In 1997 Apple was losing a billion dollars a year and making dozens of products nobody could tell apart. The rescue began with a cheque from its biggest rival and a very short list.
Easier version: read this lesson at A2/B1 level →
Ten items. Work through the four activities — say your answer out loud before you reveal it.
Three terms: turnaround · licensing · insolvency. Say the right one, then reveal.
Read each part. After it, there's a quick check (answer from memory first), then one question to discuss.
In 1985, Apple's co-founder Steve Jobs lost a boardroom battle and left the company he had started. Through the early 1990s the company that remained was profitable for a while, then steadily less so. Computers running Microsoft Windows took more and more of the market. Apple responded by making more products: many versions of the Macintosh with confusing model numbers, printers, early digital cameras, a handheld organiser called the Newton, even a games console. It also began licensing its operating system to other manufacturers, whose cheaper copies mainly took sales from Apple itself.
Underneath, the core problem was software. Apple's operating system was ageing, and a long, expensive project to replace it had failed. Three chief executives came and went in about four years. In late 1996, the company solved the software problem by buying Jobs's later company, NeXT, for roughly four hundred million dollars. The deal brought in a modern operating system — and brought back Jobs, officially as an adviser.
By mid-1997 Apple was losing money fast: roughly a billion dollars that financial year. The share price had collapsed, respected commentators were suggesting it should be sold or closed, and the chief executive was removed by the board in July. Jobs later said that the company had been within about ninety days of running out of money. He agreed to lead it on a temporary basis.
1. How did Apple's response to competition in the early 1990s make its problems worse?
2. What did the purchase of NeXT give the company, apart from software?
1. It multiplied products and model numbers, confusing customers and spreading resources thinly, and it licensed its operating system to clone makers whose cheaper machines took sales from Apple rather than from Windows.
2. It brought back the co-founder, Steve Jobs — first as an adviser, and within months as the temporary head of the company.
In August 1997, at a large Apple conference in Boston, Jobs announced a deal that shocked the audience. Microsoft — the rival many of them saw as the enemy — would invest 150 million dollars in non-voting Apple shares and commit to making its Office software for the Mac for at least five years. The two companies also settled a long patent dispute. When Bill Gates appeared on the giant screen by video link, parts of the audience booed. The share price jumped by around a third that day. The money mattered less than the message: the most important software for business customers was not going to disappear from the Mac.
Then came the cuts. Jobs ended the licensing programme and bought back the clone business of the largest licensed manufacturer. He replaced most of the board. And he reviewed the product line and found dozens of products and variations. He reduced the future to a simple grid of four boxes: computers for consumers and for professionals, each as a desktop and as a portable. Most existing products and projects were stopped, including the Newton and the printers. In 1998 a new operations chief, Tim Cook, joined and cut inventory dramatically, from months of stock to days.
In May 1998 the company presented the iMac: an all-in-one computer in translucent coloured plastic, designed for connecting to the internet at home. It was not technically revolutionary, and it removed the floppy-disk drive that many users still relied on. It sold extremely well. For the 1998 financial year, Apple was profitable again.
1. What did the Microsoft deal include, and why was its message more important than the money?
2. Describe the four-box grid. What happened to products that did not fit it?
1. A $150 million investment in non-voting shares, a commitment to produce Office for the Mac for at least five years, and a patent settlement. The message told customers and developers that essential business software would stay on the Mac, which reduced fear that the platform would die.
2. Consumer and professional computers, each in a desktop and a portable version. Products outside the grid — including the Newton handheld, printers and many Mac variants — were discontinued, and the clone licensing programme was ended.
The iMac was the start of a long run: the iPod in 2001, the online music store in 2003, the iPhone in 2007, the iPad in 2010. Jobs died in 2011, and Tim Cook, the operations chief who had cut the inventory, became chief executive. Under Cook, Apple became the first American company to be valued at a trillion dollars, and later at more than three trillion.
The turnaround became a legend with a simple moral: focus. Jobs himself liked to say that deciding what not to do was as important as deciding what to do. Business books reduced the story to the four-box grid. But the full picture has more parts. His predecessor had already started cutting costs and had made the NeXT purchase that rescued the software. Microsoft was not acting out of kindness: commentators have long pointed out that a living Apple was useful to a company already under pressure from competition regulators. And the cuts were made by a returning founder, with a kind of authority that very few hired chief executives ever have.
