Apple in china, p.10
Apple in China, page 10
CHAPTER 10 IBM WEST—THE RISE OF TIM COOK
Quitting time at IBM’s offices in Raleigh, North Carolina, was 4:12 p.m., and within a few minutes the parking lot looked like the start of a Grand Prix race. IBM, famously bureaucratic and regimented, had developed an Air Force culture under the leadership of Thomas J. Watson, and that culture carried forward well past his retirement in 1971. After the dust settled from the exiting cars, there was only one vehicle left in the parking lot, and it remained there well into the evening, usually past nine or ten. It would be in the parking lot on Saturdays and Sundays, too, often by itself, a testament to the single-minded work ethic of its owner.
Tall, with resolute eyes, exhibiting a stiff posture and exuding a quiet confidence, Tim Cook looked like an IBM executive right out of central casting. He was a small-town Alabama boy, born in 1960 as the second of three sons. Cook had no obviously discernible genius, but he made up for it with an industriousness more suited to characters of fiction. After years of being voted “Most Studious” by his high school classmates, he went off to Auburn University to study industrial engineering.
He took the conventional path to the world of computers, joining IBM in 1982 just as the PC set a standard for the whole industry save for Apple. Cook’s specialty lacked any of the glamour or revolutionary change-the-world zeal that typified Cupertino. Certainly no one ever thought to raise a pirate flag at Research Triangle Park, where he worked in the Personal Computer division. But the twelve years Cook spent at IBM were a period of massive strategic shift, when it went from manufacturing virtually everything itself to outsourcing to Asia. And Cook’s ruthless efficiency in materials management was one of those mundane areas that, while lacking flourish, helped IBM and the PC clones nearly send Apple into bankruptcy.
Cook’s work discipline put him in good stead, and within just a few years he was selected for a nighttime MBA at Duke University’s Fuqua School of Business, a program designed to groom up-and-coming executives who might run an IBM division someday. In 1992, Cook was promoted to director of North America fulfillment. It was an enormous vote of confidence for the thirty-one-year-old, who was developing a reputation for shrewd negotiating and executing just-in-time manufacturing, a method of procuring what’s needed when it’s needed, and thus doing away with inventories. IBM, though, was foundering. The company that had been the most valuable for decades abruptly lost that title and posted cumulative losses of $15 billion between 1991 and 1994, forcing a restructure toward services.
Cook departed into a senior position at PC wholesaler Intelligent Electronics, bringing order to a distressed business with bloated costs and wasted assets. In 1997 he graduated into a vice president position at Compaq—a dream role. Compaq, whose origins trace back to three friends scribbling their business plans on a napkin in a Houston pie shop, was the first company to clone the IBM PC in 1982. By 1997 it was King of the Clones, with $34 billion of revenue. Cook had been there only a matter of months when recruiters from Apple began calling. He demurred, so they delivered what was quickly becoming a signature move: They offered a personal interview with Steve Jobs.
Round Peg
That Jobs wanted to meet Cook at all illustrated just how much he’d learned in his twelve-year sabbatical from Apple. The young Steve Jobs detested IBM and everything it stood for. Apple’s most famous TV ad, introducing the Macintosh at the 1984 Super Bowl, portrayed IBM as an Orwellian Big Brother, stifling innovation. But IBM had also outmaneuvered Apple in consistently and profitably getting affordable products to the masses before losing the battle to companies that did these mundane things even more efficiently.
The older Steve Jobs understood this. Upon his return to Apple, he sought to hire a figure who embodied all the things he wasn’t good at and didn’t care to think about. Cook, by then thirty-seven, was a no-nonsense operations executive tailor-made for the role. Although Cook has a reputation for being cold, calm, and calculating, Jobs managed to lure him on inspiration and hope. Cook would later describe his decision in almost mystical terms: “You have this voice in your ear that says, ‘Go west, young man, go west,’ ” he once recounted. “It didn’t make sense. And yet, my gut said, ‘go for it!’ And I listened to my gut.”
