shopping mall (like the first Apple store, in Tysons Corner, Virginia) or is one of the grand Apple cathedrals on the major boulevards of the world’s great cities, including New York’s Fifth Avenue, Regent Street in London, and the rue de Rivoli in Paris, across from the Louvre. Visiting an Apple store is like few other retail experiences. Clear, sparse tables hold Apple’s products, which are touchable and usable. Up the elegant staircase, often a glass spiral, resides the Genius Bar, a help desk where blue-shirted employees dole out special hand-holding. Elsewhere “sales specialists” hover to answer questions, demonstrate features, and never, ever push for a sale. Why push when customers are so eager to buy?

  In fact, Apple has meticulously planned this seemingly effortless shopping experience, going so far as to train its retail employees how to relate to customers and which words to use and which to avoid in dealing with them. “Your job is to understand all of your customers’ needs—some of which they may not even realize they have,” an Apple tr
aining manual states, according to a copy obtained by the Wall Street Journal’s Yukari Iwatani Kane and Ian Sherr. The soft sales touch accomplishes the same result as the seemingly organic—but thoroughly planned—corporate marketing message: The customers feel good, but they’ve been told exactly what Apple wants them to hear.

  Apple stores have become a far more visceral “community” meeting place than online networks of friends. From the beginning the company offered targeted, free seminars on how to use Apple technology. Allen Olivo, who ran marketing for Apple’s stores when the company started opening them, created a “Made on a Mac” program for experts to talk to users in Apple stores. “We would bring in fashion photographers, and they would sit and talk to three hundred people in LA,” he said. “They’d say, ‘Here’s how I shoot with film or if I shoot digitally, here’s how I use Photoshop. Here’s how I use my laptop. Here’s how it works.’ We had disc jockeys from New York City that threw away their turntables and they were using iPods as turntables, and instantly you’ve got seven hundred people coming into the SoHo store to see their favorite rave deejays talking about how they spin and burn.” Apple continues to host evangelistic and popular events. In late 2011 the children’s author Mo Willems spoke at the Apple store on New York’s Upper West Side about his new iPad app: “Don’t Let the Pigeon Run This App!”

  Apple’s non-sales sales job seems to be working. The stores generated an average of $43 million in revenue apiece in 2011. This represented revenues of $5,137 per square foot across its stores. In comparison, Best Buy’s stores in the US average $850 per square foot, and Tiffany squeezes $3,004 per square foot, according to brokerage firm Sanford Bernstein. In hindsight, it’s a wonder anyone ev Sderot, er thought it was a kooky idea for Apple to get into retailing.

  Just as Apple didn’t invent the music player or the smartphone, it didn’t conceive of the specialty store. By the time Apple retail began, Nike, for example, already was operating showcase Nike stores, retail shrines in prime locations like Chicago’s North Michigan Avenue, meant to promote the Nike brand as much as to sell sneakers and apparel. Apple wasn’t even the first in the computer business to hawk gear at retail. Gateway, the PC maker with the lovable cow prints on its boxes, was operating stores in suburban strip malls even though its primary business was to sell online and by telephone. More prominently, Sony operated select Sony Style stores that were intended to show the elegance of Sony wares while competing minimally with Sony’s retail partners.

  Apple had broader goals by going into the retail business. It placed its stores in high-traffic locations so it could show off to Windows users; when the stores opened in 2001, that was most of the world. But Apple would most definitely move product. The more product Apple made, in fact, the more valuable its stores became, both as sales venues and as educational opportunities for its customers.

  In 2007, Jobs told Fortune that the Apple stores had been built to sell the iPhone. He likely was speaking metaphorically—or he was giving a vivid illustration of how far in advance Apple plans its products. The common lore is that Jobs recruited J.Crew CEO Mickey Drexler, then CEO of Gap Inc., to the Apple board to help him craft a retail strategy. In fact, Drexler joined in 1999, before Jobs began hunting for retail executives to run the stores initiative. Apple’s march into retail is yet another example of how the company tries to “revolutionize” a familiar concept.

  In the case of retail, Apple executives didn’t just look at existing stores for inspiration. They asked themselves: What are the best consumer experiences people have? Hotels in general—and specifically concierges—came up in response again and again, and the concierge became the inspiration for the Genius Bar. They also talked about what turns people off in stores—clutter, bad design, unfriendly or pushy salespeople. The look of the stores shows Apple’s obsession with detail. While each store is distinctive, Apple’s architects work with a limited vocabulary of design elements; only three materials, for instance—wood, glass, and steel—are used for store interiors. That’s how you know you’re in an Apple store regardless of location.

  Apple’s retail group ultimately helped integrate company offerings in yet another way. Not only did Apple control hardware and software, it also controlled sales. What’s more, Apple’s stores gave this California-centric company beachheads across the globe. These venues grew into town squares for the good citizens of Appledom. In 2009, when Apple announced it would no longer participate in Macworld—a conference produced by a third-party events-management company, not by Apple—it noted that its participation no longer was necessary. Apple, after all, could communicate directly with its customers in its stores whenever they chose to wander in. In the case of its Fifth Avenue store in New York, it never stopped communicating. That store was open twenty-four hours a day, seven days a week.

