CEO Steve Jobs says among other practices, it's "saying no to 1,000 things" so as to concentrate
on the "really important" creations.

In an era when most technology outfits have tightened their belts to adapt to a slower-growing 
market, one company stands out for forging ahead on innovation: Apple Computer (AAPL ). Others 
have slashed R&D and focused on incremental advances to existing product lines. Not Apple. 
By combining technical knowhow with a new concept for how to sell music online, Apple's iPod 
music player has become the most influential new tech product in years. At the same time, Apple 
has maintained its reputation for making the most elegant, easy-to-use desktop computers as well.

Much of the credit for this performance is attributed to Chief Executive Steven P. Jobs, who 
founded Apple in 1976 -- but was ousted in 1985 before making a triumphant return in 1997. 
BusinessWeek Computer Editor Peter Burrows recently talked about the nature of 
innovation with Jobs, who is back to work part-time after recovering from pancreatic cancer 
surgery. Here are edited excerpts of their conversation:

Q: Apple has long been an innovative place with lots of smart, passionate engineers. But it 
seemed to fall off the map in the years before you returned in 1997. What happened?
A: Let's start at the beginning. Both [Apple co-founder] Steve Wozniak and I -- and I 
think I can speak for Woz -- got our view of what a technology company should be while working 
for Hewlett-Packard (HPQ ) in the late 1960s and early 1970s. And the first rule over there was 
to build great products. Well, Apple invented the PC as we know it, and then it invented the 
graphical user interface as we know it eight years later [with the introduction of the Mac]. But
then, the company had a decade in which it took a nap.

Q: What can we learn from Apple's struggle to innovate during the decade before you returned 
in 1997?
A: You need a very product-oriented culture, even in a technology company. Lots of 
companies have tons of great engineers and smart people. But ultimately, there needs to be some 
gravitational force that pulls it all together. Otherwise, you can get great pieces of technology
all floating around the universe. But it doesn't add up to much. That's what was missing at 
Apple for a while. There were bits and pieces of interesting things floating around, but not 
that gravitational pull.

People always ask me why did Apple really fail for those years, and it's easy to blame it on 
certain people or personalities. Certainly, there was some of that. But there's a far more 
insightful way to think about it. Apple had a monopoly on the graphical user interface for 
almost 10 years. That's a long time. And how are monopolies lost? Think about it. Some very 
good product people invent some very good products, and the company achieves a monopoly.

But after that, the product people aren't the ones that drive the company forward anymore. It's 
the marketing guys or the ones who expand the business into Latin America or whatever. Because 
what's the point of focusing on making the product even better when the only company you can 
take business from is yourself?

So a different group of people start to move up. And who usually ends up running the show? The 
sales guy. John Akers at IBM (IBM ) is the consummate example. Then one day, the monopoly 
expires for whatever reason. But by then the best product people have left, or they're no 
longer listened to. And so the company goes through this tumultuous time, and it either survives
or it doesn't.

Q: Is this common in the industry?
A: Look at Microsoft (MSFT ) - who's running Microsoft?

Q: Steve Ballmer.
A: Right, the sales guy. Case closed. And that's what happened at Apple, as well.

Q: How did Apple recapture its innovative spark?
A: I used to be the youngest guy in every meeting I was in, and now I'm usually the 
oldest. And the older I get, the more I'm convinced that motives make so much difference. HP's 
primary goal was to make great products. And our primary goal here is to make the world's best 
PCs -- not to be the biggest or the richest.

We have a second goal, which is to always make a profit -- both to make some money but also so 
we can keep making those great products. For a time, those goals got flipped at Apple, and that 
subtle change made all the difference. When I got back, we had to make it a product company again.

Q: How do you manage for innovation?
A: We hire people who want to make the best things in the world. You'd be surprised how 
hard people work around here. They work nights and weekends, sometimes not seeing their families
for a while. Sometimes people work through Christmas to make sure the tooling is just right at 
some factory in some corner of the world so our product comes out the best it can be. People 
care so much, and it shows.

I get asked a lot why Apple's customers are so loyal. It's not because they belong to the Church
of Mac! That's ridiculous.

It's because when you buy our products, and three months later you get stuck on something, you 
quickly figure out [how to get past it]. And you think, "Wow, someone over there at Apple 
actually thought of this!" And then three months later you try to do something you hadn't tried 
before, and it works, and you think "Hey, they thought of that, too." And then six months later 
it happens again. There's almost no product in the world that you have that experience with, but
you have it with a Mac. And you have it with an iPod.

Q: What's the CEOs role in all of this?
A: I don't know. Head janitor?

Q: Seriously, a lot of people give you much of the credit. How much of it is you?
A: Look, I was very lucky to have grown up with this industry. I did everything in the 
early days - documentation, sales, supply chain, sweeping the floors, buying chips, you name it. 
I put computers together with my own two hands. And as the industry grew up, I kept on doing it.

Not everyone knows it, but three months after I came back to Apple, my chief operating guy quit.
I couldn't find anyone internally or elsewhere that knew as much as he did, or as I did. So I 
did that job for nine months before I found someone I saw eye-to-eye with, and that was Tim Cook.
And he has been here ever since.

Of course, I didn't tell anyone because I already had two jobs [CEO of Apple and of movie maker 
Pixar Animation Studios (PIXR )] and didn't want people to worry about whether I could handle 
three [jobs]. But after Tim came on board, we basically reinvented the logistics of the PC 
business. We've been doing better than Dell (DELL ) [in terms of some metrics such as inventory]
for five years now!

Q: With the iPod, Apple moved beyond the PC into consumer electronics. But you're still 
considered a niche player that picks its spots in bigger markets. Will you try to expand to 
become a more full-line player, like a Sony (SNE ) or Samsung?
A: The fact that you're comparing us to Sony is a statement in itself. I'm flattered. We 
really respect those guys and what they've accomplished over the years. But we're just trying to
make great products. We do things where we feel we can make a significant contribution. That's 
one of my other beliefs.

Source: http://www.businessweek.com/bwdaily/dnflash/oct2004/nf20041012_4018_db083.htm1