There’s no doubt that Apple is one of the most disruptive companies of the past 50 years. It has consistently reset the standard for entire industries with innovations such as the Macintosh computer, iPod, iPhone, and iTunes. However, the pace of innovation has significantly slowed at Apple, as the company enjoys the benefits of its technology platform and its massive install base. But, is Apple organized internally to be able to catch the next wave of radical innovation? We are not sure.
What is an ambidextrous organization?
We believe that firms thrive when they embrace the tension between optimizing their core business and exploring and scaling new opportunities. We call this Ambidexterity – the ability to simultaneously manage Core and Explore businesses. The Ambidextrous Organization is a proven approach to managing these tensions. Firms that execute it successfully can generate organic growth that outperforms growth through acquisition. They do this by giving new ventures autonomy, usually in a separate unit or entity, while retaining access to the assets of the core business, which they can use to scale faster than a startup.
Is Apple an ambidextrous company?
No, Apple is not an ambidextrous company. In an ambidextrous company, the explore business is separated from core business operations. Apple is a functional organization that manages products with “experts leading experts”. The functional structure organizes Apple around specific areas of competence, such as technology development, software, UX, marketing, etc. Senior executives at Apple manage functions, not products, or profit and loss (P&L) centers. The CEO is the only P&L owner or ‘general manager’.
Specialists come together to develop a product with individual managers having clear decision-making authority in specific areas. Resources for all innovation projects – incremental or more radical – are organized in the same hierarchy.
A new business opportunity is managed as a project, using resources from the relevant expert functions. A product manager integrates contributions of each function, acting as the ‘DRI’ (directly accountable individual). The DRI helps to sustain a high-speed of innovation at Apple with a small core team responsible for execution. These core teams with decision-making authority help to head off cross-functional disputes and stalemates could easily derail project execution.
At Apple teams focus on customer metrics – what is the rate of adoption of a new feature, how important is a feature to customers, etc. Functional managers are expected to manage the customer value and cost trade-offs of the features that they add to Apple’s products.
Others argue that Apple is ambidextrous because it is using KPIs (key performance indicators) to manage the trade-offs between short-term core business investments and long-term exploratory ones. This does have the effect of making conflict between the two competing priorities transparent – which is a key enabler for the ambidextrous organization. However, this does not make Apple an ambidextrous organization because the core business remains responsible for executing on exploratory business opportunities.
Apple is legendary as a disruptive innovator. It created an entirely new product category with the iPhone that competitors like Nokia did not understand. Nokia’s problem though was not that it did not have the technology assets to compete with Apple, but that it was relentlessly focused on incremental improvements to its existing product range. This is one of the potential flaws of the functional organization that may await Apple when the next wave of disrupt hits.