case study strategic leadership and innovation at apple inc

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How Apple Is Organized for Innovation

• Joel M. Podolny
• Morten T. Hansen

When Steve Jobs returned to Apple, in 1997, 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. Believing that conventional management had stifled innovation, Jobs 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. Although such a structure is common for small entrepreneurial firms, Apple—remarkably—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 1997. In this article the authors discuss the innovation benefits and leadership challenges of Apple’s distinctive and ever-evolving organizational model in the belief that it may be useful for other companies competing in rapidly changing environments.

It’s about experts leading experts.

Idea in Brief

The challenge.

Major companies competing in many industries struggle 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.

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.

• Joel M. Podolny is the dean and vice president of Apple University in Cupertino, California. The former dean of the Yale School of Management, Podolny was a professor at Harvard Business School and the Stanford Graduate School of Business.
• MH Morten T. Hansen is a professor at the University of California, Berkeley, and a faculty member at Apple University, Apple. He is the author of Great at Work and Collaboration and coauthor of Great by Choice . He was named one of the top management thinkers in the world by the Thinkers50 in 2019. MortentHansen

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By: Frank T. Rothaermel

The case is set in September 2019 and the protagonist is Tim Cook, the CEO at Apple, Inc. In 2019, Apple had revenues of $260 billion; yet, net revenues were down by 7 percent over the same period.…

• Length: 24 page(s)
• Publication Date: Nov 18, 2019
• Discipline: Strategy
• Product #: MH0069-PDF-ENG

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The case is set in September 2019 and the protagonist is Tim Cook, the CEO at Apple, Inc. In 2019, Apple had revenues of $260 billion; yet, net revenues were down by 7 percent over the same period. Much of the decline in Apple's revenues is a result of decreased sales of the iPhone, which contributed 62 (!) percent of Apple's total revenues in 2018, and declined to 54 percent in 2019. The case highlights the problems Tim Cook faces as demand of the iPhone slows, and Apple has failed to introduce any major new product since the iconic iPhone was launched in 2007. Trade tensions between the United States and China, moreover, are also negatively impacting the company. Over the past few years, the Chinese market accounted for 25 percent of Apple's total revenues. Apple is exposed to the trade tensions in two ways in particular. Moreover, the threatened imposition of tariffs on Chinese goods by the United States would further hurt Apple by raising the effective cost of Apple products in the United States because almost all of their manufacturing is done in China by Foxconn. Finally, Apple recently entered the video-streaming market, with its Apple TV+ service, which will develop original programming as well as act as a pipeline for other channels. This is a crowded market with strong existing players such as Netflix, Hulu (controlled by Disney), and AT&T's HBO. Other notable new entrants into the content streaming market include Disney+.

Layered Leadership and Apple’s Rise to the Top

November 23, 2021 • 7 min read.

In an excerpt from the revised and updated edition of their book ‘The Strategic Leader’s Roadmap,’ Wharton’s Harbir Singh and Michael Useem explore how Apple’s approach to leadership has contributed to its success.

In their book  The Strategic Leader’s Roadmap, Revised and Updated Edition: 6 Steps for Integrating Leadership and Strateg y , Wharton management professors Harbir Singh and Michael Useem draw on one-on-one interviews and their own research to   take readers into the offices — and mindsets — of some of today’s foremost strategic leaders. In the following excerpt adapted from the book, Singh and Useem explore key steps in the development of the iPhone’s virtual keyboard to show how a “layered leadership” approach has contributed to Apple’s success. 

Strategic leadership should emanate from multiple tiers in a company or a country, not just the top rung. While the enterprise’s strategic intent is conveyed by the most senior leader in the organ­ization, it is then the responsibility of the managers populating the next tier to convey the same message downward and for their own subordinate managers to do the same in turn, with strategic leadership cascading down the company pyramid in what can be termed layered leadership.

In formulating his principles for leading Apple Inc., founder and CEO Steve Jobs had put innovation at the center. One of his specific agendas was to create a “digital hub” for every private residence. He foresaw homes with linked music players, appliances, cameras, computers, telephones, security systems, and video recorders; Mac computers and their proprietary software would serve as connectors. All of the devices would be multifunctional, easy to operate, and aesthetically appealing. A new operating system, OS X, developed at a reported cost of $1 billion, would furnish the required interoperability and adaptability to subsequent generations of Intel chips.

