Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs

Authors Yoffie and Cusumano don't suggest we emulate their personalities or copy some of their more questionable behaviors – rudeness to employees, for example. But they do argue we can learn a huge amount from studying their leadership practices.

So who's this book for? "Strategy Rules" is best suited to leaders, senior managers, and entrepreneurs working in fast-paced industries, particularly in the technology sector, where you risk being left behind if you don't get the strategy right. Few of us will reach the dizzy heights of Gates, Grove and Jobs but, if you want to be a better business strategist, this book's for you, no matter your rank or the size of your company.

It's important to add you'll need a keen interest in the fortunes of Microsoft, Intel and Apple to really enjoy "Strategy Rules." The authors draw big-picture conclusions, but the book's packed with facts, figures, anecdotes, and interviews from the three leaders' extensive careers. It's impeccably researched, but it isn't a light read.

Both authors are business professors who've studied the three CEOs for nearly 30 years. Yoffie is the Max and Doris Starr Professor of International Business Administration at Harvard Business School, and is the longest-serving member of the Intel board of directors.

Cusumano is the Sloan Management Review Distinguished Professor of Management at the Massachusetts Institute of Technology's Sloan School of Management, with a joint appointment in the MIT School of Engineering. Between them, they've authored, co-authored or edited 20 books.

So keep listening to hear why you should look forward and reason back when setting goals; how to create broad, self-sustaining platforms, not just products; and to learn the pros and cons of building a business around a single personality.

Yoffie and Cusumano set themselves an ambitious target with this book: to condense the strategies of three of the most successful men in business into a set of take-home rules, in just over 200 pages.

We think they've done a good job of capturing the essence of the CEOs' strategies. But students of Gates, Grove and Jobs will know that their careers are much more disordered and complex than the book presents. The authors can't cover everything, and it's worth accepting that at the outset.

Yoffie and Cusumano condense their conclusions on strategy into five rules. The first is Look Forward, Reason Back. Gates, Grove, and Jobs decided where they wanted their companies to be in the future and then worked out what steps they needed to take to get there.

Secondly, Make Big Bets, Without Betting the Company. They gambled, but never in a way that put the future of their companies at undue risk.

The third rule is Build Platforms and Ecosystems. The three leaders saw the value of creating platforms that enabled others to supply complementary products and services.

Next comes Exploit Leverage and Power. They knew how to turn their opponents' strengths into weaknesses, and how to use their might to dominate the field.

And finally, Shape the Company Around Your Personal Anchor. Gates, Grove and Jobs built their businesses around their unique strengths, and hired others to fill the gaps in their knowledge.

We're going to take a closer look at some of these rules, starting with the first: Look Forward, Reason Back.

The authors observe that many people set goals by looking back and then reasoning forward, applying lessons they've learnt from past experience. But it's risky to assume the future will resemble what's gone before. So it's often better to look forward and reason back instead.

Fast-moving industries, more than any other kind, must anticipate and shape the future to stay ahead of their customers and competitors, and Gates, Grove and Jobs were excellent at this. Yes, some of their predictions turned out to be wrong, but they didn't have disastrous consequences. And they kept updating their forecasts as new information came in.

Knowing where you want to get to is easier than working out how to get there, but Gates, Grove and Jobs, along with their teams, were skilled at examining their current positions and their competitors' moves, looking at all possible options, then deciding on a path. Think about a game of chess. You locate the square you're aiming for, then plot your moves, calculating the consequences of each choice.

The three leaders looked forward and reasoned back in a number of key ways. They set boundaries and priorities and had clear, simple goals, focusing on key products and services and staying disciplined. They figured out what customers needed before they knew it themselves, and then designed products or services to fit those needs. Jobs, especially, had a gift for this.

They also anticipated their competitors' movements, living in a state of constant vigilance. Grove is known for saying, "Only the paranoid survive," which became the title of his 1996 book on strategy.

Every year as Intel boss, he'd hold strategic long-range planning meetings, where he'd vent his paranoia for more than two hours and, in 1991, he described Intel as a castle, under attack on all sides.

Jobs' paranoia was evident in his secrecy – he kept Apple's products under wraps until they were ready for release, certain his competitors would copy them.

All three leaders found ways to block competitors from entering markets and to lock in customers, for example by investing so heavily in an infrastructure that rivals were priced out, or by bundling services and offering discounts to clients. Finally, they anticipated game-changing moments in their industry and readied their companies to seize opportunities.

There isn't time to give you more specific examples of how the leaders looked forward and reasoned back, but you'll find plenty in the book. Yoffie and Cusumano delve deep into the detail, describing how Gates, Grove and Jobs made strategic decisions around software, micro-processing chips, computers, and smart phones that kept their companies on track.

These specifics lend weight and credibility to the authors' theories, although less tech-savvy readers may get bored with all the facts and figures. We can't fault the authors for their thoroughness, but they do pack a lot in.

Another of our favorite rules is Build Platforms and Ecosystems. So, let's look at that.

These days, many smart phone and tablet users take apps for granted. We may never think about the thousands of developers who are working away to design products or services that'll enhance our experience. These developers and their designs belong to a vast ecosystem that's constantly growing, creating value for all parties.

