Book Review

On the Firing Line: My 500 Days at Apple

by Gil Amelio and William Simon

Publisher: Harper Collins, $25

Brought to you by , originally in three installments April 13, 15 and 17, 1998

Copyright 1998 by Bill Fox

I. Seeds of Destruction: The First 100 Pages

My copy of Gil Amelio's book arrived Friday morning. Despite intense curiosity whetted by critical pre-release reviews, I managed to keep from cracking the cover until I was on the airplane Saturday afternoon. I had a lot of other work to do so I managed to get through only the first 100 pages during the flight. They left my stomach in knots. The book is well-written, entertaining and substantively illustrative--good reading for Apple fans. However, the substance leaves one wondering a lot and begging to comment so I will.

Frequent readers of Macs Only! know that editorially I strongly supported the policies instituted at Apple Computer, Inc. by Amelio and the man himself. They also know that I decried his ouster and the unconscionably bad press that he got throughout his 500 days and even thereafter. He gives readers a clear view as to why this happened. This is not to say that he blames everyone else for his and Apple's problems as Amelio shovels a lot of blame his own way, laying out the mistakes he made and the portending events that he ignored. In the first 100 pages, Amelio describes clearly and apparently unwittingly how he sowed the seeds of his ultimate destruction at Apple. This conclusion is mine, of course, aided with 20/20 hindsight.

First, before becoming the CEO at Apple but while a board member, according to the prologue chapter Amelio has a visit from Steve Jobs who asks for Amelio's support to once again become the CEO. From there until page 52 he says virtually nothing more about Steve Jobs--nothing as he negotiates for and then takes the helm at Apple. I find this incredible. What was he thinking all this time--that Steve was just on a lark and would disappear? Why is there nothing in his thoughts (at least nothing written in the book to this point) about how Jobs would take this and what he would do and what Amelio counter with in return? Perhaps this is explained later.

Second, when he gets no respect and, even worse, no action from his entrenched Apple subordinates, i.e. Vice Presidents and Senior Managers, he fails to take decisive action by "shoot[ing] the lead buffalo" in his own words or by replacing many of them very quickly and very deeply into the management structure with his own new team. I admire his desire to provide some stability. However, Amelio endures insubordination for a fatal length of time, never to recover. He even suffers financially big time at the hands of a lawyer in his own legal department.

I may have an inaccurate view of large corporate America but it seems that people in senior management are given their walking papers all the time. Strangely Amelio puts up with insubordination as if he were a Republican political appointee in the federal government that can't do much about it. I think I understand why. The difference in Apple's organizational culture was so much greater than he had experienced that it had him frozen like a deer in an oncoming truck's headlights with similar consequences. What did he do about the problem? He humiliated the senior executives in front of lower level employees in an internationally broadcast "all hands" meeting and developed communication wires around them after giving them a chance to respond positively to his suggestions. Both are actions inherent to governmental situations where career employees frequently resist new political bosses orders (more times than not for good reasons, I might add) but can't be readily replaced. He looked for these brilliant, well-educated and in-high-demand people to diligently jump to implement his suggestions, as he called them. They failed him and he took too long to take charge.

Still, at this point in the book it seems that Amelio is attempting to do all of the right things to move Apple in the right direction--developing a strategic plan with a vision, clearing inventory to deal with a cash shortage, simplifying the product line, focusing on product quality issues and getting out to meet Apple's customers. It appears, however, that he moved Apple too slowly because of the inertia in unmoving senior managers. For example, it took months to produce a strategic plan that after some careful study he could have concisely dictated in a day and then got it ratified with his senior management, employees and the Board. Instead he cooped people up in a closed room for months while they produced an opus that received a lukewarm reaction from the Board and went into the drawers or on the shelves of senior managers. Frankly, while my executive experience is somewhat short of leading a billion dollar corporation, I'm surprised to read that he was non-plussed over the reaction to it. Every planning effort that I am familiar with that has followed his process has produced a weighty, highly compromised and vague plan that sits on the shelf, dead on arrival. Most people, in my experience, really do want to know what the boss actually wants them to do as precisely as possible. The process he used just doesn't produce it, even if he or she openly endorses and promotes it in the end.

The final chapter in the first 100 pages is entitled "Tragedy of Errors". I'll say.