Meanwhile, Jobs introduced devices for the digital hub one by one, each becoming a game changer in its own right. The iPod, for instance, displaced MP3 digital audio players with a smaller gadget that allowed for internet updating and a choice of songs. Serving as a first node in an ecosystem of related services, including iTunes, the iPod affirmed the potential of the digital hub strategy, knitting varied features seamlessly. Observers attributed Apple’s build­out of the iPod and the hub concept more broadly to the vision and creativity of the chief executive, but it also depended on the leadership of layers well below him.

An ‘Act of Creativity’

Consider the role of Ken Kocienda, an Apple software developer whom the company had asked to create a virtual keyboard for the new iPhone. Given the mobile device’s modest dimensions, the keys on the iPhone’s virtual keyboard would have to be tiny, and for that, devising an autocorrect function would be essential so that users could type quickly and not have to backtrack to fix mistakes. Another challenge was how to cram letters, numbers, and symbols onto the phone’s slender keyboard. Here, Kocienda’s team came up with a toggling function, allowing users to easily switch the keyboard from letters to numbers to symbols, or even the Greek alphabet. Users readily embraced both innovations.

Kocienda’s leadership of his engineering team’s decisions — along with Jobs’s leadership of his top team’s decisions — proved foundational for the iPhone’s launch. “The iPhone was an act of creativity,” Kocienda said, but “it wasn’t inevitable.” Rather, it was an “accumulation of many small choices by a group of people working together closely in a specific time and place.”

When Jobs introduced Apple’s iPhone in 2007, he anticipated it would be transformative for the company and even the industry. “Every once in a while, a revolutionary product comes along that changes everything,” Jobs said. “Today, we are introducing three revolutionary products in this class. The first is a widescreen iPod with touch controls. The second is a revolutionary mobile phone. The third is a breakthrough internet communication device. These are not separate devices, it is one device and we are calling it the iPhone.” The resulting product became one of the most successful technology combinations of all time, accounting for as much as half or more of Apple’s annual revenue for years to come.

Having successfully created the keyboard and autocorrect function for the iPhone, Apple then assigned Kocienda the role of developing a keyboard for the next big thing, the iPad. Kocienda brought in Bas Ording, a software designer who had already invented inertial scrolling, where a finger swipe can make a screen slide quickly at first but then slow down, a function that users found appealing and one that has become a standard feature on virtual screens. Kocienda’s group sought to understand whether the new iPad keyboard should be a full replica of the Mac keyboard or just a subset of the Mac’s keys. Kocienda worked with Ording and the team on a range of design concepts, converging on two prototypes. The first, a virtual replica of the full keyboard, would be familiar to Mac users. The second, which allowed users to switch the virtual keyboard from lowercase letters to capital letters and back, would be less familiar. They tested a range of sizes for the virtual keys and a variety of ways for correcting typos.

Layered Leadership at its Finest

To determine which keyboard was better, Kocienda demonstrated his options to a room of top executives, including Jobs himself, in a conference room called Diplomacy at Apple’s headquarters in Cupertino, California. As Kocienda entered the room, he saw Henri Lamiraux, vice president of engineering for iOS, the operating system created by Apple for its mobile hardware, including the iPhone, iPod, and iPad. Lamiraux reported directly to Jobs, coordinating engineering for the software and hardware interfaces for Apple products, and he served as a conduit between senior­most management and teams of engineers. Also present were Scott Forstall, senior vice president for iOS software engineering, and Greg Christie, head of the Human Interface Team. Here was the top layer, the big brass.

“Behind the launch of both the iPhone and the iPad were several layers of leadership, with the CEO resolving the final issues but engineers … reaching important decisions at their own levels.”

Kocienda displayed the two main options to them: the full Mac­ like keyboard with smaller keys and the switchable keyboard with larger keys. In earlier demonstrations with other executives, Kocienda had found little agreement on the preferred option. As Jobs and the top team looked on now, Kocienda opened two screens on a prototype iPad. “There are two designs,” he explained. “One has more keys, like a laptop keyboard, and the other has bigger keys,” like “a scaled-­up iPhone. We are thinking of offering both. Try the zoom key to switch between them.”

Flipping from one to the other, Jobs tested each of the versions several times. Revealing no emotion or preference yet, he turned to Kocienda. “We only need one of these, right? Which one do you think we should see?” Kocienda was taken aback, having assumed that this was a choice for the upper layer, not his own. With time for only a moment’s reflection, he shot back, “I’ve started to like the layout with the bigger keys. I think I could learn how to type on it.” He added that the autocorrect feature already on the iPhone could easily be incorporated here. Jobs responded, simply but fatefully, “OK. We’ll go with the bigger keys.”