Cook’s character was so out of sync with Apple’s image of itself that when Bloomberg Businessweek profiled him for its cover, it cast his smiling face underneath the enormous text of Apple’s Think Different campaign—an homage to “the crazy ones”—with the words reworked to inverse the message: “Here’s to the sensible ones, the team players, the problem solvers, the round pegs in the round holes.” An executive who joined Apple a little before Cook says of him: “I remember him being very, very cautious and organized about not only work, but about his fitness, about what he ate. It seemed like everything in his life that I could perceive was just very meticulously organized.”
Cook’s spirit is kindred to that of Immanuel Kant, the eighteenth-century German philosopher whose daily routine was so consistent that residents could set their watch to when he strolled by. His zeal for order is exactly what Apple operations needed. Compaq was a well-run business, but Apple was an absolute mess. Cook could make his mark immediately. Joe O’Sullivan, by then the acting head of operations, was tasked with teaching Cook the ropes. His goal was to distill his eleven years of experience into eight weeks of on-the-job training, beginning around April 1998. After just two weeks, the two men agreed no more time was necessary. “By the time I left him, he knew more than I did about Apple,” O’Sullivan says. “That man has a fast mind. And a grasp. And a memory—honestly, it’s borderline photographic.”
Cook established exceedingly high expectations the first time he held an operations meeting of worldwide managers. In the weekly review, attendees went over what had gone wrong in the prior days, what needed to be fixed immediately, and what was coming up. These meetings were typically ninety minutes; sometimes they could stretch beyond two hours. On the day Cook took over, the weekly review went nearly thirteen hours. He insisted on a granular level of understanding and demanded fluency in the intricacies of every project. If a manager one week, in a lengthy presentation, projected that their team would ship 200,050 of something by Friday, Cook would remember. So the next week, if the manager said, “Yep, we met our numbers. We did two hundred thousand,” Cook would look at them and ask, with deadly seriousness: “And fifty?”
Not prepping for a meeting with Cook was a surefire way to embarrass yourself. If a manager was explaining a situation, saying, “Look, if we can charter a 747, our problem will be solved,” Cook would reply icily: “If?” A deafening silence would follow. The manager who thought they’d be getting a pat on the back at this point would stumble into an attempted answer. “Well, there’s demand worldwide for 747s, and we’re looking for one at the moment.” Cook would interject: “So you don’t have the 747 chartered?” The manager would look down, mumble something until Cook would follow up: “You didn’t know you were going to produce a hundred thousand units that week? Why wouldn’t you know that?”
By expecting precision, he was basically teaching it, instilling its importance in all of his colleagues so that his underlings would teach their underlings. As exceptional as that first thirteen-hour meeting was, the Friday meeting Cook held with top executives routinely became a four-hour review, a deep dive of spectacular detail into more than 120 pages of Excel numbers related to supply and demand across the global organization. There were so many rows and columns of numbers that the text was printed on special larger paper. Not everyone in these meetings wore glasses when Cook was hired; after a few years, they all did.
However tedious his expectations might feel, Cook himself was the living example of the very demands he expected. He’d arrive each day at six a.m., having already been to the gym. And he’d work so long and so consistently that Apple assigned him two administrative assistants who split the day: one worked from six a.m. to two p.m.; the other worked from two p.m. until whenever Cook went home. Several of Cook’s colleagues also had two assistants, an early indication that Cook had found a culture where he belonged. Even at the annual Top 100 meeting—Steve Jobs’s retreat in Santa Cruz for a rotating group of his favorite lieutenants—Cook’s routine was unvarying. One person recalls going to the hotel gym at five a.m. for an early morning workout and finding a perspiring Tim Cook already midway through his routine.
Numerous executives who worked with both Jobs and Cook can’t help but contrast them. One executive says Steve Jobs was difficult because his emotions could abruptly go from zero to a hundred. “Tim,” this person adds, “goes from thirty-five to thirty-six.” And yet somehow that would be more disconcerting, because it was so unusual. A former vice president at Apple says the way you knew Tim Cook was upset was when he would say, “I just don’t understand.” This person adds: “When he’d say that, you’d see little puddles on the floor—the sweat coming off of people.”
