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Insiders Explain Apple’s Unusual Organizational Structure

Steve Jobs is credited with the greatest business turnaround in history, transforming the struggling Apple into one of the world’s largest and most powerful companies, with market-dominating products. How did he do it? He started by firing all of Apple’s general managers and restructuring the company.

In the Harvard Business Review, Apple VP Joel Podolny, dean of Apple University, and Morten Hansen, a faculty member at both Apple University and UC Berkeley, have written an extensive examination of how Jobs refactored the company upon his return, and how Apple has built upon that structure ever since. When Jobs returned to Apple, it was organized around products like a conventional company, with a division dedicated to the Macintosh, another to the Newton, etc. Jobs decided that this approach hampered Apple’s ability to innovate. He switched the company to a functional structure, with divisions for hardware and software, and where individual product managers were insulated from short-term market pressures. And it ensures that work isn’t unnecessarily duplicated—a 600-person camera hardware group provides technology to multiple product lines.

Two keys enable this approach to work. One is that Jobs emphasized having managers be product experts, instead of relying on general-purpose management. (The idea of having managers who understand their products deeply is still a foreign concept in the corporate world.) The other is that senior R&D executives receive bonuses based on the performance of the entire company, instead of just their own products. That lets Apple experiment with less-popular products like the Apple TV and HomePod rather than focusing on just iPhones.

The entire article is a fascinating read for anyone interested in the business of Apple.

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Comments About Insiders Explain Apple’s Unusual Organizational Structure

Notable Replies

  1. These “Modern Managers”, who are required not to have any specialist knowledge, are de facto politicians. In NL we even have schools that produce them. But how can you manage anything without knowing anything about it? Bring in “modern management” and the organisations in question will start to flat-line eventually. To counter this, the preferred strategy is to become too-big-to-fail quango’s. With a steady flow of government money, they become safe havens for Modern Managers who live out their lives there “managing”, while touching considerable salaries. It’s a recipe for a continuing litany of expensive disasters. In the end this is an utterly unsustainable situation and it has to go. But for now politicians like it, because they see cosy job opportunities to be filled by their partisans. So the money keeps on flowing.

    Am I wrong? Shoot me.

    Steve was very wise to kill modern management off at Apple.

  2. I’ve had good managers who knew their limitations, and really bad managers who were supposedly technical experts; the two are largely orthogonal, and good management ability is rare in both nerds and non-nerds. Certainly Apple was more successful after Jobs returned (Disclaimer: I got Steved from the Newton Group), but I don’t think that was because of the re-org. The organizational structure is still causing problems; compare, for instance, the usually-tolerable quality of software from the engineering groups with the train wrecks around iTunes and friends.

  3. Michael Tsai has collected some commentary around the original article, the most interesting bits being tweets from Tony Fadell that challenges its narrative.

  4. When I worked in Apple engineering, working engineers were promoted to be managers, and sent for management training. Professional managers were almost never hired. It’s true that it’s hard to be a good manager, but I agree with the original HRB article that it’s easier to teach an engineer to be a good manager than to teach a manager to understand engineering.

    Most of the Apple VPs of technical orgs have engineering degrees, some also have MBAs.

    the train wrecks around iTunes

    iTunes is a special case. For years, most new products Apple shipped talked to iTunes (iPods, iPhones, iPads, Music store, TV/Movie store, podcasts), which meant the iTunes team was forever adding new code to support new features. They never got a chance to slow down and clean up their code. They had years of patches on top of patches, and the code became unmaintainable.

  5. I agree with that. If a good engineer is serious about becoming a good manager and is committed to leadership, you should be all set.

    I would claim though, that if you have a manager who’s well aware of his/her limitations and knows when they need to fall back on their subject matter experts (and then also trusts their judgement), you can get very good work done even if this manager doesn’t have a strong science or engineering background. In fact, I think I’d prefer the latter over a situation where you have a great engineer who’s acting as manager but is hopelessly in over their head in terms of management and leadership.

    My personal anecdote on this in case anybody’s interested: a few years ago, I worked as one of the technical leads on a $400M project for a brand new green field large research instrument. We had a project leader who’s an excellent physicist and a really nice guy, but he just wasn’t a great manager. He wasn’t the snotty MBA type at all, but he also wasn’t well organized, lacked structure, and just all around didn’t realize when things weren’t going well and how to adjust to those problems. It was a rather chaotic project and although we ended up delivering on time and almost to within spec/budget, the project burned through a couple good people on the way and to this day there are several who still have hard feelings. Our Canadian competition on the other hand went out to hire a professional project manager who had essentially no physics background whatsoever (all he had done up to that point was build tunnels and bridges IIRC), but he turned out to know exactly when he needed to get input and who to get it from. And when his senior expert on this or that told him, look this is what we need and this is why we can’t do it the other way, he took that for fact and ran with it. My colleagues over there had nothing but praise for the way he ran things and always pointed out how well he had led that project and how smooth everything had gone for them. Indeed, they came online on time and on budget, and they had a really nice machine to show off too.

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