Behind the launch of both the iPhone and the iPad were several layers of leadership, with the CEO resolving the final issues but engineers like Kocienda reaching important decisions at their own levels. The formula for the layered leadership included clearly defined goals for each, frequent communications among the layers, a shared tempo to keep all layers on track, and continual feedback up and down the layers. For navigating the several layers, Kocienda invented his own roadmap: “Remove distractions to focus attention where it needs to be. Start approximating your end goal as soon as possible. Maximize the impact of your most difficult effort. Combine inspiration, decisiveness, and craft to make demos.” Also, listen “to feedback from smart colleagues,” and then, “creative selection moves us step by step from the spark of an idea to a finished product.”

  Copyright 2021. Reprinted by permission of Wharton School Press.

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Apple Inc. in 2023

• Format: Print
• | Language: English
• | Pages: 26

About The Author

David B. Yoffie

Related work.

• January 2024
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• Apple Inc. in 2023  By: David B. Yoffie

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How Apple Achieved a Legendary $2.98 Trillion Fortune by Outsourcing | Case Study

In the annals of technological innovation, Apple Inc. stands as a testament to what strategic decisions and visionary leadership can achieve. From its humble beginnings in a garage to becoming a three trillion-dollar behemoth, Apple’s success narrative is a tale woven with threads of innovation, design excellence, and a shrewd approach to outsourcing. In this extensive case study, we embark on a journey to dissect the intricate layers of outsourcing strategy to extract valuable lessons for businesses aiming at sustainable growth.

Apple’s evolution is a saga of perpetual reinvention. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, the company started as a player in the personal computer industry. [ 1 ] Fast forward to the present day, and Apple Inc. has transformed into a global powerhouse, setting industry benchmarks and captivating consumers with its innovative products.

Table of Contents

#1: outsourcing: apple inc.’s manufacturing backbone, a: challenge: scaling up production.

As Apple Inc. ventured into the realm of consumer electronics with products like the iPhone, iPad, and MacBook, the challenge of meeting unprecedented demand emerged. In response, Apple strategically embraced outsourcing, forging key partnerships to tackle this manufacturing conundrum.

Foxconn, also known as Hon Hai Precision Industry Co., Ltd., emerged as Apple’s manufacturing linchpin. With its headquarters in Taiwan, Foxconn became the largest electronics contract manufacturer globally. The statistics tell a compelling story—Foxconn’s revenue in 2021 reached a staggering $214 billion, ranked 20th in the 2023 Fortune Global 500—a significant portion of which was attributed to its collaboration with Apple.

B: Benefit: Cost Savings and Efficiency

The outsourcing strategy wasn’t merely about meeting demand but a calculated move to optimize costs. According to industry reports, the cost of manufacturing an iPhone X was estimated to be around $370, with the device retailing at $999. This exemplifies the cost-effectiveness achieved through outsourcing, particularly with partners like Foxconn, renowned for their efficiency in mass production. In 2023, Apple Inc. launched the titanium-based iPhone 15 Pro Max, manufactured at $558 and currently retailing from $1199 to $1599.

#2: Leveraging Global Talent and Expertise

A: challenge: the pursuit of excellence.

Apple’s commitment to excellence extends beyond its sleek product designs to encompass the entire user experience. To provide this seamless experience, Apple Inc. strategically tapped into a global talent pool, seeking specialized expertise through outsourcing.

Beyond manufacturing, Apple’s collaboration extended to specialized components. For instance, Apple Inc. sourced its A-series chips from Taiwan Semiconductor Manufacturing Company (TSMC), a world leader in semiconductor manufacturing. In 2022, TSMC’s revenue soared to $63 billion, a testament to its pivotal role in Apple’s supply chain.

B: Benefit: Innovation and Quality Assurance

Outsourcing to experts meant that Apple could integrate cutting-edge technology seamlessly. The A-series chips, fabricated by TSMC, consistently pushed the boundaries of performance, ensuring that Apple’s devices were aesthetically pleasing and technological marvels. This collaborative approach contributed to Apple’s reputation for innovation and quality assurance.

#3: The Design Imperative

A: challenge: nurturing creativity.

Apple’s design philosophy is synonymous with elegance and innovation. Outsourcing became a tool to liberate internal resources, allowing Apple’s design team to focus solely on what they do best—creating iconic products.