Cook’s disdain for mediocrity was similar to that of Jobs, but it manifested itself in an entirely different way. He would persistently ask his managers for layer upon layer of information that flummoxed poor performers and exposed bullshitters. Parents know it takes only a few rounds of a toddler asking, “Why?” before their knowledge is exhausted, leading to frustration and made-up answers. Cook’s questioning was like that. He exhibited a memory and an understanding for data and planning that nobody in Cupertino had experienced before. A lower-level executive recalls Cook stopping people in the hallway ahead of a meeting to glance at their spreadsheets. Within a minute he might spot an error. “And if one number was wrong, he wouldn’t trust the whole spreadsheet,” this person says. “We just knew him as this Terminator machine. Like, he could tell if you were lying…. My boss would say: ‘If he calls on you and you get the number wrong, he’ll try again the next week. If that’s wrong, he’ll never call on you again.’ ”
Cook didn’t capture everything, of course, but in principle no item was too small to escape his notice—even a rivet costing fractions of a penny per device. Yet he was able to put all the puzzle pieces together and grasp the big picture. “If you send him a pitch, he’ll go into page 30, paragraph 7, and ask to talk in more detail,” says a person who reported to him. “It’s amazing how he can go from high-level to the very details and back.”
Cook could make grown men and women cry. A few screamed at him, leaving the room, never to come back. He was unapologetic about these episodes. Like Jobs, Cook wanted only A-list players. No hard feelings if you didn’t fit in. Those who stayed, adapted. It might not have been fun. But it was effective.
Foxconn’s First Bet
Cook’s reputation quickly extended beyond the Apple campus. When Jon Rubinstein, Apple’s head of hardware, invited Cook to the Netherlands to negotiate with a company called Lucent as they were trying to help make Wi-Fi a standard, Cook demonstrated a skill in negotiating that awed him. Apple wasn’t even a big company at the time, but Cook managed to grasp every facet of Lucent’s business to understand what the real costs were, so he could low-ball an offer and convince them they’d still earn profit at scale. “Tim hammered home the prices,” Rubinstein says. “It was basically a proctology exam.”
Meanwhile, Cook brought in allies with similar experience, solidifying his style across operational divisions. He hired Bill Frederick to run Logistics, Jeff Williams to lead Procurement, and Jacky Haynes to manage Business Processes. All three had spent more than a decade at IBM, and each completed an MBA at Duke. And they were merely the tip of the iceberg. So many people with IBM experience moved to Cupertino that Big Blue executives would jokingly call Apple “IBM West.”
Cook was fond of teaching colleagues to “be aggressive and unreasonable” when negotiating with suppliers. Max Paley, a vice president of graphics at the time, recalls not really knowing what this meant. Cook would say in a calm, deliberative cadence: “Don’t… ever… be… afraid… to… be… unreasonable.” What did that mean? Was Cook saying to be a jerk? Paley wasn’t sure, but he later grew to understand and respect it. “What he was really saying was that it’s a typical thing for people—even in business negotiations with a supplier—to try to figure out: What’s a reasonable thing to ask them? What are they likely to be able to do?” Paley says. “Whereas he was kinda saying, ‘You have no clue! You have no idea what the supplier might actually be capable of. So don’t be afraid to ask for the moon. Ask for everything you want. Ask for everything you need. If they can’t do it, they’ll say no.’ ”
Foxconn was an early test case for this approach. In Cook’s attempt to lessen the risk to iMac operations from LG by getting a second assembler, in late 1999, Apple did ask for the moon—and Foxconn, hoping to play the long game, demonstrated a willingness to do anything to get the order. “Terry Gou was relentlessly focused on doing whatever it took to make Apple succeed,” says a senior engineer on the first iMac. “Terry already had a long-term view. And he was willing to sacrifice whatever it took in the rough early days—be it margin or his employees’ personal lives—to make that thing succeed. He had a vision. He saw Apple’s long-term success, I think, even before Apple did.”
