CHAPTER TWENTY-NINE 1 page

APPLE STORES

Genius Bars and Siena Sandstone

New York’s Fifth Avenue store

The Customer Experience

Jobs hated to cede control of anything, especially when it might affect the customer experience.

But he faced a problem. There was one part of the process he didn’t control: the experience of

buying an Apple product in a store.

The days of the Byte Shop were over. Industry sales were shifting from local computer

specialty shops to megachains and big box stores, where most clerks had neither the knowledge

nor the incentive to explain the distinctive nature of Apple products. “All that the salesman cared

about was a $50 spiff,” Jobs said. Other computers were pretty generic, but Apple’s had

innovative features and a higher price tag. He didn’t want an iMac to sit on a shelf between a Dell

and a Compaq while an uninformed clerk recited the specs of each. “Unless we could find ways to

get our message to customers at the store, we were screwed.”

In great secrecy, Jobs began in late 1999 to interview executives who might be able to develop

a string of Apple retail stores. One of the candidates had a passion for design and the boyish

enthusiasm of a natural-born retailer: Ron Johnson, the vice president for merchandising at Target,

who was responsible for launching distinctive-looking products, such as a teakettle designed by

Michael Graves. “Steve is very easy to talk to,” said Johnson in recalling their first meeting. “All

of a sudden there’s a torn pair of jeans and turtleneck, and he’s off and running about why he

needed great stores. If Apple is going to succeed, he told me, we’re going to win on innovation.

And you can’t win on innovation unless you have a way to communicate to customers.”

When Johnson came back in January 2000 to be interviewed again, Jobs suggested that they

take a walk. They went to the sprawling 140-store Stanford Shopping Mall at 8:30 a.m. The stores

weren’t open yet, so they walked up and down the entire mall repeatedly and discussed how it was

organized, what role the big department stores played relative to the other stores, and why certain

specialty shops were successful.

They were still walking and talking when the stores opened at 10, and they went into Eddie

Bauer. It had an entrance off the mall and another off the parking lot. Jobs decided that Apple

stores should have only one entrance, which would make it easier to control the experience. And

the Eddie Bauer store, they agreed, was too long and narrow. It was important that customers

intuitively grasp the layout of a store as soon as they entered.

There were no tech stores in the mall, and Johnson explained why: The conventional wisdom

was that a consumer, when making a major and infrequent purchase such as a computer, would be

willing to drive to a less convenient location, where the rent would be cheaper. Jobs disagreed.

Apple stores should be in malls and on Main Streets—in areas with a lot of foot traffic, no matter

how expensive. “We may not be able to get them to drive ten miles to check out our products, but

we can get them to walk ten feet,” he said. The Windows users, in particular, had to be ambushed:

“If they’re passing by, they will drop in out of curiosity, if we make it inviting enough, and once

we get a chance to show them what we have, we will win.”

Johnson said that the size of a store signaled the importance of the brand. “Is Apple as big of a

brand as the Gap?” he asked. Jobs said it was much bigger. Johnson replied that its stores should

therefore be bigger. “Otherwise you won’t be relevant.” Jobs described Mike Markkula’s maxim

that a good company must “impute”—it must convey its values and importance in everything it

does, from packaging to marketing. Johnson loved it. It definitely applied to a company’s stores.

“The store will become the most powerful physical expression of the brand,” he predicted. He said

that when he was young he had gone to the wood-paneled, art-filled mansion-like store that Ralph

Lauren had created at Seventy-second and Madison in Manhattan. “Whenever I buy a polo shirt, I

think of that mansion, which was a physical expression of Ralph’s ideals,” Johnson said. “Mickey

Drexler did that with the Gap. You couldn’t think of a Gap product without thinking of the great

Gap store with the clean space and wood floors and white walls and folded merchandise.”

