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ARTICLE
ORGANIZATIONAL CULTURE
How Apple Is
Organized
for Innovation
It’s about experts leading experts.
by Joel M. Podolny and Morten T. Hansen
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PHOTOGRAPHER MIKAEL JANSSON
How Apple Is
Organized
for Innovation
It’s about experts
leading experts.
ORGANIZATIONAL
CULTURE
Joel M.
Podolny
Dean, Apple
University
Morten T.
Hansen
Faculty, Apple
University
AUTHORS
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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.
When Jobs arrived back at Apple, 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.
General managers ran the Macintosh products group, the
information appliances division, and the server products
division, among others. As is often the case with decentral-
ized business units, managers were inclined to ght with
one another, over transfer prices in particular. Believing that
conventional management had stied innovation, Jobs, in
his rst year returning as CEO, laid o the general managers
of all the business units (in a single day), put the entire com-
pany under one P&L, and combined the disparate functional
departments of the business units into one functional organi-
zation. (See the exhibit “Apple’s Functional Organization.”)
The adoption of a functional structure may have been
un surprising for a company of Apple’s size at the time. What is
surprising—in fact, remarkable—is that Apple 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 1998. Senior
vice presidents are in charge of functions, not products. As
was the case with Jobs before him, CEO Tim Cook occupies the
only position on the organizational chart where the design,
engineering, operations, marketing, and retail of any of Apple’s
main products meet. In eect, besides the CEO, the company
operates with no conventional general managers: people
who control an entire process from product development
through sales and are judged according to a P&L statement.
Business history and organizational theory make the case
that as entrepreneurial rms grow large and complex, they
must shift from a functional to a multidivisional structure to
align accountability and control and prevent the congestion
that occurs when countless decisions ow up the org chart
to the very top. Giving business unit leaders full control over
key functions allows them to do what is best to meet the
needs of their individual units’ customers and maximize
their results, and it enables the executives overseeing them
to assess their performance. As the Harvard Business School
historian Alfred Chandler documented, U.S. companies such
as DuPont and General Motors moved from a functional to
a multidivisional structure in the early 20th century. By the
latter half of the century the vast majority of large corpora-
tions had followed suit. Apple proves that this conventional
approach is not necessary and that the functional structure
may benet companies facing tremendous technological
change and industry upheaval.
Apple’s commitment to a functional organization does
not mean that its structure has remained static. As the
importance of articial intelligence and other new areas has
increased, that structure has changed. Here we discuss the
innovation benets and leadership challenges of Apple’s
distinctive and ever-evolving organizational model, which
may be useful for individuals and companies wanting to
better understand how to succeed in rapidly changing
environments.
THE CHALLENGE
Major companies
competing in many
industries strule 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.
IDEA IN BRIEF
Apple is
ORGANIZATIONAL
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WHY A FUNCTIONAL ORGANIZATION?
Apple’s main purpose is to create products that enrich
people’s daily lives. That involves not only developing
entirely new product categories such as the iPhone and the
Apple Watch, but also continually innovating within those
categories. Perhaps no product feature better reects Apple’s
commitment to continuous innovation than the iPhone cam-
era. When the iPhone was introduced, in 2007, Steve Jobs
devoted only six seconds to its camera in the annual keynote
event for unveiling new products. Since then iPhone camera
technology has contributed to the photography industry
with a stream of innovations: High dynamic range imaging
(2010), panorama photos (2012), True Tone ash (2013), opti-
cal image stabilization (2015), the dual-lens camera (2016),
portrait mode (2016), portrait lighting (2017), and night mode
(2019) are but a few of the improvements.
To create such innovations, Apple relies on a structure
that centers on functional expertise. Its fundamental belief
is that those with the most expertise and experience in a
domain should have decision rights for that domain. This
is based on two views: First, Apple competes in markets
where the rates of technological change and disruption are
high, so it must rely on the judgment and intuition of people
with deep knowledge of the technologies responsible for
disruption. Long before it can get market feedback and solid
market forecasts, the company must make bets about which
technologies and designs are likely to succeed in smart-
phones, computers, and so on. Relying on technical experts
rather than general managers increases the odds that those
bets will pay o.
Second, Apple’s commitment to oer the best possible
products would be undercut if short-term prot and cost
ABOUT THE ART
Apple Park, Apple’s corporate headquarters in
Cupertino, California, opened in 2017.
