Written by:
Tirta Puteri Lestari,
Muhamad Pribadi
Apple with its innovative products has revolutionized the technology industry. From iPod to MacBook. There is something quite interesting for us to examine, about how Apple originally had 8,000 employees with a revenue of $7 billion in 1997 where the average income generated by one employee was $900 thousand, until in 2019, it developed and skyrocketed into a company that opened up jobs for 137,000 employees with a revenue of $260 billion, where the average income generated by one employee was $2 million. It can be seen from here that there was a 2x increase in 2019 per employee.
Functional Organizational Structure: Breakthrough Innovation with Functional Organization
Steve Jobs thinks of the conventional organizational structure where Apple is divided into several business units and the management of profit and loss is carried out in each business unit. This is not in line with his views, according to Steve conventional management like this will hinder innovation in the Apple company. Therefore, Steve Jobs overhauled the organizational structure of the Apple company which originally used a conventional organizational structure into a functional organizational structure.
The first step Steve Jobs took was to dismiss all general managers in each business unit. Then centralize the entire company under one responsibility for profit and loss management. Then collaborate all departments with a functional organizational structure, where the company runs without a conventional general manager. And, each department will be led by a manager who is an expert in their field to supervise their department.
This is seen as being able to make Apple compete in the market, considering that market competition today tends to be disruptive. Of course, Apple needs an expert who has strong intuition and judgment to predict the success rate of an innovative product. In addition, Apple is committed to providing the best products, by considering the benefits and experience of Apple product users with the costs incurred.
For example, the iPhone 7 Plus introduced a dual-lens camera with portrait mode in 2016, Apple offers a significant user experience that is worth the price tag. Senior leader Paul Hubel took a bold risk, offering a camera as the centerpiece of the iPhone 7 Plus that was not inferior to professional cameras, enhancing the reputation of Hubel and his team. To balance cost and add value to the user experience, leaders with deep expertise in their fields make decisions. Apple’s organizational structure aligns expertise and decision rights, contrasting with conventional business unit structures that prioritize accountability and control. The enactment of this functional organizational structure is certainly in line with the leadership model underlying Apple’s structure, which focuses on aligning expertise and decision rights on teams.
Leadership Models: An Evolving Leadership Approach for Large Scale
“What is Apple’s leadership model in developing products that require coordination from multiple teams with multiple perspectives?”
Over the past 20 years, Apple’s strategy with a functional structure has led to innovation and success for the company. Along with the exponential growth of the Apple Company. Apple was able to break out and enter new markets as well as move into new technologies. But this doesn’t mean Apple is without challenges, as the company grows, its functional structure and leadership model must evolve.
Expert lead expert, Roger Rosner, Apple’s VP of Applications has to contend with challenges arising from the company’s tremendous growth. First, the number of experts present at the company has exploded over the past decade in terms of the number of employees and the number of projects underway at any given time. Second, the scope of its portfolio has widened. Although applications are his core area of expertise, some aspects of this involve things in which Rosner is not an expert.
To overcome these large-scale challenges, Roger Rosner implemented Flexibility in the leadership model, this is very important in any growing functional organization. Rosner has understood in detail, especially when it comes to the top-level aspects of software applications, the competencies he possesses. He also collaborated with managers across the company on projects involving those areas. But as the company and its responsibilities have grown, he has moved some of that competency into teaching. Now he channels his competencies by guiding and providing feedback to other team members so that they can develop software applications according to Apple’s norms. Being a teacher doesn’t mean Rosner gives written instructions, but rather she provides constructive and often passionate criticism of her team’s work.
In implementing this functional organizational structure, there are three attributes of leadership characteristics that Apple managers need to possess to create innovative decisions and solutions.
- Deep expertise, Apple applies the principle of an expert lead expert. Apple believes it is easier to manage someone who is already an expert than to train someone to become an expert. Apple gathers experts and creates a force to drive innovation.
- Detailed understanding, Apple’s leadership emphasizes the importance of understanding the details of their organization three levels down for efficient cross-functional decision-making. This deep understanding of details is central to the company’s operations, Apple’s leaders are experts in their fields, allowing them to push, probe, and be sensitive to issues, focusing their attention on the details that matter most
- The ability to debate collaboratively, collaboration at Apple is not just about working together in harmony. Differences of opinion trigger discussions or perhaps intense debates between team members, but these debates are expected to lead to the best solution. This requires open-mindedness from senior leaders. If the debate ends in a stalemate it requires higher-level managers, such as CEOs and VPs to step in as problem solvers. It also requires leaders to inspire, encourage or influence colleagues in other areas to contribute to achieving their goals.
Among many large companies, the functional organization implemented by Apple is rare, even unique. It goes against the prevailing management theory that companies should reorganize into divisions and business units as they grow larger, but the actual transformation requires that leaders also shift to a functional organization. Apple’s track record shows that the rewards can match the risks. Its approach can yield unusual results.
Apple’s boldness and success in innovation can be attributed to its organizational structure and leadership model. By implementing a functional organizational structure, Apple encourages cross-functional collaboration and allows for collaborative coordination between various teams of specialists. Debate as well as collaborative discussion and open-mindedness encourage good and innovative conclusions.
This article adapted from the article “How Apple Is Organized for Innovation” published by Harvard Business Review (https://hbr.org/2020/11/how-apple-is-organized-for-innovation)