When they finished, they drove to Apple and sat in a conference room playing with the

company’s products. There weren’t many, not enough to fill the shelves of a conventional store,

but that was an advantage. The type of store they would build, they decided, would benefit from

having few products. It would be minimalist and airy and offer a lot of places for people to try out

things. “Most people don’t know Apple products,” Johnson said. “They think of Apple as a cult.

You want to move from a cult to something cool, and having an awesome store where people can

try things will help that.” The stores would impute the ethos of Apple products: playful, easy,

creative, and on the bright side of the line between hip and intimidating.

The Prototype

When Jobs finally presented the idea, the board was not thrilled. Gateway Computers was going

down in flames after opening suburban stores, and Jobs’s argument that his would do better

because they would be in more expensive locations was not, on its face, reassuring. “Think

different” and “Here’s to the crazy ones” made for good advertising slogans, but the board was

hesitant to make them guidelines for corporate strategy. “I’m scratching my head and thinking this

is crazy,” recalled Art Levinson, the CEO of Genentech who joined the Apple board in 2000. “We

are a small company, a marginal player. I said that I’m not sure I can support something like this.”

Ed Woolard was also dubious. “Gateway has tried this and failed, while Dell is selling direct to

consumers without stores and succeeding,” he argued. Jobs was not appreciative of too much

pushback from the board. The last time that happened, he had replaced most of the members. This

time, for personal reasons as well as being tired of playing tug-of-war with Jobs, Woolard decided

to step down. But before he did, the board approved a trial run of four Apple stores.

Jobs did have one supporter on the board. In 1999 he had recruited the Bronx-born retailing

prince Millard “Mickey” Drexler, who as CEO of Gap had transformed a sleepy chain into an icon

of American casual culture. He was one of the few people in the world who were as successful

and savvy as Jobs on matters of design, image, and consumer yearnings. In addition, he had

insisted on end-to-end control: Gap stores sold only Gap products, and Gap products were sold

almost exclusively in Gap stores. “I left the department store business because I couldn’t stand not

controlling my own product, from how it’s manufactured to how it’s sold,” Drexler said. “Steve is

just that way, which is why I think he recruited me.”

Drexler gave Jobs a piece of advice: Secretly build a prototype of the store near the Apple

campus, furnish it completely, and then hang out there until you feel comfortable with it. So

Johnson and Jobs rented a vacant warehouse in Cupertino. Every Tuesday for six months, they

convened an all-morning brainstorming session there, refining their retailing philosophy as they

walked the space. It was the store equivalent of Ive’s design studio, a haven where Jobs, with his

visual approach, could come up with innovations by touching and seeing the options as they

evolved. “I loved to wander over there on my own, just checking it out,” Jobs recalled.

Sometimes he made Drexler, Larry Ellison, and other trusted friends come look. “On too many

weekends, when he wasn’t making me watch new scenes from Toy Story, he made me go to the

warehouse and look at the mockups for the store,” Ellison said. “He was obsessed by every detail

of the aesthetic and the service experience. It got to the point where I said, ‘Steve I’m not coming

to see you if you’re going to make me go to the store again.’”

Ellison’s company, Oracle, was developing software for the handheld checkout system, which

avoided having a cash register counter. On each visit Jobs prodded Ellison to figure out ways to

streamline the process by eliminating some unnecessary step, such as handing over the credit card

or printing a receipt. “If you look at the stores and the products, you will see Steve’s obsession

with beauty as simplicity—this Bauhaus aesthetic and wonderful minimalism, which goes all the

way to the checkout process in the stores,” said Ellison. “It means the absolute minimum number

of steps. Steve gave us the exact, explicit recipe for how he wanted the checkout to work.”

When Drexler came to see the prototype, he had some criticisms: “I thought the space was too

chopped up and not clean enough. There were too many distracting architectural features and

colors.” He emphasized that a customer should be able to walk into a retail space and, with one

sweep of the eye, understand the flow. Jobs agreed that simplicity and lack of distractions were

keys to a great store, as they were to a product. “After that, he nailed it,” said Drexler. “The vision

he had was complete control of the entire experience of his product, from how it was designed and

made to how it was sold.”