CHAPTER 11 FOXCONN GOES GLOBAL—CHINA, CALIFORNIA, AND THE CZECH REPUBLIC
Whereas Foxconn’s rivals saw Apple’s complex designs as a challenge, Terry Gou saw them as an opportunity. Apple was a low-volume computer maker in 1999, widely seen as difficult to work with and arrogant in the perceived superiority of its products. They were often seen as not worth the trouble. But Gou grasped earlier than anyone that the value of working with Apple wasn’t the profits, it was the learning. Foxconn might not win much profit from Apple—it might even lose money at times—but the work itself, as well as the lessons Cupertino offered by having its engineers work side by side with locals in the factories, gave his team a deep education. Foxconn’s goal was to absorb these lessons and apply the skills to its other, more lucrative clients. “His people used to hate us, because they used to make no money out of us,” says an Apple operations executive. “The Compaq guys”—the Foxconn team building for Compaq—“were making a fortune on bonuses, and no one wanted to come work on the Apple account because there were no bonuses.” But Gou answered to no one. He took a long-term view, knowing that if his team could please Apple, they could please any client.
Gou saw himself as a visionary. He admired Steve Jobs and sought to be in that sort of company. Jobs had rebuffed him, uninterested in what was a pretty small company in the late 1990s. But the hiring of Tim Cook opened the door. Although Cook had been at Compaq only half a year, the PC behemoth was Foxconn’s biggest client, and the two executives had gotten to know each other. So Gou made a big commitment. He offered to build iMacs for Apple at $40 less per unit than LG—big savings for a computer that was shipping in the thousands per day—and, in a bid to replace the Korean company’s relationship with Apple entirely, he pledged that Foxconn would establish operations on three continents just like LG. “When Hon Hai goes for something, they go for it all,” says an Apple engineer. Apple executives who considered Foxconn “the connector company” were skeptical it had this capability. Cook, astutely, agreed they didn’t. Be he argued that they could be taught.
It was the start of a relationship that would transform both companies. The meeting of the minds between Steve Jobs and Jony Ive had made Apple products unique, but it was Terry Gou and Tim Cook who would ensure they were ubiquitous.
Uncle Terry’s Vision
Terry Gou gestured animatedly into the distance. He talked square footage and new buildings, how he was going to expand the business and hire hundreds of thousands of workers to live on a bustling campus. The vision was so real, he could almost touch it. Wayne Miller, a senior manager in Product Design sitting next to him, followed the traces of Gou’s hand but saw only empty farmland. They were touring the Longhua campus together in a sort of golf cart, in 1999, a time when Foxconn had around 20,000 employees. It was a sizable company, but not particularly special. Miller just nodded, uncertain how to respond. Clearly these weren’t the rantings of a madman—Terry Gou was an impressive figure—but normal people didn’t have this kind of ambition. “The vision he laid out was quite grand. I was definitely skeptical,” Miller says. As they drove around the emerging campus, Miller noticed that workers reacted to Uncle Terry as if he were the mayor or the governor. In a way, in this gated community, he was. “They didn’t quite salute, but there was an air of respect when he passed by,” Miller says. “People would stop and straighten up.”
In 1999, Foxconn was already building the enclosure for the G4 desktop and supplying components for other Apple computers. Miller recalls Foxconn “just crushing it” in terms of production, cost, and speed, a combination nobody could really compete with. “It was mind-blowing how much manufacturing and tooling capability they had,” he says. “Terry Gou invested a lot of money, setting that place up to be fast and cheap.”
Shenzhen was a sea of cranes in every direction. “They were building everywhere,” says another Apple engineer who frequented the area. Foxconn’s Longhua campus north of Shenzhen wasn’t leading the charge in this respect. “It was a bunch of farmland,” this person says. “I remember this one hill—a bulldozer on the top, scraping the hill and removing all the dirt, pushing it down so they can get rid of the hill and just level it. And there was another big hole in the ground where they had pushed a farmhouse into it and they were backfilling it with dirt.” Foxconn had been in China for more than a decade at this point, but Longhua was “just four or five, maybe six buildings at the time,” says the Apple engineer. “This was the very beginning.”
