Apple is well-known for its hardware, software, and service breakthroughs. It increased from 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in 2019. The organizational architecture and accompanying leadership paradigm, which have played a critical role in the company's innovation success, are far less well known.
When Jobs returned to Apple, the business had a standard structure for a corporation of its size and breadth. It was split into separate units, each with its own profit and loss statement. The Macintosh products group, the information appliances division, and the server products division, among others, were all managed by general managers. Managers were prone to fighting with one another, as is common in decentralized company divisions, particularly over transfer rates.
In his first year back as CEO, Jobs 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, believing that traditional management had stifled innovation.
For a corporation of Apple's size at the time, the adoption of a functional organization may have been unsurprising. What's astounding is that Apple still has it, despite the fact that the firm is roughly 40 times larger in revenue and significantly more sophisticated than it was in 1998. Senior vice presidents are responsible for functions rather than products. CEO Tim Cook, like Jobs before him, is the sole person in the company who is responsible for the design, engineering, operations, marketing, and retail of any of Apple's primary products. In reality, aside from the CEO, the company has no traditional general managers: people who oversee the entire process from product creation to sales and are evaluated based on a profit and loss statement.
Why a Functional Organization?
Apple's primary goal is to make products that improve people's lives. This entails not only creating whole new product categories, such as the iPhone and Apple Watch, but also constantly innovating within existing ones. The iPhone camera, maybe more than any other product feature, exemplifies Apple's commitment to continual innovation. Steve Jobs only gave the iPhone's camera six seconds in the annual keynote event for revealing new products when it was released in 2007. Since then, iPhone camera technology has brought a slew of new features to the photography business, including:
The dual-lens camera (2016), high dynamic range imaging (2010), panorama photographs (2012), True Tone flash (2013), optical image stabilization (2015), portrait mode (2016), portrait lighting (2017), and night mode (2019) are just a few of the enhancements.
Apple leaders need deep expertise, immersion in details, and collaborative debate
Apple has a structure that focuses on functional knowledge in order to produce such advancements. Its core premise is that those with the most knowledge and experience in a subject should have the authority to make decisions in that domain. This is based on two points of view: First, Apple competes in markets with rapid rates of technological change and disruption, so it must rely on the judgment and intuition of people who have a strong understanding of the disruptive technologies. Long before it can acquire accurate market input and forecasts, the corporation must make educated guesses about which technology and designs will thrive in smartphones, laptops, and other devices. Using technical experts instead of general managers raises the chances of those investments paying off.
Second, if short-term profit and cost targets were the dominant factor for appraising investments and leaders, Apple's commitment to produce the greatest possible products would be undermined. Significantly, senior R&D professionals' compensation are determined by company-wide success metrics rather than the costs or income generated by specific products. As a result, product decisions are protected from short-term financial pressures. The finance team isn't invited to engineering teams' product road plan meetings, and engineering teams aren't involved in pricing choices.
1 like
Create and manage your profile
