How Steve Jobs gets things done by Fortune Editors @FortuneMagazine January 25, 2011, 4:46 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons Brilliant, iconic, visionary, yes. But buzzwords aside, understanding Steve Jobs’ success requires breaking it down. Like this. By Bill Conaty and Ram Charan, contributors If businesses managed their money as carelessly as they manage their people, most would be bankrupt. The great majority of companies that control their finances masterfully have no comparable processes for developing their leaders or even pinpointing which ones to develop. While they’re disciplined and vigilant on the financial side, their efforts around recruiting, assessing, and developing leaders lack rigor. They depend on checklists of vague cliches such as “strategic,” “innovative,” “great communicator,” “very bright,” “analytic,” or “intuitive” and settle for superficial impressions. Consequently their talent management remains hit-or-miss. These are the companies that wake up some morning suddenly realizing they need a new CEO but don’t know where to start looking. More pervasively, by repeatedly putting the wrong people into the wrong jobs, they waste both human and financial capital when those people don’t perform. Talent masters such as GE GE , P&G, Hindustan Unilever, Novartis, and Agilent dig deeper to understand an individual’s talents. They are keen observers of people, and they have discipline and expertise, honed over many years, to turn observation into verifiable fact. They develop intimacy with their leaders, meaning they understand each leader’s unique combination of talents in specific terms. That arms them with the insight they need to make good decisions about where each leader will excel. An exercise in a course at Wharton’s advanced management program exposes the futility of the buzzword descriptors many companies use. The instructor at a recent session asked the participants to explain Steve Jobs’s distinguishing talent. Put aside his controversial personality and behaviors for the moment, the instructor advised. What we want to know is why he has beaten all expectations in his second act at Apple AAPL . (Including his own; when Apple’s market value overtook Microsoft’s MSFT in June 2010, Jobs called the development “surreal.”) In the dozen years since he reclaimed the failing company, he has turned it into a hard- driving, cash-generating machine. He doesn’t just develop new products; he changes games. The iPod, iPhone, and iPad, along with iTunes, have created massive disruptions, forcing players in the music and telecom industries—among others—to change their business models. There’s enough information available about the way Jobs thinks, behaves, and makes decisions that anyone who cared to could assess his real talent in several dimensions and describe it in clear language with specificity and nuance. Most people don’t even try. When the instructor at Wharton asks participants the question about what Jobs’s talent is, hands shoot up all over the room. He’s creative, innovative, entrepreneurial; he’s a master of communication; he breaks the paradigm, creates new businesses; he changes the game of other people. After a couple of minutes the instructor calls a halt. “You can’t do it in buzzwords,” he says. “To really define a person’s talent, you need to express your full thought about a human being in whole sentences with nuances that are specific to that person. And you have to get the information by closely observing the person’s actions, decisions, and patterns of behavior.” He shows the way by asking some probing questions. “How is he creative?” Somebody replies, “He figures out what will be a great product.” Okay, but how does he do that? “He interacts with consumers.” Fine, but how does he interact with consumers? Somebody has read that he hangs out with young people. Another observes that he is always looking for upcoming technologies ahead of others. Still no cigar. The instructor next gives the executives information they can use to drill down and get to the real nature of Steve Jobs’s talent. For starters, they hear a tale from one Apple director about the special board meeting held after Jobs accepted the post. Jobs walked up to the wall of the conference room where Apple’s roughly two dozen current products were on display and began taking them down, one at a time. When he was done, only four were left. Those were the ones, he said, that would give Apple new life by differentiating it in the marketplace. The story provided two observable and verifiable facts about Jobs: he understands what appeals to customers, and he acts decisively. Now the instructor asks people to explain what the creation of the iPod reveals about his talent. The first replies from the group point to his grasp of technology. But the technology already existed, someone else notes — other people were making MP3 players. The discussion that follows leads to a more meaningful conclusion: the success of the iPod was the result of a great insight coupled with brilliant execution. At the time, Napster had created an uproar in the market for recorded music with its file-sharing service that allowed users to swap downloaded MP3 files with each other. Napster’s game was ultimately found illegal (it was essentially based on theft), but Jobs saw that the technology could create a legal market by ensuring the music industry a stream of revenues. And the market would be huge — a new social phenomenon, in fact — because it would liberate music lovers by