Case 3.2 - Lessons From Top-Tier Company - Apple Inc

Case 3.
Lessons from Top-Tier Company: Apple Inc’s Organizational Design
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.
In 1997, 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 decentralized business units,
managers were inclined to fight with one another, over transfer prices in particular. Believing that
conventional management had stifled innovation, Jobs, in his first year returning as CEO, 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.
The adoption of a functional structure may have been unsurprising 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
effect, 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 firms 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 flow
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 corporations had followed
suit. Apple proves that this conventional approach is not necessary and that the functional
structure may benefit 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 artificial intelligence and other new areas has increased,
that structure has changed. Here we should discuss about this case.
Assignments
1. Reviews the case

2. Identify what is the problem from the perspective of organization theory
3. Answer the questions based on theory and support data (journals, books, company profile, and
etc). Support your argument with the theories in chapter 3 of Daft (2018), Organization
Theory and Design.
Questions
1. Why Steve Jobs changed the organizational structure back then? What challenges and
shortcomings will be faced if the organization still applies the previous organizational
structure? Discuss your reason, based on theories in chapter 3 of Daft (2018), Organization
Theory and Design. You should add as many as support data about Apple Inc.
2. Why do you think such a big company, Apple Inc, is still using the functional structure?
Why Apple didn't apply the matrix structure like other Top Tier Companies? Discuss your
reason, based on theories in chapter 3 of Daft (2018), Organization Theory and Design. You
should add as many as support data about Apple Inc.
3. What is the benefit of the new organizational structure for the growth of Apple Inc? Discuss
your reason, based on theories in chapter 3 of Daft (2018), Organization Theory and Design.
You should add as many as support data about Apple Inc.
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Case 3.

Lessons from Top-Tier Company: Apple Inc’s Organizational Design

1. Reviews the case

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