g-f(1)23 For its innovations, Apple relies on a structure that centers on functional expertise

Fuel your growth with essential knowledge

Extra-condensed knowledge

Perhaps no product feature better reflects Apple’s commitment to continuous innovation than the iPhone camera. The iPhone camera technology has contributed to the photography industry with a stream of innovations. To create such innovations, Apple relies on a structure that centers on functional expertise. Its fundamental belief is that those with the most expertise and experience in a domain should have decision rights for that domain. Relying on technical experts rather than general managers increases the odds that those bets will pay off.

Genioux knowledge fact condensed as an image.

Condensed knowledge 

• Apple’s main purpose is to create products that enrich people’s daily lives. That involves not only developing entirely new product categories such as the iPhone and the Apple Watch, but also continually innovating within those categories. 
• Perhaps no product feature better reflects Apple’s commitment to continuous innovation than the iPhone camera. When the iPhone was introduced, in 2007, Steve Jobs devoted only six seconds to its camera in the annual keynote event for unveiling new products. Since then iPhone camera technology has contributed to the photography industry with a stream of innovations: High dynamic range imaging (2010), panorama photos (2012), True Tone flash (2013), optical image stabilization (2015), the dual-lens camera (2016), portrait mode (2016), portrait lighting (2017), and night mode (2019) are but a few of the improvements.
• To create such innovations, Apple relies on a structure that centers on functional expertise. Its fundamental belief is that those with the most expertise and experience in a domain should have decision rights for that domain. This is based on two views: First, 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.
• Second, Apple’s commitment to offer the best possible products would be undercut if short-term profit and cost targets were the overriding criteria for judging investments and leaders. Significantly, the bonuses of senior R&D executives are based on companywide performance numbers rather than the costs of or revenue from particular products. 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.

Category 1: A new, better world for everyone

[genioux fact extracted from HBR]

Authors of genioux fact

Fernando Machuca

References

How Apple Is Organized for Innovation, Joel M. Podolny and Morten T. Hansen, Harvard Business Review, November–December 2020 Issue. 

ABOUT THE AUTHORS 

Joel M. Podolny (Wikipedia, Google Scholar, LinkedIn) is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.

Morten T. Hansen (Wikipedia, Google Scholar, LinkedIn, Twitter) is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and co-author of Great by Choice. He was named one of the top management thinkers in the world by the Thinkers50 in 2019. Find him on Twitter: @MortentHansen.

g-f(1)6 Apple success: Functional organizational design and its associated leadership model

Fuel your growth with essential knowledge

Extra-condensed knowledge

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.

Genioux knowledge fact condensed as an image.

Condensed knowledge 10

1. Apple is well known for its innovations in hardware, software, and services. Thanks to them, 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. 
2. The adoption of a functional structure may have been unsurprising for a company of Apple’s size at the time. What is surprising—in fact, remarkable—is that Apple retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1998. 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. In effect, besides the CEO, the company operates with no conventional general managers: people who control an entire process from product development through sales and are judged according to a P&L statement. (See the exhibit "Apple's Functional Organization").
3. Much less well known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success. 
4. Apple’s commitment to a functional organization does not mean that its structure has remained static. As the importance of artificial intelligence and other new areas has increased, that structure has changed. Here we discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model, which may be useful for individuals and companies wanting to better understand how to succeed in rapidly changing environments.
5. To create the innovations, Apple relies on a structure that centers on functional expertise. Its fundamental belief is that those with the most expertise and experience in a domain should have decision rights for that domain.
6. In a functional organization, individual and team reputations act as a control mechanism in placing bets. 
7. 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.
8. 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.
9. The link between how Apple is organized and the type of innovations it produces is clear. As Chandler famously argued, “structure follows strategy”—even though Apple doesn’t use the structure that he anticipated large multinationals would adopt.
10. Three Leadership Characteristics

• Ever since Steve Jobs implemented the functional organization, 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. When managers have these attributes, decisions are made in a coordinated fashion by the people most qualified to make them.

HBR, Apple's Functional Organization

The genioux knowledge fact product

Category 1: A new, better world for everyone

[genioux fact extracted from HBR]

Authors of the genioux fact

Fernando Machuca

References

How Apple Is Organized for Innovation, Joel M. Podolny and Morten T. Hansen, Harvard Business Review, November–December 2020 Issue. 

Joel M. Podolny (Wikipedia, Google Scholar, LinkedIn) is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.

Morten T. Hansen (Wikipedia, Google Scholar, LinkedIn, Twitter) is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and co-author of Great by Choice. He was named one of the top management thinkers in the world by the Thinkers50 in 2019. Find him on Twitter: @MortentHansen.