enabling them to make their own buying choices legally and affordably, at any time, in any quantity. Then he created a product that was so easy to use and stylish that he could sell it at a high price, with fat margins. And we all know the rest of the story. By far the bestselling MP3 player ever, the iPod lifted the Apple brand to unprecedented heights, giving Mac sales a boost and re-establishing the company’s reputation as a leader in innovation. Drilling further, the instructor brings out another important observable fact. Jobs spends almost all his time internally with roughly a hundred experts in software, hardware, design, and the technologies of metal, plastic, and glass. Every Monday morning he brings them together to review products and the challenges of designing and executing them. It’s one of his social processes for connecting multiple disciplines to create compelling products, and he’s been doing it rigorously for a dozen years. Four hours a week, fifty weeks a year, for twelve years equals 2,400 hours spent building mental and relationship capital by connecting the newest ideas of diverse brilliant and passionate minds. It’s the kind of approach that turns an athletic team into an unsurpassed champion. Jobs is one of the few CEOs with such a disciplined practice of connecting the dots. Now the discussion gets rolling in earnest as the class begins piecing together the specific traits that define his genius. Somebody says, “So that’s the real process of connecting with the customers, through his own mind and expertise.” Somebody else raises her hand and says, “It’s interesting that more than once he was able to identify an opportunity others didn’t see.” Another person: “It’s more than that — he creates opportunities, like the iPhone.” Aha, the iPhone. What did he really do that has made it such a phenomenon? “He broke the paradigm.” What does that mean? “He was able to figure out a new business model.” Now eyes are lighting up. Until that point, the margins and brands of handset makers were controlled by the carriers. It not only won Apple the largest share of the smart-phone market but also generated new revenue streams enjoyed by no other phone maker. Jobs produced the most functional and elegant handset ever. Always tremendously protective of his brand and margins, he gave the iPhone to one carrier exclusively, AT&T T . In exchange, Apple got the price it wanted and — for the first time in telecom history — a share of the carrier’s revenue from the usage of a phone (supported by the higher rates users paid for their service). This was groundbreaking. Finally, it made money on the sale of its countless applications. Most of the new revenue streams flow straight to the bottom line, producing cash every day and making the iPhone Apple’s biggest moneymaker. Jobs’s verifiable action shows not only his business acumen but also the audacity and courage he exercised to reverse the power balance between a mighty carrier and a lowly handset supplier. Calibrating Steve Jobs What does deconstructing Jobs have to do with developing talent? Just this: the Wharton exercise mirrors on a small scale what talent masters do, which is to develop precision of observation, thought, and expression. Working with the instructor, the class wrapped up its exercise with this concise summary: Steve Jobs’s natural talent is to imagine not only what consumers want now but also what they will want in the future — and pay a premium price for. He searches for discontinuities in the external landscape. He figures out trajectories of new opportunities. Then he conceives and executes not only differentiated products that yield high margin and high brand recognition, but also business models that will exploit them most profitably. He views a product as an experience, not just an object. He can visualize what it will look and feel like, and can then execute it to near perfection. He makes advanced technology friendly to consumers based on his uncommon talent for connecting it to user experience. He has an innate feel for design, convenience, simplicity, and elegance in the product. He connects the best ideas from widely diverse disciplines to create the consumer experience he’s striving for. He figures out precisely what problems need to be solved, however impossible they may seem, and searches for the best people to solve them, regardless of their status. He is a master of communications. He crafts simple messages that connect with audiences, leveraging his record of innovation to create buzz and build demand for a new product even before it is launched. He relates with consumers, employees, and partners, and turns them into rabid fans. He builds their trust in him, in Apple, and in the Apple brand. This is the kind of insight talent masters drive for, and knowing their people’s core talents, they then search for jobs that are the right fit, creating a job if they have to. They do this repeatedly, passionately, even obsessively, day in, day out, not just once or twice a year. They make spotting and developing talent part of every leader’s job, and they work hard at it. They spend a huge amount of time and energy on people because they understand a fundamental truth: It is people who ultimately deliver the numbers. If they miss the people part, it’s just a matter of time before they’ll miss the numbers. Excerpted from The Talent Masters by Bill Conaty and Ram Charan © 2010 Ram Charan and Bill Conaty. Reprinted by permission of Crown Business, an imprint of the Crown Publishing Group.