The functional organizational structure may be causal to successful disruption. Although this hypothesis needs much more research and testing, there are correlations in the anecdotal evidence. One of the principles of this theory is that functional organizations are less prone to “political infighting” where a powerful division can disable a self-disruption through the wielding of the power of the Profit/Loss statement.
Under the divisional structure the modus operandi is that once an internal threat is detected, the incumbent division unleashes antibodies to destroy the smaller and less powerful opponent. This is possible because as soon as the threat is perceived, a threat response kicks in and the power to deflect the threat is abundant in the reward and incentive structure. This response mechanism is so common and well understood that it forms the basis of the Innovator’s Dilemma.
My hypothesis is that in the absence of product/divisional level power bases, the threat is not felt and the political power to respond is not available. In a functional organization there is no “business leadership”, where the P/L “belongs” to one person. Only the CEO has life-and-death power over products and their decision is “purchased” through discussion with functional heads who stand to benefit as much as to lose from disruptive change.
This functional organization decision process is typical if not universal in small companies and atypical if not unheard of in large companies. It’s one of the reasons small companies are inherently more disruptive. The challenge for a growing company is that functional organizations don’t scale well. There are very few and all depend on vigilant, almost maniacal defense of the structure. Divisional organizations are “natural” at scale and the preservation of functional structures is like fighting entropy.
The organizations which seem to preserve functionality at scale are militaries. This is why I’ve been thinking about it takes to manage such organizations and preserve their apolitical status.
As it turns out, militaries are also not immune from the corrosive effects of political power. In fact, the slide into corruption begins with the formation of elite divisions. The rationale is simple: elite soldiers whose loyalty and skill are most valuable are chosen for special roles and status. They begin by usually acting as bodyguards to the leadership or the state.
One of the most startling announcements during the WWDC 2013 was iOS in the car. The mockup that was shown seems to indicate the use of the car’s in-dash display as an “external monitor” for an iOS device while control would come from inputs using Siri.
The technical details were not released so it’s hard to know the protocol used to accommodate this interface. However it seems that it will be generic enough that a number of launch brands signed up for the launch. The list includes Honda, Mercedes-Benz, Nissan, Ferrari, Chevy, Infiniti, Kia, Hyundai, Volvo, Acura, Opel and Jaguar.
Is this a significant opportunity?
Before we get excited, it’s important to note that this will likely take a very long time. It won’t even begin until 2014 and the number of new models may trickle into showrooms quite slowly. Consider that the time it took for automakers to universally support external audio input (mostly the trivial line-in) was about a decade.
To also curb our enthusiasm we need to realize that the car industry does not produce many units. In 2012 there were over 60 million cars produced (with the following regional mix:)
In contrast, 60 million is about the number of phones sold every two weeks. In 2013 there will be more iPads sold than cars.
In particular the companies mentioned had the following production figures in 2011:
My estimate of last quarter’s iTunes gross revenues suggested a spending rate of $40 per iTunes account. It would make sense to consider how that figure changed over time. The following graph shows the pattern:
You can read each bar in the graph as the total “ARPU” or average revenue per iTunes user.
I overlaid a graph showing the total number of accounts as reported by Apple to the (retroactively) estimated revenue structure. Account totals are measured with the right axis and ARPU with the left. Note that I also broke down each component of iTunes as currently defined (Music, Video, Apps, Books, Software and Services.)
The time frame covered is from Q2 2007, or the quarter prior to the iPhone launch. A few patterns emerge:
I join forces with Pixxa, makers of Perspective, to present a workshop on the future of presentation.
After giving dozens of talks in the last year using an iPad with Perspective I’ve learned a few things. Having also spent years using Powerpoint to try to do the same thing, I’ve experienced first hand how slideware has gotten in the way of great storytelling.
So we teamed up to understand how stories come alive using data and drew inspiration from Aristotle, Welles, Tufte and Rosling to build a new theory of presentation.
We believe that we have summoned up enough cohesion in the theory to put it forward to an audience and tell the story of storytelling; practicing what we preach, so to speak.
Here are some of the questions we are putting forward:
- How and why are presentations different from one-on-one interactions?
- Can mobile technology help tell stories better than the Powerpoint metaphors?
- Is motion and interaction effective, and if so how can it be choreographed and directed?
- Does “camera position” affect the focal point of a story? In other words, should the presenter think of the camera as a character in the story?
- Can presentations be built more quickly and can the presenter obtain confidence without rehearsal?
- What are some of the constraints of venue and legacy AV equipment that perpetuate ancient dogma? How can the presenter eliminate or mitigate these constraints?
At a minimum, the workshop is designed to recruit and equip a new cadre (no more than 50) with a new algorithm of presentation built on rhetorical, theatrical and cinematic foundations.
We call the workshop Airshow. June 9th, 10am to 4pm, the day before WWDC, in San Francisco. Sign up here.
“So paradoxically, the opinion of those who are highly paid should be treated with suspicion while the opinion of those subject to peer review should be treated with respect. It brings to mind the difference between highly paid fortune tellers and pundits whose methods are obscure vs. poorly paid graduate students whose methods are open to all. Whose opinion is worth more?”