Mikael Jansson/Trunk Archive
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targets were the overriding criteria for judging investments
and leaders. Signicantly, the bonuses of senior R&D exec-
utives are based on companywide performance numbers
rather than the costs of or revenue from particular products.
Thus product decisions are somewhat insulated from short-
term nancial pressures. The nance team is not involved in
the product road map meetings of engineering teams, and
engineering teams are not involved in pricing decisions.
We don’t mean to suggest that Apple doesn’t consider
costs and revenue goals when deciding which technologies
and features the company will pursue. It does, but in ways
that dier from those employed by conventionally organized
companies. Instead of using overall cost and price targets as
xed parameters within which to make design and engineer-
ing choices, R&D leaders are expected to weigh the benets
to users of those choices against cost considerations.
In a functional organization, individual and team repu-
tations act as a control mechanism in placing bets. A case in
point is the decision to introduce the dual-lens camera with
portrait mode in the iPhone 7 Plus in 2016. It was a big wager
that the camera’s impact on users would be suciently great
to justify its signicant cost.
One executive told us that Paul Hubel, a senior leader
who played a central role in the portrait mode eort, was
“out over his skis,” meaning that he and his team were taking
a big risk: If users were unwilling to pay a premium for a
phone with a more costly and better camera, the team would
most likely have less credibility the next time it proposed an
expensive upgrade or feature. The camera turned out to be a
dening feature for the iPhone 7 Plus, and its success further
enhanced the reputations of Hubel and his team.
It’s easier to get the balance right between an attention to
costs and the value added to the user experience when the
leaders making decisions are those with deep expertise in
their areas rather than general managers being held account-
able primarily for meeting numerical targets. Whereas the
fundamental principle of a conventional business unit struc-
ture is to align accountability and control, the fundamental
principle of a functional organization is to align expertise and
decision rights.
Thus the link between how Apple is organized and
the type of innovations it produces is clear. As Chandler
famously argued, “structure follows strategy”—even though
Apple doesn’t use the structure that he anticipated large
multinationals would adopt.
Now let’s turn to the leadership model underlying Apple’s
structure.
THREE LEADERSHIP CHARACTERISTICS
Ever since Steve Jobs implemented the functional organi-
zation, Apple’s managers at every level, from senior vice
president on down, have been expected to possess three key
leadership characteristics: deep expertise that allows them
to meaningfully engage in all the work being done within
their individual functions; immersion in the details of those
functions; and a willingness to collaboratively debate other
functions during collective decision-making. When manag-
ers have these attri butes, decisions are made in a coordinated
fashion by the people most qualied to make them.
Deep expertise. Apple is not a company where general
managers oversee managers; rather, it 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. At Apple, hardware experts manage hardware,
software experts software, and so on. (Deviations from
this principle are rare.) This approach cascades down all
levels of the organization through areas of ever- increasing
DESIGN
OPERATIONS
SALES
HARDWARE
ENGINEERING
RETAIL
PEOPLE
SOFTWARE
FINANCE
SERVICES
LEGAL
MACHINE LEARNING & AI
CORPORATE COMM.
HARDWARE
SOFTWARE
MARKETING
OPERATIONS
SERVICES & SUPPORT
SALES
FINANCE
LEGAL
MARKETING
ENVIRONMENT,
POLICY & SOCIAL
HARDWARE
TECHNOLOGIES
MARKETING COMM.
CORPORATE DEV.
CEO
Apple’s Functional Organization
In 1997, when Steve Jobs returned to Apple, it had a conventional structure for its size and scope. It was divided into business units, each with
its own P&L responsibilities. After retaking the helm, Jobs put the entire company under one P&L and combined the disparate departments of
the business units into one functional organization that aligns expertise with decision rights—a structure Apple retains to this day.
CEO
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specialization. Apple’s leaders believe that world-class talent
wants to work for and with other world-class talent in a
specialty. It’s like joining a sports team where you get to learn
from and play with the best.
Early on, Steve Jobs came to embrace the idea that
managers at Apple should be experts in their area of man-
agement. In a 1984 interview he said, “We went through that
stage in Apple where we went out and thought, Oh, we’re
gonna be a big company, let’s hire professional management.
We went out and hired a bunch of professional management.