Today Apple is the opposite of a four-box company. It sells phones, computers, tablets, watches, headphones, a headset, and a large and growing business in services, from music and television to payments and cloud storage. In 2024 it reportedly cancelled a car project after about a decade of work — a very expensive no, but a no. So the question is live: is the lesson of 1997 that great companies must stay small in their ambitions? Or was it only a rule for emergencies — and can a company this large still say no often enough?
1. Give two reasons why focus alone may not explain the 1997 turnaround.
2. Why is Apple's current size a challenge to the lesson people usually take from 1997?
1. Any two of: the previous CEO had begun cuts and bought NeXT, whose software became the foundation of the new Mac system; Microsoft's investment and Office commitment gave vital time and confidence, and Microsoft had its own reasons for keeping Apple alive; the cuts were possible because a returning founder had unusual authority.
2. Apple now sells a very broad range of hardware and services, so the simple “four boxes” model no longer describes it; the question is whether focus was a permanent principle or an emergency measure, and whether a company of this size can still stop things.
A turnaround speech lives or dies on emphasis: the listener must know, within one sentence, what the real problem is and what matters now. Cleft sentences split one idea into two clauses so that the most important part lands in the spotlight. Used well, they sound decisive. Overused, they sound like a stage performance.
Complete the second sentence so that the part in bold is in focus. Write only the missing words.
1. The retailers, not the customers, complained first. → It complained first.
2. The board replaced the chief executive in July. → It that the board replaced the chief executive.
3. The software, not the price, lost us the market. → It lost us the market.
1. was the retailers who (or that) 2. was in July 3. was the software that
Say each one aloud and stress the focus word. The stress is half the meaning.
Complete the second sentence so that it means the same as the first. Write only the missing words.
1. We need fewer products, not more. → What we need fewer products.
2. They cancelled every project without a clear customer. → What they cancel every project without a clear customer.
3. Nobody understood why there were twelve versions of the same computer. → What nobody understood why there were twelve versions of the same computer.
4. I definitely don't want a longer list. → The last thing I a longer list.
1. is 2. did was (to) 3. was 4. want is
Sentence 2 is the one most people get wrong: when the focus is an action, the cleft needs did — and the verb that follows is in the base form.
A leader returning to a struggling company opens the first staff meeting. Complete the speech using the structures in brackets, then read it aloud slowly, with stress on the focus.
“Let me be direct with you. (wh-cleft: we have) is not a talent problem; it is a focus problem. (it-cleft: our customers) who are confused, not our engineers. (all-cleft: I am asking for) is permission to stop. (the reason) we are cutting most of the range (be + that) no team can do fifty things well. And (it-cleft: the next twelve months) we will be judged on — not the next quarter.”
What we have · It is our customers · All I am asking for · The reason (why) · is that · it is the next twelve months that
Count the clefts: five in one short speech. Now say it again with only two of them, and notice which version sounds more like a real leader.
Take these into the Speak tab: every task there asks you to tell a room what the real problem is, in one sentence they will remember.
A note on the figures: losses, valuations and investment amounts here are rounded and taken from public reporting; how close the company came to running out of money is based on its own leader's later account. Apple's current strategy is, of course, still developing.
All of it out loud, against the clock. A turnaround is announced to several audiences in the same week, and each one hears a different threat in the same decision.
Present this case to a board that is considering a major simplification of its own business. Structure it: the founder's exit and the product sprawl → the software failure and the NeXT purchase → the situation in mid-1997 → the Microsoft deal → the grid and the cuts → the iMac and the return to profit → what the legend leaves out.
Finish with one sentence on what your board should take from it. Use at least five key terms (product line, cash burn, inventory, turnaround, licensing, insolvency, interim, non-voting shares, streamline, flagship).
It is 1997. You are the interim chief executive. An analyst says: “You've just taken money from your biggest competitor and announced you're cancelling most of your products. Isn't this simply a smaller company waiting to die?”
Answer properly: concede what is true about the risk, say clearly what the real problem was, explain why fewer products means more strength, and finish with a commitment the analyst can test in twelve months. Then do it again in ninety seconds — the compression is the exercise.
Take one decision to stop something — real or invented — and announce it four ways, one minute each. Use at least one cleft sentence in each room, and notice where the focus changes.
Prefer not to use your own organisation? Take one of these instead: