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When Steve Jobs returned to Apple in 1997, his first mission was not to create but destroy. He axed a number of failing products and initiatives, such as the ill-fated Newton personal digital assistant and the Macintosh clones. Under Jobs, Apple would no longer try to be all things to all people.
What came after was not a flurry of activity, but a limited number of highly targeted moves. First came the candy-colored iMac. It was a modest success. Then came the iPod, iPhone and iPad, breakout hits which propelled Apple from a failing company to the most valuable company on earth. Each move shifted the firm’s center of gravity to a decisive point and broke through.
That, in essence, is the principle of Schwerpunkt, a German military term that roughly translates to “focal point.” Jobs understood that he didn’t have to win everywhere, just where it mattered and focused Apple’s resources on just a few meaningful products. The truth is that good strategy relies less on charts and analysis than on finding your Schwerpunkt.
Putting Relative Strength Against Relative Weakness
The iPod, Apple’s first major hit after Jobs’ return, didn’t do anything to undermine the dominance of Microsoft and the PC, but rather focused Apple’s energy on a nascent, but fragmented industry that made products that, as Jobs put it, “sucked.” At this early stage, Apple probably couldn’t have taken on the computer giants, but it mopped up these guys.
Yet the move into music players wasn’t just about picking on scrawny weaklings, it leveraged some of Apple’s unique strengths, especially its ability to design simple, easy-to-use interfaces. Jobs’ own charisma and stature, not to mention the understanding of intellectual property rights he gained from his Pixar business, made him almost uniquely placed to navigate the challenges of setting up iTunes store, which at the time was a quagmire.
In Good Strategy | Bad Strategy management scholar Richard Rumelt makes the point that good strategy puts relative strength to bear against relative weakness and that is a key part of Schwerpunkt. In order to find your focal point, you need to get a sense of where your strengths lie and where are the best opportunities to leverage those strengths.
That’s exactly what Steve Jobs did at Apple over and over again. Entering the music player business would not have worked for Microsoft or Dell, who both dominated the computer industry at the time. In fact, after the launch of the iPod both tried to create competitors and failed. The iPod was Apple’s Schwerpunkt, nobody else’s.
Identifying The Focal Point
In a military conflict, leaders determine where to concentrate their efforts by weighing a variety of factors, including commander’s intent, or the desired end state, the situation on the ground gleaned through intelligence, the terrain and the enemy’s disposition on that terrain. Officers spend their whole careers learning how to make wise decisions about schwerpunkt.
Business leaders need to weigh similar factors, including the internal capabilities of their organization such as talent, technology and information, the market context, the competitive landscape as well as what they can access through external partner ecosystems. By the time Steve Jobs returned to Apple, he had become a master at evaluating the forces at play.
With respect to the iPod, he felt confident in Apple’s ability to combine technology with design and that the market for digital music players, as he liked to put it, sucked. By looking at what competitors had to offer, he was confident that if he could create a device that would “put 1000 songs in my pocket,” he would have a hit product.
The only problem was that the technology to create such a product didn’t exist yet. That’s where the external ecosystem came in. On a routine trip to Japan to meet with suppliers, an engineer at Toshiba mentioned that the company developed a tiny memory drive that was about the size of a silver dollar, but didn’t know what it could be used for.
Jobs immediately recognized that the memory drive was his Schwerpunkt. He produced a $10 million check on the spot and got exclusive rights to the technology. Not only would he be able to create his iPod with the “1000 songs in my pocket” he so coveted, for a time at least, none of his competitors would be able to duplicate its capability.
Getting Inside The OODA Loop
When he was still a pilot, the legendary military strategist John Boyd developed the OODA loop to improve his own decision making in the cockpit. The idea is that you first OBSERVE, your surroundings, then you ORIENT that information in terms of previous knowledge and experiences. That leads you to DECIDE and ACT, which will change the situation in some way, that you will need to observe, orient, decide and act upon.
We can see how Steve Jobs employed the OODA loop in making the decision to immediately produce a $10 million dollar check for a technology that Toshiba had no idea what to do with. He took the new information he observed and immediately oriented it with previous observations he made about the market for digital music devices.
Yet what happened next was even more interesting. When the iPod came out, it was an immediate hit, which changed the basis of competition. Other computer companies, which were competing in the realm of laptops, desktops and servers, suddenly faced a very different market and moved to create their own digital music players. Dell’s Digital Jukebox launched in 2004, Microsoft’s Zune came out in 2006. Both failed miserably.
By then Apple was already preparing the launch of the iPhone, which would change the game again, causing its competitors to Observe, Orient, Decide in Act in reaction to what Apple was doing. Boyd called this “getting inside your opponent’s OODA Loop.” By continually having to orient and react to Apple, they weren’t able to gain the initiative.
Today, it’s hard to remember just how powerful firms like Microsoft and Dell were back then, but they were absolute giants. Nevertheless, by employing the concept of Schwerpunkt, Apple went from near bankruptcy to dominating its rivals in less than a decade.
A Journey Rather Than A Destination
The biggest strategic mistake you can make is to try and win everywhere at once. To win, you need to prevail in the decisive battles, not the irrelevant skirmishes. That, in essence, is the principle of Schwerpunkt—to identify a focal point where you can direct your resources and efforts.
When Steve Jobs returned to Apple, computer companies were duking it out in the PC market, yet he identified digital music players as his Schwerpunkt and the iPod made Apple a serious player. As his competitors were still reacting, he launched the iPhone and on it went. Whenever Steve Jobs would, towards the end of a product presentation say, “and just one more thing,” You could guarantee that he had identified a new Schwerpunkt.
Notice how Schwerpunkt is a dynamic, not a static, concept. It was Jobs’ ability to constantly innovate Apple’s approach, by constantly observing, reorienting and shifting the competitive context. In each case, his strategy was uniquely suited to Apple’s, capabilities, customers and ecosystem. Competitors Microsoft or Dell, more suited to the enterprise market, couldn’t be successful with a similar approach.
There is no ideal strategy, just ones that are ideally suited to a particular context, when relative strength can be brought to bear against relative weakness. Discovering the center of gravity at which you can break through is more of a journey than a destination, you can never be sure beforehand where exactly you will find it, but it will become clear once you’ve arrived.
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