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The Apple Org Structure

Yesterday James, my co-founder at Percolate, sent me over a really interesting nugget about how Apple structures its company about 35 minutes into this Critical Path podcast. Essentially Horace (from Asymco) argues that Apple’s non-cross-functional structure actually allows it to innovate and execute far better than a company structured in a more traditional, non-functional, way. As opposed to most other companies where managers are encourages to pick up experience across the enterprise, Apple encourages (or forces), people to stay in their role for the entirety of their career. On top of that, roles are not horizontal by product (head of iPhone) and instead are vertical by discipline (design, operations, technologies) and also quite siloed. He goes on to say that the only parallel he could think of is the military, who basically operates that way. (I know I haven’t done the best job articulating it, that’s because as I listen again I don’t necessarily think the thesis is articulated all that well.)

Below is my response back to James:

While I totally agree with what he says about the structure (that they’re organized functionally and it works for them), I’m not sure you can just conclude that’s ideal or drives innovation. The requirement of an org structure like that is that all vision/innovation comes from the top and moves down through the organization. That’s fine when you have someone like Jobs in charge, but it’s questionable what happens when he leaves (or when this first generation he brought up leaves maybe). Look at what happened when Jobs left the first time as evidence for how they lost their way. Apple is a fairly unique org in that it has a very limited number of SKUs and, from everything we’ve heard, Jobs was the person driving most/all.

My question back to Horace would be what will Apple look like in 20 years. IBM and GE are 3x older than Apple is and part of how they’ve survived, I’d say, is that they’ve built the responsibility of innovation into a bit more of a cross-functional discipline + centralized R&D. I don’t know if it matters, but if I was making a 50 year bet on a company I’d pick GE over Apple and part of it is that org structure and its ability to retain knowledge.

Military is actually a perfect example: Look at the struggles they’ve had over the last 20 years as the enemy stopped being similarly structured organizations and moved to being loosely connected networks. History has shown us over and over centralized organizations struggle with decentralized enemies. Now the good news for Apple is that everyone else is pretty much playing the same highly organized and very predictable game (with the exception of Google, who is in a functionally different business and Samsung, who because of their manufacturing resources and Asian heritage exist in a little bit of a different world).

Again, in a 10 year race Apple wins with a structure like this. But in a 50 year race, in which your visionary leader is unlikely to still be manning the helm, I think it brings up a whole lot of questions.

August 12, 2013 // This post is about: , , , ,

Comments

  • roli says:

    speaking of interesting structures (essentially built to speed up the centralized R&D), have you read this? http://firstround.com/article/How-Medium-is-building-a-new-kind-of-company-with-no-managers#

  • Jeri Doris says:

    I can support both a functional or product driven org design, but keeping people in the same group at the same level is challenging to swallow. Apple clearly believes that the intrinsic motivators of their employees are tied to finding fulfillment in what they do, and somehow keep them happy by keeping the focus away from career advancement. I work in a very flat organization, so I can appreciate when the focus is away from levels or titles. However, it definitely leads to potentially unnecessary attrition. Finally, having worked at GE and companies that strive for best practice sharing – rotations and job movement internally is key to their innovation. It will be interesting to see if Apple can find an alternative way to be innovative in the long-term.

  • Abe says:

    This stuff is all super interesting. Apple is an insanely secretive organization so more than anything I think any discussion of their workings needs to be prefaced with the fact that there is a ton we just don’t know about going on inside there.

    I’m not sure Dediu’s characterization of them as more siloed than most organizations is really accurate, all large orgs are super siloed. It’s a pretty well known issue by now and most all large orgs have developed counter-siloing strategies. They generally involve the management/mba class cycling between parts of the organization, while the rank and file stay within their silos (ie engineers stay engineers, creatives stay creatives, sales stay sales, etc). Apple doesn’t do this, but I strongly suspect they have their own counter-siloing measures in place and there are some hints as to what they are doing that are public.

    One thing we know, is that Apple likes to build product development teams that are physically isolated into their own rooms and suits, with carefully regulated keycard access. We know that these teams/spaces are secretive to the point where team members can’t even tell their supervisors what they are working on. I highly suspect that this is one of the key counter-siloing measures Apple has in place, essentially a product development skunkworks generating mechanism. Unlike a more traditional managerial network, information really only flows one way in this mechanism, it’s designed to take knowledge out of the silos an into products, but very little info flow back out. This essentially amplifies the feeling of a siloed organization, but at the same time allows for the building of the highly integrated products that are the hallmark of Apple.

    Another really key thing to point out is that while Apple was incredibly centralized around Steve Jobs as the final decision maker, Jobs is not you classic creative visionary. His skills were not in creating per se, but in filtering and team building. From making the entire original Mac team sign the inside of the case, to designing the Pixar HQ in order to maximize people bumping into each other, he consistently focused on how to build the best team. In almost all his hit products, he didn’t generate the ideas, he just served as a hyper-astute filter for his team. The vision and innovation flowed through him, but they didn’t originate from him. It’s still a super hard role to replace, but perhaps not quite as hard as it appears at first.

  • dr.doom says:

    “Look at what happened when Jobs left the first time as evidence for how they lost their way.”

    Steve wasn’t in charge the first time.
    Apple may have been functional in 1984 because
    it was a small company.

    Why talk about decentralization when you can give only one example. Being Al Qaida. What a joke.
    All Google has done is search everything else is
    stolen IP.

    Innovation can’t be proved by any organization. big or small. All Apple has done is built their business into many area by just extending their core technology that they got from NeXT.

    GE and IBM got where they are because of their
    connection with the government. and buying up technology from other companies and extending their
    monopoly to other arena.

  • poke says:

    I don’t see why you think innovation has to come from the top with a functional org. There’s necessarily more interaction between functions (since they collaborate day-to-day) than there is between divisions, so innovation is more likely to bubble up. That’s part of the idea.

    I’m pretty sure that, on Horace’s account, the siloing is only for product groups, since he likens it to the Hollywood model where people can be moved from project to project. The lack of transfer between functions is to stop fiefdoms forming; but there’s lots of transfer between product groups.

    I think the real problem with divisions is that they’re a permanent solution to temporary problems. The functional org recognises that the power that a particular product range has now is not going to last. Apple is intentionally run as the Ship of Theseus; everything is open to change. Of course it’s a trade off. Products get left in limbo as engineers are moved around, etc.

  • Anthony says:

    Two points:

    1) Jobs left (was kicked out) the first time _because_ of Apple’s dysfunction. The dysfunction was not a result of him leaving.

    2) These organizational structures (“functional” vs. “divisional”) are tied to _execution_, not innovation.

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