Category Archives: 21st Century Company

21st Century Company

The flexibility of Apple

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O’Brien: Apple’s path to the app store wasn’t a straight road – San Jose Mercury News
[Via MercuryNews.com]

The unveiling of the iPhone almost four years ago stands as a pivotal moment in computing history. The elegant design not only ushered in the mobile computing revolution, it also ignited an entire billion-dollar business based on mobile apps.

And, it is widely believed, this was all part of a master plan designed by Steve Jobs and Apple (AAPL).

But in a recent conversation with former Apple insider Bob Borchers, a very different picture emerged, one that hasn’t been reported until now. What he told me is that the mobile app ecosystem developed far differently from what Apple originally envisioned.

And it happened because Apple did two things: It listened to users. And it adapted.

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An important aspect of 21st Century is adaptation – they do not get it right the first time. Apple did not have a grand plan in mind. It was just trying to create the best, most stable smartphone it could.

But, because of the iPhone’s cutting edge nature, it allowed the possibility of outside change. Originally, Apple did not envision the app store.

It listened though and adapted. And in doing so, created an ecosystem much more powerful than just the iPhone itself.

The success of the App Store, though, was dependent on Apple having so many of the pieces already in place – iOS was based on OS X, meaning that  a large number of developers could jump on the new system rapidly; iTunes already had the infrastructure to support all the needs of an App store; the hardware of the iPhone could support so much more than web apps.

The success of the App store helped lead to the success of the iPad – Apple made sure that it could run not only iPhone apps but its own.

Apple would not be in the position today if it had clamped down on the development of apps for the iPhone.

21st Century Company, Open Access, Web 2.0

Describing a 21st century company

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Codifying asymmetry: How Apple became Jobsian
[Via asymco]

Any student of organizational theory must struggle with the question of how to assign weight to the influence of the leadership of a company. In the case of Apple, the question is:

Is Jobs is the embodiment of Apple or is Apple already Jobsian, imbued with his ethos?

John Gruber summed up the “Apple is Jobsian” argument by saying that Apple is Steve Jobs’ greatest creation and that he has been working on crafting the company as much as he has been crafting products. The result being that it’s well designed for sustainable longevity.

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Apple seems to be taking positive steps to understand why it works the way it does. As I have written several times, it is one of the first 21st century companies. I worked at another – Immunex.

The hallmark of these companies is the ability to do more with less. Their efficiencies mean they stay focussed on what really works, Much of the management of Apple has internalized these values. The simple, not the complex. Admit mistakes and move on. Deep collaboration and cross pollination.

One other – something Immunex also did well – is to focus on what NOT to do. Figuring out rapidly what does not work, examining the project to see what not to do, provides opportunity savings that can be critical with small groups. Failing quickly and successfully is a key. This is something much larger companies can not do.

Pixar does many of the same things. I wrote more in depth in my series about the Synthetic Company. (1, 2, 3)

Margaret Wheatley said it best in her essay  on The Unplanned Organization:

I also want to emphasize that emergent organizations are leader-full, not leaderless. Leaders emerge and recede as needed. Leadership is a series of behaviors rather than a role for heroes.

That is why Apple will do fine without Jobs, just as Pixar will do fine and why any 21st century organizations will succeed – the community is the leader. They can adapt to things that come at them and are resilient to changes.

20th Century companies often lived or died by their CEO. Not so for 21st Century companies. They live or die by the community that has been created.

We will see more of these as time goes on because they will be the successful organizations dealing with the complexities of this century.

21st Century Company, Knowledge Creation, Web 2.0

The real sign of Apple’s innovations – they fit on a table

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$76 billion a year from a tableful of products
[Via asymco]

During the calendar year 2010 Apple spent nearly $2 billion in R&D. That is a significant increase from $714 million in 2006. However, as a percent of sales, R&D spending has decreased. Sales have grown more rapidly than resources hired to develop the products (or to sell them).

