Reading: How Apple Is Organized For Innovation

Almost all companies I worked with over the last 25 years had an oversupply of non-technical managers and an undersupply of technical experts in leadership positions. These companies build products with less value for the users and take longer to do so. Apple shows that companies can succeed with a functional organisation, where experts lead experts.

Joel M. Podolny and Morten T. Hansen describe in their article How Apple Is Organized for Innovation how Apple succeeds with a functional organisation where technical experts lead technical experts. Apple doesn’t have separate business units for iPhone, Watch, Mac or TV. Instead, it has functional units for Design, Hardware Engineering, Software, Services or Machine Learning. People from multiple units collaborate to build highly innovative products like the iPhone or the Apple Watch.

Apple must know long before it gains market feedback, whether its bets, for example, on HDR imaging, panorama photos, portrait mode or triple-lens cameras will pay off. “Relying on technical experts rather than general managers increases the odds that those bets will pay off.” Hence, those people “with the most expertise and experience in a domain should have decision rights for that domain”. Technical experts see the value in taking a well-calculated risk. In contrast, managers see the costs and stifle innovation.

[People] with the most expertise and experience in a domain should have decision rights for that domain.

Joel M. Podolny and Morten T. Hansen, How Apple Is Organized for Innovation

Apple’s leaders must possess three key characteristics: deep expertise, immersion into details and willingness to collaboratively debate.

Deep Expertise. “Apple […] is a company where experts lead experts. The assumption is that it’s easier to train an expert to manage well than to train a manager to be an expert.” Experts like to work with other experts. Technical experts have a natural authority, which managers rarely have.

Immersion into Details is a core principle at Apple: “Leaders should know the details of their organizations three levels down.” If managers don’t know the details, they can’t make decision in meetings. They must adjourn the meeting and have meetings with the experts. If experts disagree, they can’t decide and will have more meetings, until experts give up in exasperation. They come back to another leadership meeting often with bad decisions.
If managers are also technical experts, they can make good decisions right away. The whole decision-making process is a lot faster and yields better results.

Willingness to collaboratively debate. “Leaders are expected to hold strong, well-grounded views and advocate forcefully for them, yet also be willing to change their minds when presented with evidence that others’ views are better.” As no single functional unit is responsible for developing a product, constructive and cooperative discussions are crucial. When these discussions reach an impasse, higher-level managers will decide based on their technical expertise. In addition to being right, the decision must yield a good return on investment.

Leaders are expected to hold strong, well-grounded views and advocate forcefully for them, yet also be willing to change their minds when presented with evidence that others’ views are better.

Joel M. Podolny and Morten T. Hansen, How Apple Is Organized for Innovation

Apple succeeds, because it has an efficient and effective decision process based on technical expertise and on collaborative debate. It succeeds despite its enormous size, where each functional unit has thousands of people. If Apple can make it work, companies with software development teams of less than 100 people should have no problem to make it work. And the rewards are huge!