Gates, Grove and Jobs realized the value of building platforms and ecosystems, not just products, and they prioritized this when making key decisions on design, performance and price – although Jobs was much slower to catch on to this than his peers.

Microsoft's Gates thought ‘platform first, product second' when IBM executives came to him in 1980, looking for an operating system for their new personal computer. Microsoft didn't have anything that fit the bill, so Gates bought one from a local company, re-branded it DOS, then licensed it to IBM, but without exclusivity.

Microsoft went on to sell DOS to IBM's rivals and the operating system became the foundation on which hardware companies built PCs, and on which Microsoft and other software firms built complementary applications, like Excel and Word.

Grove took much longer to understand the value of an industry platform built around Intel's microprocessor, and Jobs dragged his feet the most.

The Apple CEO was a product guy, who took great pride in Apple's self-sufficiency and liked being in control. But his stubbornness didn't always make great business sense. Take the iPod. Originally, the iTunes software that was used to download, convert, organize, and transfer files to the iPod only worked on Macintosh computers, despite the fact that 95 percent of personal computers used Windows operating systems.

Over and again, Jobs refused to open up iTunes to the mass market, but eventually he caved in to pressure from his executives. Apple released iTunes for Windows in 2003 and iPod sales exploded, changing the company's fortunes forever. But Jobs never truly embraced platform thinking, and some might say Apple lost out because of it.

Platforms with mass-market appeal need to be fairly cheap and accessible to attract users and complementary products. And most successful platforms make it easy for designers to create products and services that fit. Apple platforms don't meet these criteria, but Google's Android operating system does, allowing it to build a huge ecosystem of partners. By 2014, Android had about 80 percent of the worldwide smart phone market, and more than 60 percent of the tablet market.

We like the way Yoffie and Cusumano show the differences between the three leaders' approaches to platforms and ecosystems, and point out the flaws in Jobs' strategy. This helps readers understand the trade-offs between focusing on stand-alone products or platforms, and the benefits of building open and accessible networks.

The final rule – Shape the Organization Around Your Personal Anchor – tells us more about the three CEOs' unique personalities, and looks at the pros and cons of having such strong figures at the helm.

These days, top business schools aim to produce well-rounded general managers, but neither Gates, Grove nor Jobs was one of these. They had no formal business training, each viewed himself as the smartest person in the room, and they were often disrespectful to employees.

They also had very clearly defined strengths and values that had a huge impact on their companies, guided their thinking, and affected their day-to-day work, from hiring decisions to the degree to which they delegated.

Gates had a deep understanding of software, as a technology and a business, and believed passionately that it could change the world. Grove was a highly educated scientist who brought rigorous discipline in management and operations. And Jobs was design-obsessed, with a gift for making complex technology accessible to the average person. These were their personal anchors behind their companies' success.

But leaders with such strong personalities must develop a deep understanding of their strengths and limitations if they're to keep their businesses on track. None of these three CEOs started out with good self-awareness – they built it up over time.

Gates understood his technical bent was both an asset and a potential liability that could limit Microsoft's growth. So he hired experienced executives to focus on marketing, sales and day-to-day operations, and he brought in software engineers and product managers when Microsoft began to move into the consumer market. This team helped compensate for Gates' deficiencies and made sure the company developed a broad focus.

Grove, too, realized he needed others to support him as Intel grew, but he also made sure he filled his knowledge gaps, asking experts to teach him about advances in semiconductor technology. He never stopped learning, read widely, and wrote down his thoughts in books.

In the early days of Apple, Jobs wanted to control every last detail of product design, and had little interest in the ins and outs of running a business. He was arrogant at first, but eventually saw that he needed to surround himself with experts in fields like finance and operations. That said, he never truly gave up control.

So Gates, Grove and Jobs had extraordinary talent, but they weren't all-rounders. They accepted they couldn't run their businesses alone, albeit to varying degrees.

The authors argue that Gates, Grove and Jobs were cult figures who had a huge impact on their companies' cultures, strategies and business models. Their personal anchors brought focus and discipline in uncertain times, but their influence wasn't always positive. Anchors keep a ship stuck in one place, and all three companies have struggled to move into new growth areas under subsequent CEOs.

We like the way the authors address the advantages and disadvantages of having strong leadership, offering a cautionary tale to the leaders of today and tomorrow.

The book ends with a look at how today's fabled leaders – the likes of Facebook's Mark Zuckerberg and Amazon's Jeff Bezos – have pursued successful strategies that fit with the authors' five rules. This is a nice touch, bringing the book into the present and throwing up questions for the future.

"Strategy Rules" delves deep into the successes and failures of three imperfect, but brilliant, giants of the tech industry. It doesn't set Gates, Grove and Jobs up as models – the authors criticize them where warranted – but it does condense their spectacular careers into valuable, applicable lessons. So if you want to be a better business strategist and learn from three great masters, we think you'll get a lot from this book.

"Strategy Rules," by David Yoffie and Michael Cusumano, is published by Harper Business.

That's the end of this episode of Book Insights. Thanks for listening.