It didn’t work at all....They knew how to manage, but they
didn’t know how to do anything. If you’re a great person, why
do you want to work for somebody you can’t learn anything
from? And you know what’s interesting? You know who the
best managers are? They are the great individual contributors
who never, ever want to be a manager but decide they have
to be…because no one else is going to…do as good a job.”
One current example is Roger Rosner, who heads
Apple’s software application business, which includes
work-productivity apps such as Pages (word processing),
Numbers (spreadsheets), and Keynote (presentations) along
with GarageBand (music composition), iMovie (movie
editing), and News (an app providing news content). Rosner,
who studied electrical engineering at Carnegie Mellon, joined
Apple in 2001 as a senior engineering manager and rose to
become the director of iWork applications, the vice president
of productivity apps, and since 2013 the VP of applications.
With his deep expertise gained from previous experience
as the director of engineering at several smaller software
companies, Rosner exemplies an expert leading experts.
In a functional organization, experts leading experts
means that specialists create a deep bench in a given area,
where they can learn from one another. For example, Apple’s
more than 600 experts on camera hardware technology
work in a group led by Graham Townsend, a camera expert.
Because iPhones, iPads, laptops, and desktop computers all
include cameras, these experts would be scattered across
product lines if Apple were organized in business units. That
would dilute their collective expertise, reducing their power
to solve problems and generate and rene innovations.
Immersion in the details. One principle that permeates
Apple is “Leaders should know the details of their orga-
nization three levels down,” because that is essential for
speedy and eective cross- functional decision-making at the
highest levels. If managers attend a decision-making meeting
without the details at their disposal, the decision must either
be made without the details or postponed. Managers tell war
stories about making presentations to senior leaders who
drill down into cells on a spreadsheet, lines of code, or a test
result on a product.
Of course, the leaders of many companies insist that they
and their teams are steeped in the details. But few organi-
zations match Apple. Consider how its senior leaders pay
extreme attention to the exact shape of products’ rounded
corners. The standard method for rounding corners is to
use an arc of a circle to connect the perpendicular sides of
a rectangular object, which produces a somewhat abrupt
transition from straight to curve. In contrast, Apple’s leaders
insist on continuous curves, resulting in a shape known
in the design community as a “squircle”: The slope starts
sooner but is less abrupt. (See the exhibit “One Example
of Apple’s Attention to Detail.”) An advantage of hardware
products without abrupt changes in curvature is that they
produce softer highlights (that is, little to no jump in light
reection along the corner). The dierence is subtle, and
executing on it isn’t simply a matter of a more complicated
mathematical formula. It demands that Apple’s operations
leaders commit to extremely precise manufacturing toler-
ances to produce millions of iPhones and other products with
squircles. This deep immersion in detail isn’t just a concern
that is pushed down to lower-level people; it is central at the
leadership level.
Having leaders who are experts in their areas and can
go deep into the details has profound implications for how
Apple is run. Leaders can push, probe, and “smell” an issue.
They know which details are important and where to focus
their attention. Many people at Apple see it as liberating,
even exhilarating, to work for experts, who provide better
guidance and mentoring than a general manager would.
Together, all can strive to do the best work of their lives in
their chosen area.
Willingness to collaboratively debate. Apple has
hundreds of specialist teams across the company, dozens of
which may be needed for even one key component of a new
product oering. For example, the dual-lens camera with
portrait mode required the collaboration of no fewer than
Apple leaders are expected to possess deep expertise, be immersed
in the details of their functions, and engage in collaborative debate.
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CULTURE
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40 specialist teams: silicon design, camera software, reliabil-
ity engineering, motion sensor hardware, video engineering,
core motion, and camera sensor design, to name just a few.
How on earth does Apple develop and ship products that
require such coordination? The answer is collaborative
debate. Because no function is responsible for a product or a
service on its own, cross-functional collaboration is crucial.
When debates reach an impasse, as some inevitably do,
higher-level managers weigh in as tiebreakers, including at
times the CEO and the senior VPs. To do this at speed with
sucient attention to detail is challenging for even the best
of leaders, making it all the more important that the company
ll many senior positions from within the ranks of its VPs,
who have experience in Apple’s way of operating.
However, given Apple’s size and scope, even the executive
team can resolve only a limited number of stalemates. The
many horizontal dependencies mean that ineective peer
relationships at the VP and director levels have the potential
to undermine not only particular proj ects but the entire
company. Consequently, for people to attain and remain in
a leadership position within a function, they must be highly
eective collaborators.