In October 2000, near what he thought was the end of the process, Johnson woke up in the

middle of a night before one of the Tuesday meetings with a painful thought: They had gotten

something fundamentally wrong. They were organizing the store around each of Apple’s main

product lines, with areas for the PowerMac, iMac, iBook, and PowerBook. But Jobs had begun

developing a new concept: the computer as a hub for all your digital activity. In other words, your

computer might handle video and pictures from your cameras, and perhaps someday your music

player and songs, or your books and magazines. Johnson’s predawn brainstorm was that the stores

should organize displays not just around the company’s four lines of computers, but also around

things people might want to do. “For example, I thought there should be a movie bay where we’d

have various Macs and PowerBooks running iMovie and showing how you can import from your

video camera and edit.”

Johnson arrived at Jobs’s office early that Tuesday and told him about his sudden insight that

they needed to reconfigure the stores. He had heard tales of his boss’s intemperate tongue, but he

had not yet felt its lash—until now. Jobs erupted. “Do you know what a big change this is?” he

yelled. “I’ve worked my ass off on this store for six months, and now you want to change

everything!” Jobs suddenly got quiet. “I’m tired. I don’t know if I can design another store from

scratch.”

Johnson was speechless, and Jobs made sure he remained so. On the ride to the prototype store,

where people had gathered for the Tuesday meeting, he told Johnson not to say a word, either to

him or to the other members of the team. So the seven-minute drive proceeded in silence. When

they arrived, Jobs had finished processing the information. “I knew Ron was right,” he recalled.

So to Johnson’s surprise, Jobs opened the meeting by saying, “Ron thinks we’ve got it all wrong.

He thinks it should be organized not around products but instead around what people do.” There

was a pause, then Jobs continued. “And you know, he’s right.” He said they would redo the

layout, even though it would likely delay the planned January rollout by three or four months.

“We’ve only got one chance to get it right.”

Jobs liked to tell the story—and he did so to his team that day—about how everything that he

had done correctly had required a moment when he hit the rewind button. In each case he had to

rework something that he discovered was not perfect. He talked about doing it on Toy Story, when

the character of Woody had evolved into being a jerk, and on a couple of occasions with the

original Macintosh. “If something isn’t right, you can’t just ignore it and say you’ll fix it later,” he

said. “That’s what other companies do.”

When the revised prototype was finally completed in January 2001, Jobs allowed the board to

see it for the first time. He explained the theories behind the design by sketching on a whiteboard;

then he loaded board members into a van for the two-mile trip. When they saw what Jobs and

Johnson had built, they unanimously approved going ahead. It would, the board agreed, take the

relationship between retailing and brand image to a new level. It would also ensure that consumers

did not see Apple computers as merely a commodity product like Dell or Compaq.

Most outside experts disagreed. “Maybe it’s time Steve Jobs stopped thinking quite so

differently,” Business Week wrote in a story headlined “Sorry Steve, Here’s Why Apple Stores

Won’t Work.” Apple’s former chief financial officer, Joseph Graziano, was quoted as saying,

“Apple’s problem is it still believes the way to grow is serving caviar in a world that seems pretty

content with cheese and crackers.” And the retail consultant David Goldstein declared, “I give

them two years before they’re turning out the lights on a very painful and expensive mistake.”

Wood, Stone, Steel, Glass

On May 19, 2001, the first Apple store opened in Tyson’s Corner, Virginia, with gleaming white

counters, bleached wood floors, and a huge “Think Different” poster of John and Yoko in bed.

The skeptics were wrong. Gateway stores had been averaging 250 visitors a week. By 2004 Apple

stores were averaging 5,400 per week. That year the stores had $1.2 billion in revenue, setting a

record in the retail industry for reaching the billion-dollar milestone. Sales in each store were

tabulated every four minutes by Ellison’s software, giving instant information on how to integrate

manufacturing, supply, and sales channels.