II. Taking Charge: The Second 100 Pages

One explanation of things going slowly is that perhaps as a result of his compensation negotiations, Gil Amelio mentally had a five year plan for fixing Apple. His view was that he had a pat deal as CEO of National Semiconductor that was worth $27 million or so over five years, compensation that was already earned for the recovery and projected continued prosperity of that company. In moving to Apple, he was taking on a big risk. He didn't want to lose what he saw as a virtual entitlement, so his Apple compensation was to be that cushion plus a salary and incentives that varied depending on his degree of success. Amelio paints a picture of being screwed over, losing the immediate compensation guarantee that he thought he had after resigning at National and having his cushion doled out over five years. Somehow this doesn't ring true for a solid, astute, experienced and successful businessman but it does support my five-year theory. And this has probably happened to all of us but probably not on that scale.

The title of the first chapter in the second 100 pages is "Done well if done quickly--Shaping my own executive team." However, the chapter describes tackling sales problems with a new appointment that ultimately didn't work out and getting out of the daily mire with another new appointment to a new position that Amelio describes as a serious mistake from the outset. Apple was matrix-managed by function and a restructuring that placed a greater emphasis on product rather than pieces of the product's development and sale was implemented to overcome the Balkanization of the company that was killing the opportunity for materializing the team spirit needed to pull Apple out of its nose-dive. The need for a strong team spirit, a dedicated group pulling together to end the decline, was clearly identified by Amelio as a primary requirement yet it continued to elude him. The following chapters are still filled with "...but nothing ever happened."

Apple's unfortunate new-found lack of quality was a huge legacy to overcome. Amelio clearly identified the problems, boldly writing off a huge inventory of lousy Performas, instituting sensible quality procedures and stopping production of the even more problematic PowerBook 5300's. Unfortunately, the latter step while laudable from a quality perspective, turned into a huge gaff, as Amelio relates, when the "Mission Impossible" advertising project that he personally approved over insider advice paid off in a huge demand but as a result of his 5300 decision and slow production of the 1400 replacement there were no PowerBooks to be bought. Still, despite nagging problems with the new 6400's and several members of the new 7300-8600-9600 line up, overall quality surged upward at Apple with the PowerBook 1400 setting the course. Achieving a high quality standard was an essential accomplishment, one made despite the described people problems. Amelio hit a nail on the head with this one.

Amelio wrote that he knew that Bill Gate's Microsoft was a lynch pin in Apple's future success. He reached out for collaboration and cooperation but Gates denied what he needed, for example a Microsoft Word that didn't take an eternity to start up. He invited Gates to an off-site retreat but rather than helping Amelio persuade Gates to make a commitment to fixing up the languishing Microsoft products, Amelio describes the gathered executives as treating Gates like the enemy. He professes his disappointment in the Apple executives but he was the master of ceremonies--good idea, poor execution. Misunderstanding Apple's organizational culture speared him again.

The first of Amelio's great accomplishments at Apple, i.e. preceding the successful drive for quality, was set up by describing how one long time Apple senior executive, while Amelio was a Board member, had lost it all on one roll of the dice, an ill-considered him-or-me showdown that failed miserably. Amelio's one roll of the dice was a never-been-done but successful one-night telephone conference sale of nearly $700 million in convertible stock debentures. The idea was not his but rendered to meet his criteria, i.e. avoiding an unwanted three-week road show to raise funds to solve Apple's cash problem. Of course, the decision was his and it paid off handsomely--Apple could survive!

Curiously, he failed to kill a bizarre set of executive sales meetings in Mexico, Europe and Hawaii that kept executives out of the office for three weeks during the critical October 1996 period when critical holiday sales are set up. The contrast in allowing this time killer versus finding away around a similar time killer to sell the debentures is astounding--even Amelio agrees but did not stop it. Another bad decision for which Amelio administers self-flagellation is the accounting gimmick to show a profit in the fall of 1996 and the lucrative bonuses for top executives he agreed to.

The decision to continue licensing the Mac OS is dealt with rather lightly in the second 100 pages but the search for and selection of a new OS is not. We read that Amelio tried out Windows NT but dropped it because he was convinced that there were technical problems that were too serious to overcome despite Bill Gates unrelenting sales pitch and assurances that they could. We read that the BeOS was not selected because Jean-Louis Gassee' blundered by trying to push the price from Apple's offer of $200 million to $275 million when he would have settled for $200 million according to Amelio's intelligence. Then, we read that NeXT was bought for $400 million by Amelio over tea at Steve Jobs' house alone and after a couple of walks around the block in Palo Alto but that Amelio thinks it was perhaps $200 million too much but still worth it. Apple certainly got a lot more with NeXT, i.e. WebObjects and 300 excellent engineers. There is the implication that NeXT brought Apple less time to a new OS as Amelio called the BeOS "...three years and megabucks away." Well, its nearly 18 months and megabucks spent and I don't see the NeXT OS, Rhapsody, in my future as a complete and working OS any time soon. Still, there is nothing in the book to lead me to change my opinion that it was a good decision, a great accomplishment that is Amelio's third at this point. The other two are cash and quality just in case you forgot.

