Five Strategy Lessons From Bill Gates, Andy Grove And Steve Jobs

By Michael Blanding

If there were a Mount Rushmore for technological innovation, Bill Gates, Andy Grove and Steve Jobs would be the faces looking outward. The longtime CEOs of Microsoft , Intel  and Apple have done more than anyone to popularize the modern-day personal computer, and in doing so, also created three of the most highly valued companies in the world.

But how were they able to steer their companies through the volatile ups and downs of decades of changing technologies? What did they have in common? And what can we learn from them about successful strategy?

Those are the questions David B. Yoffie and Michael A. Cusumano address in their new book, Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs. "I have known all three of these individuals," says Yoffie, the Max and Doris Starr Professor of International Business Administration at Harvard Business School. "By looking at what they had in common, I thought there was a great opportunity to understand what distinguishes a really great strategist from your average CEO."

Yoffie has had access to all three men—having served on Intel's board since 1989 and written numerous business cases on Apple and Microsoft. He first started talking about the idea for the book more than six years ago with Cusumano, the Sloan Management Review Distinguished Professor of Management at MIT Sloan School of Management. But, Yoffie says, they wanted to wait until all three had finished their tenures. "The idea was to wait until Steve's departure, which unfortunately came with his death. Literally a week after Steve's death, we had lunch and agreed we would do the book."

The result is a look into the minds of three tech pioneers who, to outside appearances, don't share much in common.

"When I mention I wrote the book, the first response I get is, 'I can't imagine three more different people,'" says Yoffie. Besides their contrasting personalities—Gates the pragmatic technocrat; Grove the disciplined engineer; and Jobs the visionary perfectionist—their companies had unique business models and filled very different niches in the technology value chain.

Five Key Strategies

As they examined what the three CEOs had in common, however, Yoffie and Cusumano homed in on five key strategies that any manager, entrepreneur or CEO can learn. Each of the lessons reads like a paradox or Zen koan that takes intelligence and practice to unpack. "Look Forward, Reason Back," for example, takes its lead from game theory, in which a great chess master will simultaneously be able to see the eventual path to checkmate and the best next move to get there.

Gates, Grove and Jobs's Keys to Success

1. Look Forward, Reason Back
2. Make Big Bets, Without Betting the Company
3. Build Platforms and Ecosystems—Not Just Products
4. Exploit Leverage and Power—Play Judo and Sumo
5. Shape the Organization around Your Personal Anchor

"Where many CEOs fail is they can espouse these great ideas about what the world is going to look like in five years, but they aren't able to look at what they need to do today to achieve that result," says Yoffie. Bill Gates was able to envision a world in which there was a computer on every desk at a time when personal computers didn't exist. But he also realized that the way to capitalize on that future was to focus his energies on controlling software, not hardware.

Andy Grove foresaw the eventual break up of the vertically integrated computer industry, and was able to specialize in creating the core component of computing—the microprocessor. And then he championed that silicon part with the famous "Intel Inside" marketing campaign. "The notion that you could brand a product that no one had ever seen and that no one understood what it did was brilliant," says Yoffie. "That changed the entire structure of the semiconductor industry forever."

“They were all in many ways highly imperfect leaders. We didn't want to idealize them or sugarcoat them.” Steve Jobs saw a future in which consumers would move beyond the computer to use a range of electronic devices for entertainment and communication and then systematically rolled them out one step at a time—the iPod, iPhone and iPad.

Building An Ecosystem

Gates was the first of the three to demonstrate another of Yoffie and Cusumano's lessons: "Build Platforms and Ecosystems—Not Just Products." Early on Gates realized that no one product could provide a lasting competitive advantage, but if consumers became hooked on a particular platform, such as the Microsoft operating system, then you could roll out new products that they would adopt, such as Word, Internet Explorer and Windows Media Player. Even more importantly, such platforms would allow creative developers outside your organization to add their unique value.

Grove faced a crucial decision regarding Intel's own platform when in the late 1980s his engineers figured out a way to make a more efficient processor that nevertheless wouldn't be compatible with Intel's previous architecture. After agonizing about the decision for a year, Grove chose to stick to the platform Intel had already developed, even if it meant jettisoning a potentially better product. "That was the moment of truth whether he was going to be a product company or a platform company," says Yoffie. "In the end, the opportunity to build an ecosystem was more important."

Interestingly, Jobs stubbornly held out the longest in his vision of the product as supreme—pushing the proprietary Mac as the central hub of Apple's product line despite falling market share. Eventually he was persuaded to shift focus and allow the iTunes music platform to be used on PCs as well as on Apple iPods and iPhones. That decision, of course, was a game-changer, establishing Apple as the dominant player in mobile computing. "If iTunes had been available for the Mac only, it would have always remained a niche product and nothing more," says Yoffie.

As that example illustrates, even brilliant CEOs make mistakes sometimes. But Gates, Grove and Jobs recognized their own strengths and weaknesses and had the ability to cut bait, as Jobs did, and change course when it mattered.

Yoffie and Cusumano express this in their last lesson, "Shape the Organization around Your Personal Anchor," using the image of the "anchor" in a double-sense, both what grounds you and what can weigh you down. "These guys were not supermen," says Yoffie. "They were all in many ways highly imperfect leaders. We didn't want to idealize them or sugarcoat them."

All three CEO-strategists, however, were self-aware enough to surround themselves with executives who helped compensate for their own weaknesses. Gates, for example, knew his strength was not in operations, so he brought in an outside COO to run the day-to-day operations. In the same vein, Jobs nearly destroyed Apple in the early 1980s by trying to do too much himself. When he returned in 1997, Tim Cook was one of his first hires to run operations, which allowed Jobs to focus on overall strategy and design.

"These guys each had very different skills they brought to the table," says Yoffie, "but they also became successful in part because they were able to figure out what they were not good at, and they were able to fill those gaps by recruiting individuals and forming teams to do the things they couldn't do or wouldn't do or shouldn't do."

That kind of self-aware recognition of weakness is not something you often see listed in the traits of a great strategic leader. Based on the example of these three men's success, it may be the most important lesson of all.