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.