In Q4 2005 Operational Expenses (costs which are not tied directly to units of production–sometimes called fixed costs) were 14.2% of sales. In the last quarter of 2010, the ratio was 9.2%. Sales and administrative expenses (which include advertising, promotion and overhead) were 7.1% and R&D (which includes all engineering, testing) were 2.2%. As percent of sales both reached new lows.

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I mentioned this last week but this is a nice graph to see trends.

This remark was pretty cool to think about:

The efficiency with which Apple creates sales is legendary. There can be many explanations for this but the most telling evidence of causality I can find is the small number of products in the portfolio. Tim Cook stated that given the sales value, there is more concentration of product at Apple than at any other company except perhaps an oil company. All the products Apple sells can fit on one average sized kitchen table and they generated $76 billion in sales last year.

I’ve written about Apple’s approaches, as well as those of other 21st Century companies. One of the  key aspects is their efficiency – they produce a huge amount of innovative work that belies the small size of their research groups. Pixar is another example.

I worked for a company that accomplished this – Immunex. We were able to compete with much larger companies by focussing our research efforts very tightly. Not that we only worked on a few things. We worked on a lot of them.

But we only allowed a very few to pass through to real development. We did this by having a very open and transparent vetting process for projects. We examined every research project 3 times a year in a process that could be attended by everyone.

What this did is make it very hard to carry on projects purely for political reasons. In many companies, a powerful sponsor could take possession of a project and push it through, resulting in something that dies on the market; in these companies, politcal pull can bemore important than actual innovation.

Because of the social aspect of our vetting, it became much harder to say that a project would continue “Because I said so” when everyone could see that another project held better value. It decreased the ability of politicians to get a project approved.

And, since everyone’s views were heard, people could understand why a decision was made – it was made in public.

We worked hard to kill projects or put them on the backburner. But it was all done in public. And then we allowed every scientist to spend a percentage of their time working on a project – any project – that they wanted to. This not only allowed people to continue for a time even on killed projects, hoping to rejuvenate them, but allowed really creative ideas to be examined.

But, after a certain time, each of these were vetted in public. If they did not pass the public test, they were scrapped.

We developed a lot of innovative ways to foster creativity but the most important was making the discussions and decisions open to anyone, make the important decisions as early as possible and make them public.

I don’t know if Apple does the latter but it seems likely they do the former, as this from asymco suggests:

Most observers of technology are not aware of the pace of its development. It’s natural to assume that most R&D costs are in the product creation, or early phases of development. Coming up with something new must be hard. But that’s not actually true. Most R&D work is routine polishing of products and coordination late in the development cycle. “Productization” is far more resource intensive than “concepting”.

This is absolutely true – coming up with ideas is easy; making them happen is hard.

It stands to reason that making go/no-go decisions early in the pipeline is a lot less expensive than making stop-ship decisions prior to launch.

I have no specific evidence that this is the case, but I guess Apple conceives of plenty of concepts, but chooses to move forward to develop and market very few. Most companies don’t have the ability to decide early and proceed with costly R&D and marketing in order to find out whether products will “work” in the marketplace. The proliferation of flawed products is a big cause of the inefficiency of product development.

Look at so many companies. They put out lots of products hoping the market will decide which is best. They want consumers to do the hard work. How did the Kin see the light of day? Many companies just can not kill a project that has emotional and political connections. So they let it slump on through, hoping that the market sees potential.

That is why, a year after the iPad, we have 100 different copy cats, while in the years before the Ipad there was just nothing even close. Most companies have no real idea of what is successful to they copy other’s success.

But Apple, like Immunex, repeats innovation time and again because it has developed a process of killing things that do not work and, if they can, killing them before they progress very far. They may not always succeed – they have had failures – but they usually know why it failed.

I worked for a company that came up with innovative solutions for years –again and again – so I know that what Apple is doing is not only working but is reproducible.

That is what separates a 21st Century Company from a 20th Century one.