As the stores flourished, Jobs stayed involved in every aspect. Lee Clow recalled, “In one of

our marketing meetings just as the stores were opening, Steve made us spend a half hour deciding

what hue of gray the restroom signs should be.” The architectural firm of Bohlin Cywinski

Jackson designed the signature stores, but Jobs made all of the major decisions.

Jobs particularly focused on the staircases, which echoed the one he had built at NeXT. When

he visited a store as it was being constructed, he invariably suggested changes to the staircase. His

name is listed as the lead inventor on two patent applications on the staircases, one for the seethrough

look that features all-glass treads and glass supports melded together with titanium, the

other for the engineering system that uses a monolithic unit of glass containing multiple glass

sheets laminated together for supporting loads.

In 1985, as he was being ousted from his first tour at Apple, he had visited Italy and been

impressed by the gray stone of Florence’s sidewalks. In 2002, when he came to the conclusion that

the light wood floors in the stores were beginning to look somewhat pedestrian—a concern that it’

s hard to imagine bedeviling someone like Microsoft CEO Steve Ballmer—Jobs wanted to use

that stone instead. Some of his colleagues pushed to replicate the color and texture using concrete,

which would have been ten times cheaper, but Jobs insisted that it had to be authentic. The grayblue

Pietra Serena sandstone, which has a fine-grained texture, comes from a family-owned

quarry, Il Casone, in Firenzuola outside of Florence. “We select only 3% of what comes out of the

mountain, because it has to have the right shading and veining and purity,” said Johnson. “Steve

felt very strongly that we had to get the color right and it had to be a material with high integrity.”

So designers in Florence picked out just the right quarried stone, oversaw cutting it into the proper

tiles, and made sure each tile was marked with a sticker to ensure that it was laid out next to its

companion tiles. “Knowing that it’s the same stone that Florence uses for its sidewalks assures

you that it can stand the test of time,” said Johnson.

Another notable feature of the stores was the Genius Bar. Johnson came up with the idea on a

two-day retreat with his team. He had asked them all to describe the best service they’d ever

enjoyed. Almost everyone mentioned some nice experience at a Four Seasons or Ritz-Carlton

hotel. So Johnson sent his first five store managers through the Ritz-Carlton training program and

came up with the idea of replicating something between a concierge desk and a bar. “What if we

staffed the bar with the smartest Mac people,” he said to Jobs. “We could call it the Genius Bar.”

Jobs called the idea crazy. He even objected to the name. “You can’t call them geniuses,” he

said. “They’re geeks. They don’t have the people skills to deliver on something called the genius

bar.” Johnson thought he had lost, but the next day he ran into Apple’s general counsel, who said,

“By the way, Steve just told me to trademark the name ‘genius bar.’”

Many of Jobs’s passions came together for Manhattan’s Fifth Avenue store, which opened in

2006: a cube, a signature staircase, glass, and making a maximum statement through minimalism.

“It was really Steve’s store,” said Johnson. Open 24/7, it vindicated the strategy of finding

signature high-traffic locations by attracting fifty thousand visitors a week during its first year.

(Remember Gateway’s draw: 250 visitors a week.) “This store grosses more per square foot than

any store in the world,” Jobs proudly noted in 2010. “It also grosses more in total—absolute

dollars, not just per square foot—than any store in New York. That includes Saks and

Bloomingdale’s.”

Jobs was able to drum up excitement for store openings with the same flair he used for product

releases. People began to travel to store openings and spend the night outside so they could be

among the first in. “My then 14-year-old son suggested my first overnighter at Palo Alto, and the

experience turned into an interesting social event,” wrote Gary Allen, who started a website that

caters to Apple store fans. “He and I have done several overnighters, including five in other

countries, and have met so many great people.”

