How Apple’s Organizational Structure Bred Both Innovation and Silos
And how Collaboration and Common Mission Helped Transform its Culture to be “Different, Together”
For the second year in a row, Apple topped the list of most innovative companies worldwide, according to Boston Consulting Group’s latest yearly ranking[1]. Apple’s organizational design is among the many reasons attributed to Apple’s innovation dominance. The entire company comes in at Apple under one P&L, forming a functional organization. In this structure, senior vice presidents oversee functions, not products, aligning expertise and domain knowledge with decision-making abilities.
Apple’s focus on functional expertise allows the company to compete successfully in the technology market, which is rife with disruption and change and requires players to make decisions on trends and technologies without the benefit of market forecasts. The more experienced and knowledgeable these functional units are, the more likely Apple will be to make the right product decisions.
Steve Jobs adopted this functional organization structure in 1997 upon his return to the company. Believing that the conventional management structure of individual business units, each owning its P&L, was holding back innovation[2]. Before 1997, business units at Apple were prone to infighting, mostly about transfer prices. Adopting a functional structure solved the transfer price problem but bred silos and the dynamic of each functional unit functioning as its own company.
Specialization Breeds Silos and Secrecy
While having functional leaders and groups that are experts in their domains has allowed Apple to excel in producing innovative products, the company has had to overcome a byproduct of having hundreds of specialist teams across the company; silos and secrecy. The challenge of secrecy is not new to Apple. The company’s unofficial corporate motto is “Surprise and Delight,” which is the underlying belief that products should catch the public unaware, providing the public with something they didn’t even realize they needed[1].
“Surprise and Delight” took the shape of project-specific NDAs, restricted access for employees across physical buildings, coded product documents, special tracking of prototypes, a need-to-know culture, and a series of norms and rules has dissuaded open discussion of internal problems.
This level of organizational secrecy had the unintended consequence of creating instances of teams withholding information, clashing personal agendas among functional team leaders, and infighting. As Apple’s product ecosystem grew, the silos created by the culture of secrecy impeded collaboration, which became more critical as the technical challenges rose.
Turning Secrecy into a Productive Force at Apple
With Apple’s embedded culture of secrecy contributing to silos and critical product information not being shared across functional teams, the company needed to acknowledge the damage the lack of cooperation created and look for ways for the functional teams to collaborate more. The lack of cooperation and functional structure formed “fiefdoms” at Apple, with each functional unit acting like an independent company[2].
Establishing a Cooperative Environment for Borrowing
At Apple, the company realized that continuing to operate in silos posed a threat to innovation. Under the direction of Chris Deaver, a company HR partner, Apple set out to change how the different functional teams communicated and, as a result, collaborated[3]. Instead of waiting until it was time to bring each team’s final contribution to production, the company began holding weekly cross-team sessions, focusing on an open approach to sharing the challenges they were facing.
These sessions set the tone for a culture shift at Apple. The culture of secrecy gave way to “Different Together,” where collaboration and sharing best practices help the company raise the level of innovation[4].
The culture of secrecy gave way to “Different Together,” where collaboration and sharing best practices help the company raise the level of innovation.
Lessons for Other Companies
Companies looking to help improve synergies within their organization should also help their teams focus on a common mission. Apple’s functional teams work toward Apple’s mission to bring “the best user experience to its customers through its innovative hardware, software, and services.” Focusing on that common mission helped Apple appreciate that the secrecy behind operations should not be framed as a hierarchical or territorial obstacle but as a necessity in its drive to provide the best user experience and surprise and delight them.
Apple’s shift to sharing and co-creation helped the company do something many others fail to accomplish, shift organizational culture. Apple enabled its different functional teams to borrow from one another, building trust and teamwork while staying focused on what the teams were all working towards, helping the organization be “different, together.”
[1] Manly, J., Ringel, M., Baeza, R., Cornock, W., Paschkewitz, J., Hurwitz, A., Harnoss, J. D., Apostolatos, K., Backler, W., Meinecke, H., Koslow, L., Pieper, C., Gross-Selbeck, S., Unnikrishnan, S., Panandiker, R., & Sano, N. (2022, September 15). Are You Ready for Green Growth? BCG Global. https://www.bcg.com/publications/2022/innovation-in-climate-and-sustainability-will-lead-to-green-growth
[2] How Apple Is Organized for Innovation. (2022, August 10). Harvard Business Review. https://hbr.org/2020/11/how-apple-is-organized-for-innovation Gartenberg, M. (2018, February 26). Surprise and delight. iMore. https://www.imore.com/surprise-and-delight
[3] Lashinsky, A. (2021, June 16). How Apple Works: Inside the World’s Biggest Startup. Fortune. https://fortune.com/2011/05/09/inside-apple/
[4], fastcompany.com. (n.d.). https://www.fastcompany.com/90748492/apple-airpods-pro-creation
[5] fastcompany.com. (n.d.). https://www.fastcompany.com/90748492/apple-airpods-pro-creation
