Growth of Apple
it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019.
Steve Jobs’ structural change
As is often the case with decentralized business units, managers were inclined to fight with one another, over transfer prices in particular… laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization.
Job of the CEO
Senior vice presidents are in charge of functions, not products. As was the case with Jobs before him, CEO Tim Cook occupies the only position on the organizational chart where the design, engineering, operations, marketing, and retail of any of Apple’s main products meet.
Change in corporate structure in early 20th century
As the Harvard Business School historian Alfred Chandler documented, U.S. companies such as DuPont and General Motors moved from a functional to a multidivisional structure in the early 20th century. By the latter half of the century the vast majority of large corporations had followed suit. Apple proves that this conventional approach is not necessary and that the functional structure may benefit companies facing tremendous technological change and industry upheaval.
Why technical experts?
Apple competes in markets where the rates of technological change and disruption are high, so it must rely on the judgment and intuition of people with deep knowledge of the technologies responsible for disruption. Long before it can get market feedback and solid market forecasts, the company must make bets about which technologies and designs are likely to succeed in smartphones, computers, and so on. Relying on technical experts rather than general managers increases the odds that those bets will pay off.
Finance vs Engineering: Short term vs long term
Thus product decisions are somewhat insulated from short-term financial pressures. The finance team is not involved in the product road map meetings of engineering teams, and engineering teams are not involved in pricing decisions.
Weigh the benifits to users and the choice against cost
Instead of using overall cost and price targets as fixed parameters within which to make design and engineering choices, R&D leaders are expected to weigh the benefits to users of those choices against cost considerations.
Technical leaders vs general managers
It’s easier to get the balance right between an attention to costs and the value added to the user experience when the leaders making decisions are those with deep expertise in their areas rather than general managers being held accountable primarily for meeting numerical targets.
Business unit vs functional organization
Whereas the fundamental principle of a conventional business unit structure is to align accountability and control, the fundamental principle of a functional organization is to align expertise and decision rights.
Three key leadership characteristics
Apple’s managers at every level, from senior vice president on down, have been expected to possess three key leadership characteristics: deep expertise that allows them to meaningfully engage in all the work being done within their individual functions; immersion in the details of those functions; and a willingness to collaboratively debate other functions during collective decision-making.
Experts lead experts
Apple is not a company where general managers oversee managers; rather, it is a company where experts lead experts. The assumption is that it’s easier to train an expert to manage well than to train a manager to be an expert. At Apple, hardware experts manage hardware, software experts software, and so on.
All experts in one house
For example, Apple’s more than 600 experts on camera hardware technology work in a group led by Graham Townsend, a camera expert. Because iPhones, iPads, laptops, and desktop computers all include cameras, these experts would be scattered across product lines if Apple were organized in business units. That would dilute their collective expertise, reducing their power to solve problems and generate and refine innovations.
Exciting to work for experts
Many people at Apple see it as liberating, even exhilarating, to work for experts, who provide better guidance and mentoring than a general manager would. Together, all can strive to do the best work of their lives in their chosen area.
Collaborative debate
For example, the dual-lens camera with portrait mode required the collaboration of no fewer than 40 specialist teams: silicon design, camera software, reliability engineering, motion sensor hardware, video engineering, core motion, and camera sensor design, to name just a few. How on earth does Apple develop and ship products that require such coordination? The answer is collaborative debate. Because no function is responsible for a product or a service on its own, cross-functional collaboration is crucial.
Dealing with corner cases
But for the team, sidestepping rare or extreme situations—what engineers call corner cases—would violate Apple’s strict engineering standard of zero “artifacts,” meaning “any undesired or unintended alteration in data introduced in a digital process by an involved technique and/or technology.”
Open-mindedness
Apple’s collaborative debate involves people from various functions who disagree, push back, promote or reject ideas, and build on one another’s ideas to come up with the best solutions. It requires open-mindedness from senior leaders. It also requires those leaders to inspire, prod, or influence colleagues in other areas to contribute toward achieving their goals.
Good mess vs bad mess
“Good mess” happens when various teams work with a shared purpose, as in the case of the portrait mode project. “Bad mess” occurs when teams push their own agendas ahead of common goals.
Simplify at the leadership level
Cognizant of this problem, Apple has been quite disciplined about limiting the number of senior positions to minimize how many leaders must be involved in any cross-functional activity.