In July 2011, a decade after the first ones opened, there were 326 Apple stores. The biggest was

in London’s Covent Garden, the tallest in Tokyo’s Ginza. The average annual revenue per store

was $34 million, and the total net sales in fiscal 2010 were $9.8 billion. But the stores did even

more. They directly accounted for only 15% of Apple’s revenue, but by creating buzz and brand

awareness they indirectly helped boost everything the company did.

Even as he was fighting the effects of cancer in 2011, Jobs spent time envisioning future store

projects, such as the one he wanted to build in New York City’s Grand Central Terminal. One

afternoon he showed me a picture of the Fifth Avenue store and pointed to the eighteen pieces of

glass on each side. “This was state of the art in glass technology at the time,” he said. “We had to

build our own autoclaves to make the glass.” Then he pulled out a drawing in which the eighteen

panes were replaced by four huge panes. That is what he wanted to do next, he said. Once again, it

was a challenge at the intersection of aesthetics and technology. “If we wanted to do it with our

current technology, we would have to make the cube a foot shorter,” he said. “And I didn’t want

to do that. So we have to build some new autoclaves in China.”

Ron Johnson was not thrilled by the idea. He thought the eighteen panes actually looked better

than four panes would. “The proportions we have today work magically with the colonnade of the

GM Building,” he said. “It glitters like a jewel box. I think if we get the glass too transparent, it

will almost go away to a fault.” He debated the point with Jobs, but to no avail. “When technology

enables something new, he wants to take advantage of that,” said Johnson. “Plus, for Steve, less is

always more, simpler is always better. Therefore, if you can build a glass box with fewer

elements, it’s better, it’s simpler, and it’s at the forefront of technology. That’s where Steve likes

to be, in both his products and his stores.”

CHAPTER THIRTY

THE DIGITAL HUB

From iTunes to the iPod

The original iPod, 2001

Connecting the Dots

Once a year Jobs took his most valuable employees on a retreat, which he called “The Top 100.”

They were picked based on a simple guideline: the people you would bring if you could take only

a hundred people with you on a lifeboat to your next company. At the end of each retreat, Jobs

would stand in front of a whiteboard (he loved whiteboards because they gave him complete

control of a situation and they engendered focus) and ask, “What are the ten things we should be

doing next?” People would fight to get their suggestions on the list. Jobs would write them down,

and then cross off the ones he decreed dumb. After much jockeying, the group would come up

with a list of ten. Then Jobs would slash the bottom seven and announce, “We can only do three.”

By 2001 Apple had revived its personal computer offerings. It was now time to think different.

A set of new possibilities topped the what-next list on his whiteboard that year.

At the time, a pall had descended on the digital realm. The dot-com bubble had burst, and the

NASDAQ had fallen more than 50% from its peak. Only three tech companies had ads during the

January 2001 Super Bowl, compared to seventeen the year before. But the sense of deflation went

deeper. For the twenty-five years since Jobs and Wozniak had founded Apple, the personal

computer had been the centerpiece of the digital revolution. Now experts were predicting that its

central role was ending. It had “matured into something boring,” wrote the Wall Street Journal’s

Walt Mossberg. Jeff Weitzen, the CEO of Gateway, proclaimed, “We’re clearly migrating away

from the PC as the centerpiece.”

It was at that moment that Jobs launched a new grand strategy that would transform Apple—

and with it the entire technology industry. The personal computer, instead of edging toward the

sidelines, would become a “digital hub” that coordinated a variety of devices, from music players

to video recorders to cameras. You’d link and sync all these devices with your computer, and it

would manage your music, pictures, video, text, and all aspects of what Jobs dubbed your “digital

lifestyle.” Apple would no longer be just a computer company—indeed it would drop that word

from its name—but the Macintosh would be reinvigorated by becoming the hub for an astounding

array of new gadgets, including the iPod and iPhone and iPad.

