The Apple of Steve Jobs' Eye
by Brent Schlender

(FORTUNE Magazine) - Since Steve Jobs agreed to sell Pixar to Disney for $7.4 billion, speculation has abounded about his motives, in particular whether he is plotting someday to vie for the crown now worn by Disney CEO Robert Iger. But before we read too much into the deal, consider this: Perhaps Jobs simply took advantage of a tremendous opportunity to cash out and give his Pixar team a chance to call the shots at the fabled animation house. There's no doubt it's a satisfying deal on a personal level for Jobs. But it's not necessarily as strategically motivated as it might seem.

First, a little history. When Jobs bought Pixar from George Lucas for $10 million in 1986, it was a 44-person outfit that designed and built specialized computer workstations and software for 3-D animation. Computer scientist Ed Catmull, who started and led the group, and John Lasseter, a young animator he had hired from Disney in 1984, harbored the desire to make films. Jobs was vaguely aware of this cinematic ambition when he bought the company and christened it Pixar, but he was mostly interested in the hardware and software and how it might play into personal computers. At that time he was running a computer maker called Next, which he founded after he was booted out of Apple Computer in 1985. Jobs loved the short films Lasseter made to demonstrate Pixar's technology, but he had to be convinced that filmmaking should be the company's primary business focus.

Unlike at Apple and Next, Jobs was not hands-on at Pixar. He behaved very little like a CEO except when it came to fussing over special details such as designing Pixar's factory-like headquarters and its wood-fired, brick pizza oven, or finding the right investment bank to take the company public, or negotiating distribution deals with Disney and toymakers. It's as if Jobs recognized that the company was like a child prodigy and needed far less supervision than Apple or Next.

Pixar is an extremely well-run company, with a strong culture and an ingenious structure that blends the best of Silicon Valley and Hollywood. It's a movie factory, with the same people working side by side on film after film, rather than an umbrella organization that funds what are effectively ad hoc production ventures. Pixar invents most of the technology it uses, and it developed a distinctive methodology for creating characters and bringing them to life. Disney's Iger knew that Catmull and Lasseter had built a genuinely new kind of studio and that Pixar could teach Disney about making movies in the 21st century. It was those two factors, not the prospect of Jobs' sitting on the board--or even the outright ownership of the Pixar library and characters--that made the deal so attractive to Iger.

Jobs, meanwhile, remains focused on Apple. He has always insisted that Apple's greatest advantage is that it "builds the whole widget." Apple designs the hardware, software, and operating systems so that they are optimized for one another. The notion of the "whole widget" has broadened to encompass the Macintosh computer, software, the iPod portable player, the Internet music and video download service, and even Apple's retail stores. That has always been Jobs' real genius--his ability to orchestrate layers of products, services, venues, and technologies as a coherent, self-reinforcing brand network. That's what management guru Jim Collins is referring to when he calls Jobs the "Beethoven of business." And that's why Apple, much more than Pixar, is his ideal instrument.

It might seem that those skills would lend themselves to running Disney one day. It is, after all, a similar network of self-reinforcing businesses: The movies, videos, TV networks, Broadway shows, and theme parks all buttress one another. But there are two crucial differences: Disney is an agglomeration of seemingly similar businesses that have been pieced together through acquisition, whereas Apple has grown organically. Second, Apple is in the "consumer technology" business (as opposed to consumer electronics), in which genuine invention, if managed and marketed skillfully, can reap enormous profits, especially if you are willing to aggressively render obsolete your own previous innovations. That's what Jobs is doing with a vengeance, and this intoxicating, roller-coaster business may well seem more substantial to him than the media industry.

Disney is useful to the Apple CEO, but no more than the other major media firms or the big telcos might be. No question, Jobs will have enormous influence as a Disney director, and he relishes the idea of an avuncular role. But Apple is his first and favorite child. He can rightfully claim to have invented the PC industry and reinvented the consumer technology business. He thinks it can be a big enough canvas for his grandest ambitions. Disney will always be the brainchild of Walt Disney. Jobs' greatest satisfaction will come from making Apple a bigger part of all our lives, not from reinventing what is already a legend. No doubt there is an even bigger widget taking shape in his mind. Top of page