The Risk of Not Taking Enough Risk

By Deborah Perry Piscione

We know part of Steve Job’s story, but there is a critical part that rarely gets told and is essential to Apple’s success. When Jobs returned to Apple in 1997 to execute what became one of the most successful turnarounds in corporate history, he made two crucial decisions.

The first would be to focus on consumer and business desktops and laptops. Prior to Jobs’ return, while most of Apple’s businesses floundered, Apple still had an excellent and profitable franchise selling printers. Most people in the Apple printing group assumed that they would be spared the savage cuts that the rest of the company was experiencing, but they were wrong — dead wrong. The entire printer group was eliminated in a single act to ensure the company focused on the strategic items that Jobs had articulated as priorities.

After Jobs gained dominance in the desktop and laptop space, he pondered what to do next. In this environment and under his strong — some might say heavy-handed and narcissistic — leadership, it might seem that launching a consumer-electronics product was somewhat risky. But his second vital decision was making to make this a primary focus and trust Tony Fadell to make this happen.

Fadell started working for Apple in February 2001 as a contractor designing the iPod and planning Apple's audio product strategy, and in 2006, he was hired full time as the senior vice president for hardware and mobile devices. His reputation as a decisive guy who likes to tinker, invent, and push the risk envelope was a perfect fit.  In an interview with Saurabh Gupta, who served under Fadell as the engineering manager for iPod software from 2006–12, Gupta recalled how Fadell challenged his team to the biggest engineering achievement — to fit audio processing into a small and sleek device.  The iPod, which Fadell quickly became known as the creator of, “was not on plan to have the success that it did and certainly not generate more than 50 percent of Apple’s revenue in 2006,” according to Gupta, but it did. “Steve thought the iPod would serve as some small accessory for the Mac, not as [a] standalone product,” says Gupta. “I think we were all amazed by the response . . . it was such a gamble . . . and because early iPod prototypes looked similar to an early smart phone, we knew that we were on to something else,” he continues. That early something became the prototype for the iPhone. What was something of a random and risky attempt to break ground in a new market drove Apple to become the richest company in the world.

Fadell went on to lead the team that designed the first eighteen generations of the iPod and also led the team that built the first three generations of the iPhone. What enabled Fadell to be so experimental was a collage of many things, but most importantly, Jobs gave Fadell total freedom over technical elements, product design, and development, and then Jobs would laser in on the marketing and packaging to complete it. They were a dream team, despite their fourteen-year age difference.

Today, with the benefit of perfect hindsight, we know that the iPod was a huge hit. We can tell that this was the perfect product in the convergence of computers and personal entertainment. But that was far from clear at the time. Some of the comments that were posted on Mac Rumors, an Apple fan blog, just after the iPod’s release were:

• “The reality distortion field is starting to warp Steve’s mind if he thinks for one second that this [iPod] thing is gonna take off.”
• “Who gets that thing is a very stupid person.”

Many complained about the high price tag, but the main complaint was that instead of sticking to what Apple did best — computers — the company had strayed into the consumer goods market. Looking back, had Apple stuck with computers, there is no doubt that they would not have entered the music player market or the smartphone market and would now not be the most valuable company in the world.

The ability to embrace risk is critical if leaders are to succeed in the long run. It may not always be clear at the time that there will be a home run, but unless a leader is willing to take some risk, it will be impossible for them to feel the exhilaration of victory. The stark reality is that if leaders don’t take risks with developing new products, ideas, and thinking, their organizations will lose market share and relevance or, even worse, become obsolete. Consider the fact that since 2000, 52 percent of Fortune 500 companies have disappeared, and in 2020, 75 percent of the Standard and Poor’s index will be companies you have not even heard of yet.

Deborah Perry Piscione is a serial entrepreneur, innovation advisor and bestselling author. Her latest book, The People Equation: Why Innovation Is People, Not Products, and in her keynote speeches, she shares her research on accelerating innovation efforts in companies across the board.

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