What's Apple's Biggest Challenge: Replacing Steve or Wall Street?

Discussions of management succession have been triggered once again in boardrooms around the world by Steve Jobs' decision to relinquish his job as CEO of Apple. Regarding Apple, of course, the question is what will Jobs' withdrawal from day-to-day decision-making mean for its future?

If leaders often become "cult heroes," to use a term coined by Jeffrey Sonnenfeld, Steve Jobs is the cult hero's cult hero. The assumption (not Sonnenfeld's) is that cult heroes are unique, one of a kind, impossible to replace, and that succession is the biggest challenge facing any company led by one. But is this the real problem confronting the company with the departure of a Steve Jobs?

Apple watchers cite several important contributors to the company's success:

1. Its product development relies less on finding out what customers want than it does on what its employees think would be "cool."
2. Its strategy is based on the introduction of a stream of thoroughly tested and proven products and new models, all based on a common platform, that often cannibalize each other, and that are simple, elegant, and easy to use.
3. It borrows good ideas from organizations such as Xerox and Gap but practices secrecy with its own ideas.
4. Its strengths and interests reflect its cofounder's interest in hardware, not software. Possibly as a result, it relies heavily on partnering with others in the development of application software.
5. Its product development is organized around sometimes competing teams operating under a regime with the philosophy that "The system is, there is no system … (as opposed to discipline and) great processes," as Jobs puts it.

All of this has occurred under the leadership of a person who practices hands-on management, sometimes personally making detailed decisions. Jobs' influence on Apple is pervasive. As one visitor observed, designers are the most respected people in the organization at Apple as opposed to Microsoft where the technical people rule.

In some respects, Apple's experience with Jobs has parallels with Starbucks' history with Howard Schultz, also a hands-on, detail-oriented leader who created the innovative concept of a "third place" outside the home and workplace where customers could enjoy an experience that included great coffee. However, after he stepped away from the CEO's job, Schultz watched apprehensively as new competitors entered the market and his successors succumbed to Wall Street's expectations for even greater success than Starbucks' had enjoyed under Schultz. Wall Street demanded increasing growth, internationalization, better productivity, and new products. And Schultz's successors responded by opening up to five new stores per day; extending business to many new foreign markets; introducing a faster, higher capacity espresso machine that, because of its bulk, created a barrier between the barista and the customer; and offering new products ranging from new breakfast items to stuffed toys. In 2008, Schultz had to step back in to save the company.

This raises the question of whether Tim Cook, Jobs' successor, has anything to learn from the Starbucks experience? Is Apple's biggest challenge that of replacing Steve Jobs or is it that of resisting the inevitable pressures from competition and Wall Street? Just how are those pressures resisted? And at what risk? What do you think?

To read more:

Jeffrey Sonnenfeld, The Hero's Farewell: What Happens When CEOs Retire (New York: Oxford University Press, 1988).

Jim Heskett's latest book,The Culture Cycle, will be published in September.