The return of Steve Jobs to the role of Apple's CEO in 1997, it could be argued, was one of the most important moments in the history of business. At the time, it would have been hard to foresee just how influential Apple would become. It's not an overstatement to say the company was in pretty rough shape.
It was in 1997 that Jobs stood onstage and told the company's loyal fans that the company had taken a $150 million investment from Microsoft, one of its most fierce rivals. It was the same year that Dell's CEO, Michael Dell, said that if he were leading the company, he would shut it down and give the money back to shareholders.
Obviously, Jobs didn't shut the company down. Instead, he began working on a string of iconic products like the iMac, the iPod, and what would become macOS X.
But there was another move Jobs made in that first year back at Apple that might have been just as important. For context, this came up during the testimony of the current CEO, Tim Cook, in the trial over Epic's lawsuit against Apple.
Cook was explaining that it was impossible to fully paint a picture of the App Store's profitability, because the company doesn't track every expense that way. Cook said this was because he didn't want various divisions arguing about where costs should be allocated because that would be unproductive. He went on to say that it was Jobs's idea.
At the time, every business unit had its own profit and loss statement (P&L), and the divisions regularly fought over where to allocate costs. Each manager was primarily concerned with whether their unit showed a profit, regardless of whether the company itself was healthy or profitable.
The company was losing $1 billion a year at the time, but every division was reporting that they were profitable. Jobs not only eliminated every general manager but also put the entire company on a single P&L.
To Cook's point, there are costs that are shared among different areas of the business, and there's nothing productive about having them arguing and fighting over where the costs should be attributed. Maybe more important, the fact that Apple isn't organized by business unit, but rather by function, helps insulate those teams from financial pressures, freeing them to think in terms of what is best for the product and ultimately the customer.
In 2020, Harvard Business Review described it this way:
The bonuses of senior R&D executives are based on companywide performance numbers rather than the costs of or revenue from particular products. Thus product decisions are somewhat insulated from short-term financial pressures. The finance team is not involved in the product road map meetings of engineering teams, and engineering teams are not involved in pricing decisions.
Here's the thing. Most people think of Steve Jobs's obsession with product design as his most important contribution to Apple. Certainly, he played a singular role in the development of some of the most iconic consumer electronic devices ever created--the iMac, the iPod, the iPhone.
No one doubts that Jobs made an extraordinary contribution to Apple with his sense of product design and his ability to understand what will delight customers. I think that's true, but I'm not sure it's a full picture.
Jobs's recognition that the company should only have one P&L might be just as important to Apple's becoming the $2 trillion company it is today. In fact, there's a reasonable chance that had Jobs not had his observation and made a change, Apple wouldn't be the company it is today. It might not even be a company. In that scenario, there would never have been an iMac or iPhone at all. If that's the case, that one simple decision really did change everything.