That doesn’t mean people can’t express their points of
view. 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. Doing so is not always
easy, of course. A leader’s ability to be both partisan and
open-minded is facilitated by two things: deep understand-
ing of and devotion to the company’s values and common
purpose, and a commitment to separating how right from
how hard a particular path is so that the diculty of execut-
ing a decision doesn’t prevent its being selected.
The development of the iPhone’s portrait mode illustrates
a fanatical attention to detail at the leadership level, intense
collaborative debate among teams, and the power of a shared
purpose to shape and ultimately resolve debates. In 2009
Hubel had the idea of developing an iPhone feature that
would allow people to take portrait photos with bokeh—
a Japanese term that refers to the pleasing blurring of a
background—which photography experts generally consider
to be of the highest quality. At that time only expensive
single-lens reex cameras could take such photos, but
Hubel thought that with a dual-lens design and advanced
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computational- photography techniques, Apple could add
the capability in the iPhone. His idea aligned well with the
camera team’s stated purpose: “More people taking better
images more of the time.”
As the team worked to turn this idea into reality, several
challenges emerged. The rst attempts produced some
amazing portrait pictures but also a number of “failure cases”
in which the algorithm was unable to distinguish between
the central object in sharp relief (a face, for instance) and the
background being blurred. For example, if a person’s face
was to be photographed from behind chicken wire, it was not
possible to construct an algorithm that would capture the
chicken wire to the side of the face with the same sharpness
as the chicken wire in front of it. The wire to the side would
be as blurred as the background.
One might say, “Who cares about the chicken wire case?
That’s exceedingly rare.” But for the team, sidestepping rare or
extreme situations—what engineers call corner cases—would
violate Apple’s strict engineering standard of zero “artifacts,”
meaning “any undesired or unintended alteration in data
introduced in a digital process by an involved technique and/or
technology.” Corner cases sparked “many tough discussions”
between the camera team and other teams involved, recalls
Myra Haggerty, the VP of sensor software and UX prototyping,
who oversaw the rmware and algorithm teams. Sebastien
Marineau-Mes, the VP to whom the camera software team
ultimately reported, decided to defer the release of the feature
until the following year to give the team time to better address
failure cases—“a hard pill to swallow,” Hubel admits.
To get some agreement on quality standards, the engi-
neering teams invited senior design and marketing leaders to
meet, guring that they would oer a new perspective. The
design leaders brought an additional artistic sensibility to the
debate, asking, “What makes a beautiful portrait?” To help
reassess the zero-artifacts standard, they collected images
from great portrait photographers. They noted, among other
things, that these photos often had blurring at the edges of a
face but sharpness on the eyes. So they charged the algorithm
teams with achieving the same eect. When the teams suc-
ceeded, they knew they had an acceptable standard.
Another issue that emerged was the ability to preview a
portrait photo with a blurred background. The camera team
had designed the feature so that users could see its eect on
their photos only after they had been taken, but the human
interface (HI) design team pushed back, insisting that users
should be able to see a “live preview” and get some guidance
about how to make adjustments before taking the photo.
Johnnie Manzari, a member of the HI team, gave the camera
team a demo. “When we saw the demo, we realized that this
is what we needed to do,” Townsend told us. The members
of his camera hardware team weren’t sure they could do
it, but diculty was not an acceptable excuse for failing to
deliver what would clearly be a superior user experience. After
months of engineering eort, a key stakeholder, the video
engineering team (responsible for the low-level software that
controls sensor and camera operations) found a way, and the
collaboration paid o. Portrait mode was central to Apple’s
marketing of the iPhone 7 Plus. It proved a major reason for
users’ choosing to buy and delighting in the use of the phone.
As this example shows, Apple’s collaborative debate
involves people from various functions who disagree, push
back, promote or reject ideas, and build on one another’s
ideas to come up with the best solutions. It requires open-
mindedness from senior leaders. It also requires those
leaders to inspire, prod, or inuence colleagues in other
areas to contribute toward achieving their goals.
While Townsend is accountable for how great the camera
is, he needed dozens of other teams—each of which had a
long list of its own commitments—to contribute their time and
eort to the portrait mode proj ect. At Apple that’s known as
accountability without control: You’re accountable for making
the proj ect succeed even though you don’t control all the other
teams. This process can be messy yet produce great results.