By outsourcing components and manufacturing, Apple’s in-house design team gained the freedom to innovate without being bogged down by production intricacies. Statistics reveal the impact—Apple’s design-led approach contributed to a brand value of $263.4 billion in 2022, making it the most valuable brand globally.

B: Benefit: Unleashing Creativity

This focus on design resulted in visually stunning products and fostered a culture of innovation within Apple Inc. The iPhone’s iconic design, for instance, not only captured the market but set a new standard for the entire industry. The freedom to innovate became a catalyst for Apple’s success.

#4: Outsourcing in the Digital Age

A: Challenge: Navigating the Digital Landscape

As the digital landscape evolved, Apple Inc. faced the challenge of staying at the forefront of software development. The solution lies in strategic outsourcing partnerships that complement Apple’s internal capabilities.

Apple’s collaboration extended to software development, with partnerships and acquisitions reinforcing its commitment to excellence. For instance, the acquisition of Beats Electronics in 2014 for $3 billion not only bolstered Apple’s presence in the audio industry but also brought the expertise of Beats’ software engineers into the Apple ecosystem.

B: Benefit: Software Synergy

Outsourcing software development allowed Apple to harness the collective expertise of a global talent pool. The collaborative synergy translated into user-friendly interfaces, seamless integration across devices, and a robust app ecosystem. The strategic outsourcing of software development became a key ingredient in Apple’s recipe for success in the digital age.

#5: Ethical Considerations and Corporate Responsibility

A: challenge: balancing success and responsibility.

While the outsourcing strategy contributed significantly to Apple’s success, it also brought attention to ethical considerations and corporate responsibility. Reports of challenging working conditions at some manufacturing partners prompted Apple to reevaluate its approach.

Apple’s response to these ethical concerns showcased adaptability and a commitment to responsible business practices. According to Apple’s Supplier Responsibility Progress Report in 2022, the company conducted over 1,100 supplier assessments, addressing issues related to labor practices, environmental impact, and ethical sourcing.

B: Benefit: Ethical Leadership

Addressing ethical concerns associated with outsourcing elevated Apple’s corporate image. The commitment to responsible business practices resonated with consumers and set a precedent for the industry. This ethical leadership became a crucial element in Apple’s success story.

Final Verdict: The Outsourcing Symphony

In the grand symphony of Apple’s success, outsourcing plays a pivotal role as a harmonious melody that elevates the entire composition. The strategic outsourcing of manufacturing, expertise, design, and software development has propelled Apple to unprecedented heights and is currently worth almost $3 trillion. This in-depth exploration attests to the transformative power of strategic outsourcing.

* Lessons Learned: A Call to Action

1. Strategic Partnerships : Identify and cultivate strategic outsourcing partnerships that align with your business goals and values. Partnering with industry giants like Foxconn and TSMC gave a solid foundation.

2. Focus on Core Competencies : Outsourcing allows you to concentrate on your core competencies, whether design, innovation, or marketing. As exemplified above, streamlining the design process can lead to market-leading products.

3. Global Talent Pool : Tap into a global talent pool to access specialized expertise and stay at the forefront of innovation. Partnerships with global leaders, such as TSMC in semiconductor manufacturing, were proven to be instrumental.

4. Ethical Outsourcing : Prioritize ethical considerations and corporate responsibility in your outsourcing practices to build a positive brand image. As demonstrated above, regular assessments and a commitment to transparency can set industry standards.

5. Adaptability : Be adaptable and responsive to challenges, iterating your outsourcing strategy to meet evolving demands. Responsiveness to ethical concerns showcases the importance of adaptability in sustaining success.

In the business landscape, the outsourcing symphony can be the key to sustained success. As businesses consider their growth strategies, the above case study serves as a compelling testament to the transformative power of strategic outsourcing. Embrace the symphony, conduct it with precision, and let the echoes of success reverberate through the corridors of your organization.

Get in touch with us at CodersOnFire and start outsourcing your software development projects to gain monumental success in your business.

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Strategic Leadership and Innovation at Apple Inc - Case Study Example

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Decoding tradeweb markets inc (tw): a strategic swot insight.

Robust revenue growth with a significant increase in transaction fees and commissions.

Strong operating income performance, highlighting efficient cost management.

Continued investment in technology and strategic acquisitions to bolster market position.

Global economic uncertainties and competitive pressures remain a concern.

