Strategy Rules: A Q&A with Michael Cusumano

As the next generation of technology giants ascends, what to make of the predecessors? Microsoft, Intel, and Apple are behemoths, but their founders are retired, semi-retired, or have passed away. What lessons did they leave?

In the new book Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs, Harvard Business School Professor David Yoffie and MIT Sloan Professor Michael Cusumano distill three legendary technology careers into a set of rules for corporate leadership in all industries.

In an interview, Cusumano explained how insider access to Intel informed the authors, which new companies embody the book’s lessons, and what Apple Watch is doing wrong.

You write that the Apple Watch employs a “product over platform” strategy that contradicts the platform-first advice in Strategy Rules. How should Apple develop or market the watch differently?

As currently designed, the Apple Watch is simply a complementary product. You cannot use it without the iPhone. The applications will operate primarily on the iPhone, with some hardware and software features of the Apple Watch enabling different functions. This reminds us of how Apple first introduced the iPod and iTunes—you had to have a Macintosh computer in order to use them.

This strategy limited the market share of the iPod and iTunes to the very small number of Mac users at the time, in the early 2000s. Not until Apple opened up the iPod and iTunes to Windows users in 2003-2004—the vast majority of the computing market at the time—did Apple reverse its financial losses and start to grow at such amazing rates. Similarly, the market share of the Apple Watch as designed today will always be limited to the market share of the iPhone. That is much bigger than the Mac was a decade ago, but Google Android is by far the largest smartphone platform. So, if Apple really wanted to introduce the Apple Watch as a new wearable computing and communications platform, it should be open to the majority of smartphone users as well as iPhone users. Apple could still do this in the future or continue to treat its products as more of a portfolio around its own company platform.

Your co-author David Yoffie has been on the board of directors at Intel since 1989. What do you think this access provides to readers of Strategy Rules?

David brings to the book a deep insider knowledge of how [then Intel CEO] Andy Grove made critical decisions at key junctions in the development of the personal computer industry and the Internet. Grove also knew Bill Gates and Steve Jobs very well, and Microsoft and Intel have been close partners since the 1980s, while both companies looked to Steve Jobs and Apple as innovation leaders. So we get to see how Andy viewed the world, through David’s perspective on the board and from our interviews with Andy.

How can leaders focus on these strategy rules without veering too far toward the intense oversight and sometimes explosive anger of Gates, Grove, and Jobs that you recount in the book? Or is it unavoidable?

Gates, Grove, and Jobs all displayed incredible passion for their companies and their industries. At times, yes, they displayed considerable anger. But this comes with passion, which was essential to their leadership style. They were also great teachers, in our view, showing others in their companies what mattered most to the customer and the business. Sometimes this meant they got upset when people didn’t get their vision or got something wrong. Each of them also made mistakes and were not too proud to admit when they were wrong.

Which technology executives of the next generation of companies do you think are best employing the rules you emphasize in the book?

Google, Facebook, Amazon, Twitter, [Chinese Internet company] Tencent, Alibaba, Airbnb, Uber, and several others are all Internet companies whose explosive growth has been driven by network effects and their positive feedback loops. Their founders all extrapolated from the power of the Internet to see particular possibilities for their companies, and then devised very specific plans to get from point A to point B. We call this “Look Forward, Reason Back.” They all have made some big bets, based on their vision of the future, but without risking everything. They all have built global platforms that allow their companies to expand—exponentially—into new markets and services. They all have demonstrated the use of leverage or cleverness as well as market power. They all have distinctive CEOs and founders who built the companies around their strengths and found partners to balance out their weaknesses. Unlike product companies of previous generations, especially before the personal computer, the founders and leaders of these companies all demonstrate the kind of strategic thinking and management that we talk about in Strategy Rules.