Lessons From Apple On Making Perfect Products

Apple, the world’s most valuable publicly traded company, is also the World’s Most Admired Company for the tenth consecutive year, as Fortuneannounced yesterday. This is not exactly a surprise, even if it does seem unfair—like one kid being the richest, smartest, and best-looking in high school. But it raises an important, obvious question: What useful lessons can the rest of us learn from Apple? “Hire Steve Jobs as CEO” is a valid lesson but not useful. Nonetheless, much of Apple’s success derives from three highly unusual management policies that are available to any company:

-Apple has only one P&L. Think of it – $216 billion of revenue last year, No. 3 on the Fortune 500, yet just one bottom line in the whole vast enterprise. You can immediately see how this policy simplifies decision-making, focuses effort, and diminishes turf battles (though nothing can eliminate them). In any big organization the temptations to establish multiple P&Ls are powerful. Ambitious managers like it, incentivizing those managers is easier, and resource allocation can also be easier, or at least it can appear to be. But Apple decided long ago that the benefits aren’t worth the costs. The results are hard to argue with. A related, rare trait is that…

-Apple still has a remarkably small product line. It has long been observed that every model of every product Apple makes would fit on a conference room table. While the table is getting bigger, it’s still astounding that a product-based company can achieve such scale with so few items. Why aren’t most companies so tightly focused? I suspect it’s because estimating the benefits of broadening the product line is easier than estimating the benefits of concentrating enormous time and energy on a few products. Most managers are more comfortable making a decision based on numbers than making a judgment call. This can be a classic error. As Warren Buffett says, “It’s better to be approximately right than precisely wrong.” While growth requires new products, CEO Tim Cook has largely maintained the courage to be approximately right.

-Apple develops products in an unusual way. Jobs called the process “integration.” The idea is simple: Bring together the people who create the various elements of the customer experience – hardware, software, interfaces, online experience, even packaging – and assign one person, the integrator, to oversee development of them all so they combine into one knockout complete experience. Sounds obvious, but most companies don’t do it that way. They typically bring together cost managers, revenue managers, and P&L managers, not experience creators. Decisions are often made sequentially, not simultaneously. The result is always sub-optimal. As Jobs said, with characteristic immodesty, “Integration is the only way I could create perfect products.”

Emulating these practices may not be easy, especially in big, old organizations. But it’s possible. It doesn’t demand the ineffable genius of a visionary founder. Your outfit may never become the World’s Most Admired (though who knows?), but it can learn from Apple how to move in that direction.

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