On April 25, 2024, Tradeweb Markets Inc ( NASDAQ:TW ) filed its 10-Q report, providing a detailed view of its financial performance for the first quarter of the year. The company, a leader in electronic fixed-income trading platforms, has shown a remarkable increase in revenues, with transaction fees and commissions rising from $266,598 in Q1 2023 to $335,451 in Q1 2024. Subscription fees also saw an uptick, contributing to a total revenue of $408,739 for the quarter, up from $329,249 the previous year. Operating income surged to $167,678, reflecting a strong command over expenses and operational efficiency. Net income attributable to Tradeweb Markets Inc. reached $126,142, with earnings per share growing from $0.42 to $0.59. These financial highlights underscore the company's robust performance and serve as a foundation for the SWOT analysis that follows.

Warning! GuruFocus has detected 7 Warning Sign with TW.

Market Leadership and Innovation: Tradeweb Markets Inc. has established itself as a leader in the electronic trading space, particularly in fixed-income securities. The company's innovative trading platforms and technology have attracted a broad client base, including institutional, wholesale, and retail sectors. The recent financial results demonstrate the company's ability to leverage its market position to generate significant transaction fees and commissions, which are the primary drivers of its revenue growth. Tradeweb's commitment to innovation is evident in its continued investment in technology, as shown by the $21,310 spent on technology and communications in Q1 2024, up from $17,567 in the prior year. This investment not only enhances the trading experience for clients but also positions the company to adapt quickly to market changes and regulatory requirements.

Strategic Acquisitions: Tradeweb's growth strategy includes strategic acquisitions that expand its product offerings and geographic reach. The recent acquisition of r8fin, a provider of algorithmic-based trading tools, for $125.9 million, is a testament to this approach. This acquisition complements Tradeweb's existing trading solutions and opens up new opportunities for innovation and market expansion. The company's proactive approach to identifying and integrating complementary businesses has strengthened its competitive advantage and diversified its revenue streams.

Dependence on Market Conditions: While Tradeweb's electronic trading platforms have seen increased adoption, the company's performance is closely tied to market conditions. Volatility in the fixed-income market can impact trading volumes and, consequently, the transaction fees and commissions that form the bulk of Tradeweb's revenues. This dependence on market conditions introduces a level of uncertainty in the company's financial performance, as seen in the past with fluctuations in interest rates and economic cycles affecting trading activity.

Operational Risks: Tradeweb's operations involve complex technology systems and a global network of clients, exposing the company to operational risks such as system failures, cybersecurity threats, and execution errors. Despite significant investments in technology, any disruption in service or security breach could undermine client confidence and lead to financial losses. The company's expenses related to technology and communications reflect its focus on mitigating these risks, but they remain an inherent weakness in the business model.

Opportunities

Regulatory Tailwinds: The financial industry continues to experience regulatory changes that encourage electronic trading and transparency. Tradeweb is well-positioned to benefit from these trends, as its platforms offer compliance solutions and efficient trade execution. The company's ability to navigate the regulatory landscape and provide value-added services to clients presents an opportunity for further growth and client acquisition.

Global Expansion: Tradeweb has the opportunity to expand its presence in emerging markets and capitalize on the growing demand for electronic trading solutions worldwide. The company's international operations already contribute to its revenue, and further expansion could open up new revenue streams. By leveraging its technology and expertise, Tradeweb can establish itself as a global leader in electronic trading across multiple asset classes.

Intense Competition: The electronic trading industry is highly competitive, with numerous players vying for market share. Tradeweb faces competition from established financial institutions, as well as new entrants that offer innovative trading solutions. The company must continuously invest in technology and enhance its offerings to maintain its competitive edge, which could put pressure on its margins and profitability.

Economic Uncertainties: Global economic uncertainties, such as interest rate changes, geopolitical tensions, and market downturns, can adversely affect trading volumes and, consequently, Tradeweb's revenues. The company's performance is sensitive to these macroeconomic factors, which could pose a threat to its financial stability and growth prospects.

In conclusion, Tradeweb Markets Inc. ( NASDAQ:TW ) demonstrates a strong financial performance with significant growth in revenues and net income. The company's strengths lie in its market leadership, innovative technology, and strategic acquisitions. However, it must navigate weaknesses such as dependence on market conditions and operational risks. Opportunities for expansion and regulatory tailwinds present avenues for growth, while competition and economic uncertainties pose threats to be managed. Overall, Tradeweb's strategic focus and financial health position it well to capitalize on market opportunities and address potential challenges.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.

This article first appeared on GuruFocus .