To read more see Horace Dediu on the bad habits of Apple analysts and why Tim Cook shouldn’t be fired – The Next Web
To anyone who has visited the current “campus”, it’s obvious that Apple has outgrown it some time ago. It’s also obvious given the increase in headcount and operational expenses over time as can be seen below:
(I added Q1 2013 estimate based on company guidance.)
One can understand why, from a practical point of view, they want to consolidate what amounts to at least twice as many people back into one place.
But there is also a more subtle reason and it has to do to a fundamental distinction:
Although Samsung and Apple are acclaimed as the leaders in profit capture for smart (and otherwise) phones, what is not lauded is how much they spend on capital equipment used in the making of these phones.
In 2012 Samsung spent around $20 billion while Apple spent about $10 billion (excluding leasehold improvements or Apple stores but including real estate).
Compare these figures with Intel at $11 billion, Google at $3.2 billion, Microsoft about $2.8 billion and Amazon $3.8 billion (including presumably new distribution centers.)
What each company spends on differs depending on its business model, but as the graph above shows it’s easy to see that there is a class of “big spenders” who spend so much that it makes it hard to imagine just what $10 billion/yr could actually buy.
To get an idea of just how big that figure is consider that
LG Electronics has acquired HP’s WebOS for an undisclosed amount. When last it changed hands WebOS was part of Palm which was purchased for $1.2 billion in 2010.
Palm has thus been effectively divided into several smaller pieces distributed as follows:
HP will own:
- Support of existing Palm users
- Palm back-end assets including source code, infrastructure and talent
- webOS patents
LG will own:
- Stewardship of the Open WebOS and Enyo open-source projects where the source code resides
- Associated talent
- WebOS websites
- License for IP related to webOS
LG announced that it plans to offer an “intuitive user experience an Internet services across a range of consumer electronics devices.” In an interview, the CTO of LG said that given the current situation with Android, LG does not plan on making smartphones running webOS but will use it in televisions and other devices such as cars, signage and appliances where there are no embedded OS’s. “We’d like to secure a software platform across all devices.”
I’ll be speaking at the Harvard Business School Technology and Operations Management Digital Seminar Series on ”The evolution of value chains in a computing markets measured in the billions of units per year.”
2013 will see two billion phones shipped into a market of over 6 billion points of network connectivity for over 4 billion consumers. In addition to phones, there will be a few hundred million more tablets and mobile computers shipped. It’s very likely that the majority of these devices will be “smart”, meaning designed to be a part of an ecosystem of software, content and services. Contrary to the common assumption that larger markets sustain more competitors, this immense and rapidly growing market has become profitable for only two device vendors. The reason is that the windows for competitive advantage are fairly narrow and although production can be ramped more quickly than ever, the resources needed are available to few. The frequency and amplitude of market flux benefits only those who can operate at scale and punishes those who can’t. Close observation of the investments of these “superpower” competitors shows an extraordinary level of capital purchases of manufacturing equipment, regardless of their nominal position in the value chain. These capital expenses have been growing in proportion to in the frequency of product launches. I present data showing a correlation between manufacturing equipment CapEx and ecosystem success and put forward a hypothesis that this relationship is causal. I also discuss the implications for ecosystems owners with regard to the processes, resources and priorities necessary to succeed in this evolved value chain.
The event is open to the public and taking place March 7th, 3:00PM to 4:30PM in the Cotting Conference Room.
Apple’s products are the envy of the world. They have been spectacularly successful and are widely imitated, if not copied. The expectation that precedes a new Apple product launch is only matched by the expectation of the replication of those products by competitors.
This cycle of product mimicry was succinctly summarized by Marc Andreessen regarding a rumored Apple TV product:
And once the television launches, everyone will scramble to copy it. ”There’s a pattern in our industry, Apple crystallizes the product, and the minute Apple crystallizes it, then everyone knows how to compete.”
This idea that the basis of competition is set by Apple and then the race is on to climb the trajectory of improvement is so well understood that it’s axiomatic: “It’s just the way things are.” Apple releases a product that defines a category or disrupts an industry and it becomes obvious what needs to be built.
But what I wonder is why there isn’t a desire to copy Apple’s product creation process. Why isn’t the catalyst for a new category or disruption put forward by another company? More precisely, why isn’t there another company which consistently re-defines categories and repeatedly, predictably even, re-defines how technology is used.
Put another way: Why is it that everyone wants to copy Apple’s products but nobody wants to copy being Apple?
Note that I don’t suggest that there isn’t a capability to copy. It may or may not be possible, but capability comes after desire and without desire there can be no capability. What I’m suggesting is that there isn’t a desire to “be like Apple”. If there were a desire, we would be seeing a massive search and debate into what makes Apple successful. Management consultants would be pounding the pavement pitching the “Apple way”. Wall Street would be sizing up companies to a standard of “Apple-ness” and rewarding those who conform and punishing those who don’t.
None of this is happening. I can think of two reasons why:
- Apple is not to be imitated because it’s not worth copying. I.e. Apple is not a successful company.
- Apple is successful but Apple cannot be copied because its success is a magical process involving sorcery.