With NeXT, Amelio also got Steve Jobs. He appears again after page 52 and the prologue. We read that Amelio encouraged a mute Jobs to take a role in Apple setting the stage for the final "100" pages of the book. Was this Amelio's worst decision? I haven't read them yet but I am sure the final chapters are bloody. I'm finding that it is very hard to put down to engage in other business.

III. In the Back but with a Charming Smile: The Final Pages

To clear up one matter mentioned in Wednesday's installment, Amelio had a five year contract but told the Board that it would take three years to turn Apple around. In terms of profitability, with some more Steve Jobs' whittling near the bone, Apple became profitable in just under 24 months. This was aided, of course, by the phenomenal success of the G3 computers introduced in the Fall of 1997 but initiated under Amelio.

The final pages begin with: "I finally realized that I was not being well-served by key members of my executive team, I had left them in place too long." (p. 201). A fatal length of time. He made this statement after discovering that the sales group had failed to follow his orders to stop the channel stuffing practice in the Winter Quarter of 1996/7. On the other hand, nowhere in the book is an alternative incentive system described that would have eliminated the financial incentive for them to channel stuff.

Also described are the disastrous preparations for Macworld '97 in San Francisco. Amelio couldn't get the writer to finish his notes. There was no time planning, no rehearsal and his personal assistant loaded the wrong file in the TelePrompTer and didn't check it--Amelio came off looking very bad as did the whole presentation, including the finale when Steve Jobs walked off the stage as Steve Wozniak was announced. Remember the bad press on this? I sure do. I commented that it seemed the press stupidly wanted a showman rather than a solid business executive running Apple. I began to worry seriously about Amelio's tenure at that point.

Amelio recounts finally making a wholesale change in the remaining original executive staff as a part of a second restructuring into cheaper functional divisions forced by misforecasting the downturn in sales from $9 billion to $7 billion per year. This was a year after taking the helm, much too long for the poor response he got from them. In contrast, rightly or wrongly Steve Jobs took care of this issue right away.

Following the NeXT purchase and Amelio bringing Jobs back, funny things started happening, all of which tended to undermine confidence in Amelio's leadership--things like Larry Ellison's comments about buying Apple and his negative leadership comments, press comments about Jobs plotting a takeover, Jobs' weird comments to the press, Jobs selling his 1.5 million Apple shares that he received in the NeXT sale and, according to Amelio, then lying about it, and a key Board member prodding Amelio to get out and do more sales, promotion and marketing with so much to do to get Apple together.

The chapter that describes Amelio being fired begins with a decription of a dinner out with Jobs and wives. Amelio's wife remarks how charming Jobs is. This is just before the axe falls. Amelio is fired by the Board on Sunday July 6th while Amelio was putting the finishing touches on a letter to Bill Gates regarding a deal with Microsoft. Why was Amelio fired? You'll have to read the book but I do not believe that Amelio was given the real reason and he does not speculate further in the book.

Remember Steve Jobs' visit with Amelio at National Semiconductor in the prologue when he asked Amelio for his help in becoming Apple's CEO? It appears to me that Amelio complied if unwittingly. Amelio recounts what he thinks were his biggest mistakes but in Amelio's mind bringing Steve Jobs back was not the biggest among them. What was? Again, you'll have to read the book. See if you agree--I don't.

Why did Amelio write the book? Read his interview with Ed Prasek at www.machome.com in his own words. Amelio comes across in his book as an honest, straight, honorable businessman and a humanist. It is very sad that a guy with these qualities didn't make it at Apple. It is especially sad in light of his crucial accomplishments (quality, cash, cost reduction and product line simplification) that, indeed, saved our beloved Apple in the short run and laid a solid foundation for the long run.

On final reflection, my biggest disappointment with the book is that it did not enlighten us on any aspect of the Mac OS licensing issue or on the Common Hardware Reference Platform (CHRP) issue--both really BIG deals. However, it is still a great book for Apple fans. I think you'll enjoy it!

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Copyright © 1998 by Bill Fox
All rights reserved--no commercial use permitted without attribution.

Of course . . . . . . and I am proud to be an Evangelista! . . .

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