How Apple Is Organized for Innovation

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Context: In 2019, Apple had 137k employees and doing $260 billion in revenue, HBR explains the behind-the-scenes of Apples management practices.

Finished: Oct 26, 2020

Nuggets done by Daniel Yubi

Re-structure

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Separate P&L responsibilities creates a decentralized approach, enabling autonomy, but can create different incentives.

  • In 1997, Steve Jobs arrived back at Apple, and re-structured the company from business units, each with its own P&L responsibilities and put the entire company under one P&L,
  • From a disparate functional departments of the business units into one functional organization.
  • Believing that conventional management had stifled innovation, Jobs, in his first year returning as CEO, laid off the general managers of all the business units (in a single day)
    • As is often the case with decentralized business units, managers were inclined to fight with one another, over transfer prices in particular.

Functional Organization

  • Functional organization aligns expertise with decision rights
  • VPs are in charge of functions, not products.
    • Example: Marketing as a function, rather than a GM owning the Macintosh product. Not each product will get the best Marketing expertise, as each product is led by the GM, and each GM will approach Marketing differently, with a different P&L.
  • CEO Tim Cook occupies the only position on the org chart where multiple functions meet (design, product, engineering, etc)
  • Besides the CEO, the company operates with no conventional GMs (people who control an entire process from product dev, to sales, and are judged to a P&L statement)
  • Relying on technical experts rather than general manager increases the odds that innovation bets will pay off.
  • In a functional organization, individual and team reputations acts as a control mechanism in placing bets.
  • Chandler: "Structure follows strategyLeadership Characteristics
  • The introduction of dual lens camera with portrait mode, was a big risk for the team:
    • If users were unwilling to pay a premium for a phone with a more costly and better camera, the team would most likely have less credibility the next time it proposed an expensive upgrade or feature.

Key Leadership Characteristics

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Each VP must have: Deep expertise, immersion in the details of those functions, and a willingness to collaborate and debate other functions.

Deep Expertise

  • Apple is not a company where general managers oversee managers; rather, it is a company where experts lead experts.
  • It is easier to train an expert to manage well, than train a manager to be an expert.
  • It’s like joining a sports team where you get to learn from and play with the best.
  • Steve Jobs on hiring professional managers:
    • "It didn’t work at all….They knew how to manage, but they didn’t know how to do anything. If you’re a great person, why do you want to work for somebody you can’t learn anything from? And you know what’s interesting? You know who the best managers are? They are the great individual contributors who never, ever want to be a manager but decide they have to be…because no one else is going to…do as good a job.”
  • Apple has more than 600 experts on camera hardware technology, led by Graham Townsend, a camera expert.
  • All iPhones, iPads, Laptops, and desktop computers all include cameras, these experts would be scattered across product lines.
  • That dilutes their collective expertise, reducing their power to solve problems and generate and refine innovations.

Immersion in the details

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“Leaders should know the details of their organization three levels down,”

  • If managers attend a decision-making meeting without the details at their disposal, the decision must be either made without the details, or postponed.
  • There are stories of managers making presentations to sr. leaders who drill down into cells on a spreadsheet, lines of code, or a test result on a product.
  • Leaders can push, probe, and “smell” an issue.

Willingness to collaboratively debate.

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Separate how right from how hard a particular path is so that the difficulty of executing a decision doesn’t prevent its being selected.

  • When debates reach an impasse, as some inevitably do, higher-level managers weigh in as tiebreakers
  • Camera team's stated purpose:
    • “More people taking better images more of the time.”
  • 2009 Hubel had the idea of allowing portrait photos with bokeh, this can be solved by dual-lens design and advance computational-photography.
  • One of the challenges was a corner case/edge case, and Apple has a strict engineering standard of zero "artifacts".
    • The camera software team delayed the launch to address failure cases (artifacts due to bokeh)
    • They brought Design to solve the question:
      • What makes a beautiful portrait?
  • At Apple that’s known as accountability without control: You’re accountable for making the project succeed even though you don’t control all the other teams.

Discretionary Leadership

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    • As long as a particular activity remains in the learning box, leaders must adopt a beginner's mindset
      • e.g. Questioning subordinates in a way that suggest they don't already know the answers
    • Apple’s functional organization is rare,
    • If not unique, among very large companies. It flies in the face of prevailing management theory that companies should be reorganized into divisions and business units as they become large. But something vital gets lost in a shift to business units: the alignment of decision rights with expertise.
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