When he was turning thirty, Jobs had used a metaphor about record albums. He was musing

about why folks over thirty develop rigid thought patterns and tend to be less innovative. “People

get stuck in those patterns, just like grooves in a record, and they never get out of them,” he said.

At age forty-five, Jobs was now about to get out of his groove.

FireWire

Jobs’s vision that your computer could become your digital hub went back to a technology called

FireWire, which Apple developed in the early 1990s. It was a high-speed serial port that moved

digital files such as video from one device to another. Japanese camcorder makers adopted it, and

Jobs decided to include it on the updated versions of the iMac that came out in October 1999. He

began to see that FireWire could be part of a system that moved video from cameras onto a

computer, where it could be edited and distributed.

To make this work, the iMac needed to have great video editing software. So Jobs went to his

old friends at Adobe, the digital graphics company, and asked them to make a new Mac version of

Adobe Premiere, which was popular on Windows computers. Adobe’s executives stunned Jobs by

flatly turning him down. The Macintosh, they said, had too few users to make it worthwhile. Jobs

was furious and felt betrayed. “I put Adobe on the map, and they screwed me,” he later claimed.

Adobe made matters even worse when it also didn’t write its other popular programs, such as

Photoshop, for the Mac OSX, even though the Macintosh was popular among designers and other

creative people who used those applications.

Jobs never forgave Adobe, and a decade later he got into a public war with the company by not

permitting Adobe Flash to run on the iPad. He took away a valuable lesson that reinforced his

desire for end-to-end control of all key elements of a system: “My primary insight when we were

screwed by Adobe in 1999 was that we shouldn’t get into any business where we didn’t control

both the hardware and the software, otherwise we’d get our head handed to us.”

So starting in 1999 Apple began to produce application software for the Mac, with a focus on

people at the intersection of art and technology. These included Final Cut Pro, for editing digital

video; iMovie, which was a simpler consumer version; iDVD, for burning video or music onto a

disc; iPhoto, to compete with Adobe Photoshop; GarageBand, for creating and mixing music;

iTunes, for managing your songs; and the iTunes Store, for buying songs.

The idea of the digital hub quickly came into focus. “I first understood this with the

camcorder,” Jobs said. “Using iMovie makes your camcorder ten times more valuable.” Instead of

having hundreds of hours of raw footage you would never really sit through, you could edit it on

your computer, make elegant dissolves, add music, and roll credits, listing yourself as executive

producer. It allowed people to be creative, to express themselves, to make something emotional.

“That’s when it hit me that the personal computer was going to morph into something else.”

Jobs had another insight: If the computer served as the hub, it would allow the portable devices

to become simpler. A lot of the functions that the devices tried to do, such as editing the video or

pictures, they did poorly because they had small screens and could not easily accommodate menus

filled with lots of functions. Computers could handle that more easily.

And one more thing . . . What Jobs also saw was that this worked best when everything—the

device, computer, software, applications, FireWire—was all tightly integrated. “I became even

more of a believer in providing end-to-end solutions,” he recalled.

The beauty of this realization was that there was only one company that was well-positioned to

provide such an integrated approach. Microsoft wrote software, Dell and Compaq made hardware,

Sony produced a lot of digital devices, Adobe developed a lot of applications. But only Apple did

all of these things. “We’re the only company that owns the whole widget—the hardware, the

software and the operating system,” he explained to Time. “We can take full responsibility for the

user experience. We can do things that the other guys can’t do.”

Apple’s first integrated foray into the digital hub strategy was video. With FireWire, you could

get your video onto your Mac, and with iMovie you could edit it into a masterpiece. Then what?

You’d want to burn some DVDs so you and your friends could watch it on a TV. “So we spent a

lot of time working with the drive manufacturers to get a consumer drive that could burn a DVD,”

he said. “We were the first to ever ship that.” As usual Jobs focused on making the product as

Date: 2015-12-17; view: 545