  Some Apple customers love the company so much that they’re taking their affection to a whole new level. In 2010, a few self-described Apple fanboys, one a former M Sne ch icrosoft employee, started Cupidtino, a dating site for Apple product devotees. The Cupidtino.com site is an amusing homage to Apple, and the idea is that people who dig Apple products should somehow dig one another. (The name is a mashup of Cupid and Cupertino.) Fittingly, the look of the site is spare and clean. It uses the Helvetica font, just like Apple does. Icons dance and flip when you click on them, just as they do on Apple.com.

  Some thirty-one thousand users have registered for Cupidtino. Its founders say they consciously asked themselves “What would Steve do?” in designing the site. Compared with other dating sites such as Match.com and eHarmony.com, Cupidtino is simple. Instead of long forms, it asks users to fill in four standard descriptions: “What I do,” “I became a Mac when… ,” “Cool facts about me,” and “You’re my type if… ” Cupidtino features a giant photo of each user, which makes sense, given that the user is a well-designed product, a quality item that others should covet. “The emphasis is on what you’re getting,” said Kintan Brahmbhatt, an adviser to Cupidtino, who happens to be an employee of Amazon.com’s IMDb.com division in Seattle. Cupidtino displays photos of prospective dates, he noted, in the same way that Apple displays the iPhone on its website: large and prominent. (The Cupidtino founders know of at least one wedding spawned on their site: a US Marine in Japan named Curtis who found true love by bonding over email with Jesse, a “fangirl” in San Jose who dreamed of working at Apple. The two met when Curtis visited California on leave, and they married a short time later.)

  Cupidtino is a labor of love for its founders, yet they’re trying to make money at it. Users can send as many messages as they like, but to receive messages, they must subscribe for $4.79 a month, the cost of a twenty-ounce Venti Mocha at a Starbucks in Cupertino. So far, between 2 percent and 5 percent of users pay, said Brahmbhatt, adding that Cupidtino has turned down requests by condom manufacturers and Apple accessories makers to advertise on the site. “We don’t want to pollute the site right now,” he said. “We want to take a minimalist approach. It’s what Steve would have done.”

  Plan for After Your Successor

  In the days and weeks after Steve Jobs resigned as CEO of Apple on August 24, 2011, there was much hand-wringing about the future of the company.

  The stock price initially fell by a few percentage points. Analysts, reporters, and fanboys tried to parse what little information Jobs disclosed about his being unable to meet his “duties and expectations as Apple’s CEO.” He died six weeks later.

  In his final weeks, Jobs remained as involved in Apple as his strength allowed him to be. Apple executives and board members continued to visit him at his home in Palo Alto. He went out for breakfast and watched a movie at home with his friend Bill Campbell. Little information about his health seeped out, though the website TMZ.com posted a photo of Jobs looking grotesquely gaunt and propped up by a nurse, causing fresh concern among the faithful.

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  Given all the worry, and the universal consensus that Jobs was the ver
y essence of Apple, a curious thing happened after his resignation. Within less than a month, Apple’s stock price hit new all-time highs. The day before his death, the company unveiled a new iPhone, the iPhone 4S, which included an eight-megapixel camera, a faster processor than the iPhone 4, and Siri, the voice-activated personal assistant Jobs had queried at his last board meeting as CEO. When Siri debuted a week after Jobs died, it garnered hugely favorable reviews from critics—David Pogue of the New York Times and the Wall Street Journal’s Walt Mossberg included. Pre-orders of the new phone topped one million in a single day, surpassing the previous single day pre-order record of six hundred thousand held by its predecessor. Employees, partners, and investors alike had time to prepare for Jobs’s passing. He had been in declining health for much of 2011, attending fewer and fewer meetings on the Apple campus. The words he had written in January, when he began his final leave of absence, were prophetic and germane to those considering an Apple without Steve. He said that he had confidence that Tim Cook “and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.” The key word was executing, the implication being that Jobs’s loyal lieutenants were capably following through on a game plan Jobs already had crafted and approved.

  Jobs had done more to ensure that his DNA remain a part of the company than he ever let on publicly. For years, he and other board members had insisted that Apple had a succession plan in place without disclosing what it was. The plan included the obvious manpower issues—who would succeed Jobs as CEO—and also some other measures to make sure that Apple’s core values would be passed down to successive generations of leaders.

  On the same August day that Jobs relinquished his position as CEO, the board swiftly named Tim Cook the next CEO. Despite rumors that the board had authorized recruiters to shop for another replacement for Jobs, the board never seriously considered naming anyone other than Cook to the position. It was Jobs’s board, of course, and he chose Cook, his able sidekick, to take his place.