“Good mess” happens when various teams work with a shared
purpose, as in the case of the portrait mode proj ect. “Bad
mess” occurs when teams push their own agendas ahead of
common goals. Those who become associated with bad mess
and don’t or can’t change their behavior are removed from
leadership positions, if not from Apple altogether.
LEADERSHIP AT SCALE
Apple’s way of organizing has led to tremendous innovation
and success over the past two decades. Yet it has not been
without challenges, especially with revenues and head count
having exploded since 2008.
One Example of Apple’s Attention to Detail
The standard method for rounding the corners of a rectangular object is to use an
arc of a circle to connect the object’s perpendicular sides. That can result in an abrupt
transition in curvature. To produce softer highlights by minimizing light reflection,
Apple uses a “squircle,” which creates continuous curves.
Source: Apple
Rounded rectangle
Squircle
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As the company has grown, entering new markets and
moving into new technologies, its functional structure and
leadership model have had to evolve. Deciding how to orga-
nize areas of expertise to best enable collaboration and rapid
decision- making has been an important responsibility of the
CEO. The adjustments Tim Cook has implemented in recent
years include dividing the hardware function into hardware
engineering and hardware technologies; adding articial
intelligence and machine learning as a functional area; and
moving human interface out of software to merge it with
industrial design, creating an integrated design function.
Another challenge posed by organizational growth is the
pressure it imposes on the several hundred VPs and directors
below the executive team. If Apple were to cap the size or
scope of a senior leader’s organization to limit the number
and breadth of details that the leader is expected to own, the
company would need to hugely expand the number of senior
leaders, making the kind of collaboration that has worked so
well impossible to preserve.
Cognizant of this problem, Apple has been quite dis-
ciplined about limiting the number of senior positions to
minimize how many leaders must be involved in any cross-
functional activity. In 2006, the year before the iPhone’s
launch, the company had some 17,000 employees; by 2019
that number had grown more than eightfold, to 137,000.
Meanwhile, the number of VPs approximately doubled, from
50 to 96. The inevitable result is that senior leaders head
larger and more diverse teams of experts, meaning more
details to oversee and new areas of responsibility that fall
outside their core expertise.
In response, many Apple managers over the past ve years
or so have been evolving the leadership approach described
above: experts leading experts, immersion in the details,
and collaborative debate. We have codied these adaptions
in what we call the discretionary leadership model, which
we have incorporated into a new educational program for
Apple’s VPs and directors. Its purpose is to address the chal-
lenge of getting this leadership approach to drive innovation
in all areas of the company, not just product development,
at an ever-greater scale.
When Apple was smaller, it may have been reasonable to
expect leaders to be experts on and immersed in the details
of pretty much everything going on in their organizations.
However, they now need to exercise greater discretion
regarding where and how they spend their time and eorts.
They must decide which activities demand their full atten-
tion to detail because those activities create the most value
for Apple. Some of those will fall within their existing core
expertise (what they still need to own), and some will require
them to learn new areas of expertise. Activities that require
less attention from the leader can be pushed down to others
(and the leaders will either teach others or delegate in cases
where they aren’t experts).
Rosner, the VP of applications, provides a good example.
Like many other Apple managers, he has had to contend
with three challenges arising from Apple’s tremendous
growth. First, the size of his function has exploded over the
past decade in terms of both head count (from 150 to about
1,000) and the number of proj ects under way at any given
time. Clearly, he cannot dive into all the details of all those
proj ects. Second, the scope of his portfolio has widened:
Over the past 10 years he has assumed responsibility for new
applications, including News, Clips (video editing), Books,
and Final Cut Pro (advanced video editing). Although apps
are his core area of expertise, some aspects of these—among
them editorial content for News, how book publishing works,
and video editing—involve matters in which Rosner is not
an expert. Finally, as Apple’s product portfolio and number
of proj ects have expanded, even more coordination with
other functions is required, increasing the
complexity of
Roger Rosner’s
Discretionary Leadership
Apple’s VP of applications, Roger Rosner, oversees a portfolio
comprising four distinct categories that require varying amounts of
his time and attention to detail. In 2019 it looked like this:
Low
expertise
High
expertise
Highly involved
in the details
30%
40%
of time
15% 15%
Not highly involved
in the details
LEARNING
• Parts of News
• Voice memos
• Weather
OWNING
• Parts of News
• UI design
• Software
architecture
DELEGATING
• iMovie
• Final Cut Pro
• GarageBand
TEACHING
• Keynote
• Pages
• Numbers
Source: Apple
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collaborating across the many units. For instance, whereas
Rosner is responsible for the engineering side of News, other
managers oversee the operating system on which it depends,
the content, and the business relationships with content
creators (such as the New York Times) and advertisers.
