Apple Computer Entrepreneurship Strategy

American Entrepreneur

Apple Computer, Inc & Steven Jobs

Business Analysis

May 4, 2004

Group 4

I. Background

A. How was the opportunity discovered?

Dropouts

Steve Jobs and Steve Wozniac were college dropouts who wanted to build computers. Computers in the early 1970's were generally huge grey boxes that served a few dedicated functions and were only used by large institutions, which were the only entities that could afford them. The computer Jobs and Wozniak wanted to build, though, was a "personal computer" that would serve a wide variety of functions for an individual- not just a few functions for a wide variety of individuals. The computer they envisioned and designed is basically the same PC we know today.

Jobs and Wozniac did not invent personal computing, but they were the first to bring it to the mass market. The company they founded, Apple Computers, beat such technology heavyweights as IBM, Xerox and Hewlett Packard to the punch. They were able to do this because no one believed it was possible to design a computer that was both affordable to and usable by the average consumer- or at least no one was yet willing to put money behind such a product.

"Homebrewed"

In California's Santa Clara Valley during the 1970's, personal computing was the realm of a group of loosely-knit technical hobbyists. These hobbyists weren't as interested in selling their creations as they were in sharing ideas and designing the most efficient machines possible using only the cheap parts available to them. Steve Wozniac was one of the most gifted of these hobbyists.

Like most of the members of the "Homebrew Computer Club", which operated out of the garage of one of its members, Wozniak was basing his computer designs around the Intel 8080 micro processing chip- which cost $179. When it came time to actually build his computer, though, he had to settle for the $20 MOS Technology 6502 microprocessor, as the Intel chip was out of his price range. Had Wozniak not settled on the MOST 6502 processor, he would not have ended up designing the first "affordable" personal computer, as the price of the Intel chip would have put a finished computer built around it out of most people's price range. Since he was talented enough to design a fully-functioning computer around the MOST 6502 and to keep the computer contained to it a relatively small, wooden housing, the "Apple 1", as it would eventually be named, it was the first computer someone could actual afford, actually move into his or her home and, most importantly, actually use.

Today the "Apple 1" might look like a typewriter someone built in a high school woodshop class, but it was the most innovative computer ever designed.

The Byte Shop Order

Wozniak, however, didn't think about trying to sell either his design or finished PC's. He was planning to hand out the designs for free to the Homebrew hobbyists until his old friend Steve Jobs intervened. Steve's idea was to produce printed circuit boards and sell them to a manufacturer who would turn them into a finished computer, thus avoiding the dealing directly with retailers.

It was the perfect marriage between an "artisan" entrepreneur and an "opportunistic" entrepreneur. A quote by Wozniak simultaneously sums up Job's marketing savvy and Wozniac's business naiveté: "Steve had worked in surplus electronics and said if you can buy a part for 30 cents and sell it to this guy at a surplus store for $6, you don't have to tell him what you paid for it. It's worth $6 to the guy. And that was his philosophy of running a business". Though Jobs was nowhere near the design genius Wozniac was, it was he who identified the market potential of Wozniac's innovative design.

Jobs and Wozniak were both acquaintances of Paul Terrel, the owner of the "Byte Shop", which by most accounts was the first retail computer chain in the world. Jobs had hoped not to deal directly with retailers, but this was the only channel available to him. Additionally, though Jobs was only hoping to produce circuit boards printed from Wozniac's innovative design, Terrel wanted complete computers (except for monitors, as the Apple 1 was designed to be plugged into a TV set).

Thus, it was circumstance more than meticulous market research that led to the development and sale of the first mass-market personal computer. Wozniak the artisan crafted an innovative design, and Jobs the opportunist helped identify the market. All they lacked was the funding necessary to meet the Byte Shop's order of 50 completed units, for which the newly christened Apple Computers would be paid $500 per unit.

Though Apple was not officially formed until months after the Byte Shop order was completed, the order itself was a signal of interest that gave Jobs and Wozniac the encouragement they needed to quit their day jobs and focus on their new company. After the Byte Shop, Wozniak and Jobs began pursuing funding from banks and VC firms in order to grow the company. They felt they possessed a singular vision about what the personal computing experience should be. Steve in particular, who was steeped in Eastern philosophies, considered himself the avatar of the home PC.

B. How were the resources procured?

Fulfilling the Byte Shop Order

In order to fulfill the Byte Shop order, parts were needed and a small, semi-skilled assembly team needed to be formed. Jobs and Wozniak were skilled enough to manage the assembly process, and the order was small enough to necessitate only the hiring of assembly workers, not additional management. Most of the workers were friends of Jobs and Wozniak who were paid just a few dollars an hour. However, they were both almost broke. Despite having day jobs and no children to support, neither was older than 21 and had not accumulated any assets, and thus didn't have much to borrow against. At the time of the Byte Shop order they were not yet "officially" starting up a company, but time and money resources were both still