"We mandated in advance that we'd build a deep enough staff to allow plenty of time for planning," says Markkula. He wants his top people to spend 25% of their time on long-range planning, and another 25% on recruiting and training new key personnel. If you don't these things you'll be overrun, he claims. "Good management doesn't mean just coping with day-to-day problems. You're far better staying out of trouble in the first place."
Apple makes a point of recruiting its managers from major growth companies, because these people have confronted the kinds of growth problems Apple is just beginning to experience. "We look to them to see down the road and predict the problems they've encountered elsewhere," says Markkula. "Then we can plan to avoid them."
The hardest key person to recruit has proved to be a senior financial officer. "It's a problem locating good risk takers," says Markkula. In the meantime, the company has relied heavily on Scott's financial abilities and on the financial experience of several outside directors.
Consistent with Markkula's go-for-broke strategy, from the start Apple has spent heavily on advertising and promotion. The company bought costly full color ads in national magazine when it was barely in production. Last year, with its Apple II computer a sellout in many outlets, the company spent $1 million for ads and promotion, on a par with much larger firms.
"We had to gain a broad recognition in the market fast. We could not start small," declares Markkula. He's determined to make Apple's name dominant in personal computers before TI and IBM enter the field with their superior marketing firepower.
The strategy seems to be working. At the moment, Radio Shack—whose computers are in the $600-$800 range—sells more units than Apple. But dollar sales of Apple II—which starts at just under $1,000 and can go over $2,000 with add-ons—just about match industry leader Radio Shack, Markkula believes. And he says Apple is gaining market share whereas Radio Shack appears to be leveling off.
Markkula's marketing plan is to move as quickly as possible to dominate, one at a time, the key areas of the personal computer field. "When you're small, it's hard to be all things to all people, but we'll soon be big enough to handle that," says Markkula. Apple's first effort was to sell to hobbyists, and Markkula is satisfied the company is the major force in this market segment. This year a major emphasis will be on developing sales to schools. Apple will then concentrate on the small business market, with application software and a distribution strategy aimed at businessmen.
To date, Markkula's marketing plan has depended on distributors rather than Apple's own salespeople. Apple products are in 450 independent computer hobby shops, and in nationally franchised retail operations such as Computerland. Markkula is now busy developing outlets that will attract non-hobbyist buyers.
That doesn't mean Apple is abandoning its basic home market. From the beginning the company has spent heavily to please customers who demand good looks as well as utility in items brought into their homes. The company spent $100,000 in tooling fir a stylish foam housing for Apple II—far more than most competitors who use a metal "black box" form of housing. That decision has paid off in more than good looks. The cost per unit of the foam structures has dropped about 20 percent of the cost of metal casings as production rates have increased, Markkula claims.
Apple's commitment to planning rather than coping shows clearly in its approach to internal data processing needs. In 1977, at a time when manual order-processing methods were still sufficient, Apple began an elaborate study to estimate the number of orders that would be processed in five years. With that accomplished, outside consultants spent six months identifying five potential hardware and software supplier. The company finally selected a Digital Equipment Corp. PDP 11/70, satisfied that the system will meet company need up to at least the $500-million sales level. "It takes a year to define needs," says Markkula. "Why wait? Most of us here have seen our former companies restricted in their growth by failure to plan in advance for computer needs."
Another chore that Apple accomplished early on was putting its orders, credit files, and shipping records into data banks. "Once you've built up three or four years of records, it's costly to transfer these to electronic memory," says Michael Scott.
Markkula notes that suppliers, especially in such high-demand industries as electronics, can make or break a fast growing company when demand swells unexpectedly. Apple has made a point of building credibility with its distributors and with manufacturers of components. From the start, the company was conscientious about paying both on time. "There have been times when we were the only company able to ship because we could get the parts that others couldn't," says Markkula.
In planning its physical capacities, Apple aims for maximum flexibility, with movable partitions and flexible tubings to hold electric wiring. In one plant, floor layouts were revamped four times in nine months, but because the facility had been designed with expansion in mind, the changes didn't cause major problems. The company had always anticipated future space needs: last June, Scott asked for 5,000 sq. ft of open bay space adjoining one production area. For a while, the area remained empty, and one of his foremen chided Scott: "You'll never fill that up." Today the area is jammed from floor to ceiling with packing and shipping materials, boxes, and components.
Scott also believes that fast-growing companies should depend on outside help for staff specialties such as public relations and for the manufacture of nonproprietary components and systems. Don't worry too much about being innovative in such areas as production procedures if a cost-efficient outside alternative exists, he advises. "As long as we are protected in terms of quality assurance, there are better things to do with our time here. Our scarcest commodity at Apple isn't cash, but time to plan."
Scott is adamant, however, that growing companies should devote lots of time to committing standard policies and procedure to paper. "You need written personnel policies and a manual that say specifically how you want a purchase order to be written," he says. He reasons that when a company is growing as fast as Apple, managers don't have time to stop and tell new employees how to do everything.
Ironically, about the only thing that Apple didn't plan in detail was its name, which sticks out in an industry dominated by contrived corporate names trying to reflect a mysterious world of bits and bytes. Jobs, who was a California "fruitarian" at the time the enterprise was moving from bedroom to garage, liked the simple, crisp, natural image of an apple. So that's what the computer and, later, the company.
