How Apple Is Organized for Innovation

It’s about experts leading experts.

by

Joel M. Podolny

and

Morten T. Hansen

by

Joel M. Podolny

and

Morten T. Hansen

From the Magazine (November–December 2020) · Long read

Mikael Jansson/Trunk Archive

Summary.

When Steve Jobs returned to Apple, in 1997, it had a conventional structure for a company of its size and scope. It was divided into business units, each with its own P&L responsibilities. Believing that conventional management had stifled innovation, Jobs laid off the general managers of all the business units (in a single day), put the entire company under one P&L, and combined the disparate functional departments of the business units into one functional organization. Although such a structure is common for small entrepreneurial firms, Apple—remarkably—retains it today, even though the company is nearly 40 times as large in terms of revenue and far more complex than it was in 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.

Idea in Brief

The Challenge

Major companies competing in many industries struggle to stay abreast of rapidly changing technologies.

One Major Cause

They are typically organized into business units, each with its own set of functions. Thus the key decision makers—the unit leaders—lack a deep understanding of all the domains that answer to them.

The Apple Model

The company is organized around functions, and expertise aligns with decision rights. Leaders are cross-functionally collaborative and deeply knowledgeable about details.

Apple is well-known for its innovations in hardware, software, and services. Thanks to them, it grew from some 8,000 employees and $7 billion in revenue in 1997, the year Steve Jobs returned, to 137,000 employees and $260 billion in revenue in 2019. Much less well-known are the organizational design and the associated leadership model that have played a crucial role in the company’s innovation success.

A version of this article appeared in the November–December 2020 issue of Harvard Business Review.

Joel M. Podolny is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.
MH

Morten T. Hansen is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and coauthor of Great by Choice. He was named one of the top management thinkers in the world by the Thinkers50 in 2019.
MortentHansen

How Apple Is Organized for Innovation

Idea in Brief

The Challenge

One Major Cause

The Apple Model

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