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A Look Inside Apple's Magic Kingdom

Posted by Bill Lee on May 16, 2011 at 12:20 PM

Interesting article in the current Fortune <>. Some interesting takeaways to me (confirming Steve Jobs' remarkable contrarianism as perhaps the key to his tremendous success).

For example, he dismisses the need for managerial skills, preferring to cultivate process specialists. Indeed Apple's organization doesn't have a matrix structure, dotted lines, committees,or separate lines of business--it's the organizational personification of the firm's simple product line. The Apple meritocracy can be brutal, but turnover is low. The firm has no grand strategy contrary to widespread belief, but can move much more rapidly than comparably sized firms. Jobs regards P&L as a distraction--only one executive in the company has P&L responsiblity. Unlike Microsoft (and a lot of other companies) Apple doesn't look for revenue opportunities and figure out how to capture them. It builds great products within its areas of competency, and then sells them. 

Here's more detail:

 - Steve Jobs is dismissive of "management" skills, and the company has no general managers. Apple has only 70 or so VPs (for 25,000 employees). 

- Instead they develop process specialists--graphic arts, supply chain, coding, retailing, etc. Apple's retail chief, Ron Johnson, doesn't handle inventory, for example--store inventory and all other supply chain issues are handled  by COO Tin Cook, an expert in supply chain management. To Jobs, this approach creates an organization with best-in-class skills. General managers tend to create fiefdoms.

- Not surprisingly, a huge focus of Jobs is to institutionalize what he does so that the company can continue its success when he's gone. As part of that effort he's brought in top academic talent to create case studies of how critical decisions in the company's history were made.

-- Somewhere between a janitor and a VP, "reasons don't matter anymore." It's a hard core, no excuses environment. When a rare recent goof,  MobileMe, happened, he called the Mobile Me team into a meeting, berated them for a half hour, then replaced the executive in charge on the spot.

- That said , turnover at Apple is quite low. 

- Every Monday Jobs and his executive team review the whole business, including every product under development. It's tedious--80% of each meeting is the same as the last one--but it keeps everyone on the same page, an important aspect of the firm's famous ability to focus.

- Everyone knows who's responsible for what--this approach even has an acronym--the "DRI" (directly responsible individual). When a DRI's project appears on the Monday meeting agenda, so does his or her name. DRI names also appear next to action items on the action lists that result from meetings.

- Apple's famous simplicity found in it's small, well defined product line is reflected in a simple org structure.  It has no matrix structure, no dotted lines, no committees,  no separate lines of business, and no general managers. Jobs considers P&L to be a distraction, so only one executive -- the CFO -- has P&L responsibility. 

- The Apple org structure has a center and two concentric circles. Jobs (CEO) is at the center, a small group of a dozen or so senior executives in a circle around Jobs, and each of them has one to five or six executive reports---who comprise a 3d, outer circle.  This is where Apple's speed comes  from.  "If the executive team decides to change direction, it's instantaneous," said one former senior executive. 

- People think the company has some grand strategy, but it doesn't.  What it has is the ability to make and implement fast decisions, including corrections when it screws up. For example, Apple execs completely overlooked that 3d party developers would clamor to develop apps for the iPhone, but were able to respond quickly to the demand when the iPhone was released.

- Every year or so, Jobs gathers a group called the "Top 100" for a three day offsite in an undisclosed location for an intensive strategy session.  Jobs will include people one year and exclude them the next, and some of the 100 are not executives. They're selected for their ability to contribute. At the meeting, Jobs shares his grand vision for the firm going forward. 

- These are the 100 people Jobs would take with him, if he ever had to restart it from the ground up.

- An executive who worked at both Microsoft and Apple distinguished their approaches to business: Microsoft identifies a pocket of unrealized revenue and tries to figure out what to make to capture it. Apple starts with great products and then sells them. "Prototypes and demos always come before spreadsheets" at Apple, as one executive put it.


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