To cope, Rosner has adapted his role. As an expert who
leads other experts, he had been immersed in details—
especially those concerning the top-level aspects of software
applications and their architecture that aect how users
engage with the software. He also collaborated with manag-
ers across the company in proj ects that involved those areas.
But with the expansion of his responsibilities, he has
moved some things from his owning box—including tradi-
tional productivity apps such as Keynote and Pages—into his
teaching box. (See the exhibit “Roger Rosner’s Discretionary
Leadership.”) Now he guides and gives feedback to other
team members so that they can develop software applica-
tions according to Apple’s norms. Being a teacher doesn’t
mean that Rosner gives instruction at a whiteboard; rather,
he oers strong, often passionate critiques of his team’s
work. (Clearly, general managers without his core expertise
would nd it dicult to teach what they don’t know.)
The second challenge for Rosner involved the addition
of activities beyond his original expertise. Six years ago he
was given responsibility for the engineering and design of
News. Consequently, he had to learn about publishing news
content via an app—to understand news publications, digital
advertising, machine learning to personalize news content,
architecting for privacy, and how to incentivize publishers.
Thus some of his work fell into the learning box. Here man-
agers face a steep learning curve to acquire new skills. Given
how demanding this is, only critical new activities should fall
into this category. Over six years of intense learning, Rosner
has mastered some of these areas, which are now in his
owning box.
As long as a particular activity remains in the learning
box, leaders must adopt a beginner’s mindset, questioning
subordinates in a way that suggests they don’t already know
the answer (because they don’t). This diers starkly from
the way leaders question subordinates about activities in the
owning and teaching boxes.
Finally, Rosner has delegated some areas—including
iMovie and GarageBand, in which he is not an expert—to
people with the requisite capabilities. For activities in the
delegating box, he assembles teams, agrees on objectives,
monitors and reviews prog ress, and holds the teams account-
able: the stu of general management.
Whereas Apple’s VPs spend most of their time in the own-
ing and learning boxes, general managers at other companies
tend to spend most of their time in the delegating box. Rosner
estimates that he spends about 40% of his time on activities
he owns (including collaboration with others in a given area),
about 30% on learning, about 15% on teaching, and about 15%
on delegating. These numbers vary by manager, of course,
depending on their business and the needs at a given time.
The discretionary leadership model preserves the funda-
mental principle of an eective functional organization at
scale—aligning expertise and decision rights. Apple can
eectively move into new areas when leaders like Rosner
take on new responsibilities outside their original expertise,
and teams can grow in size when leaders teach others their
craft and delegate work. We believe that Apple will continue
to innovate and prosper by being organized this way.
APPLE’S FUNCTIONAL ORGANIZATION is rare, if not unique,
among very large companies. It ies in the face of prevailing
management theory that companies should be reorganized
into divisions and business units as they become large. But
something vital gets lost in a shift to business units: the
alignment of decision rights with expertise.
Why do companies so often cling to having general man-
agers in charge of business units? One reason, we believe,
is that making the change is dicult. It entails overcoming
inertia, reallocating power among managers, changing an
individual- oriented incentive system, and learning new ways
of collaborating. That is daunting when a company already
faces huge external challenges. An intermediate step may be
to cultivate the experts-leading-experts model even within
a business unit structure. For example, when lling the next
senior management role, pick someone with deep expertise
in that area as opposed to someone who might make the best
general manager. But a full-edged transformation requires
that leaders also transition to a functional organization.
Apple’s track rec ord proves that the rewards may justify the
risks. Its approach can produce extraordinary results.
HBR Reprint R2006F
JOEL M. PODOLNY is a vice president of Apple and the dean
of Apple University. Prior to joining Apple, in 2009, he was
the dean of the Yale School of Management and on the faculty of
Harvard’s and Stanford’s business schools.
MORTEN T. HANSEN
is a member of Apple University’s faculty and a professor at the
University of California, Berkeley. He was formerly on the faculties
of Harvard Business School and INSEAD.
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