Lessons From Apple On Making Perfect Products

February 17, 2017, 3:20 PM UTC

Apple, the world’s most valuable publicly traded company, is also the World’s Most Admired Company for the tenth consecutive year, as Fortune announced 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.

You can share Power Sheet with friends and followers here.

What We're Reading Today

Samsung heir arrested on bribery charges
South Korean officials ordered the arrest of Jay Lee after an investigation into payments made to a confidant of impeached President Park Geun-hye. Samsung and Lee deny any wrongdoing. The arrest isn't expected to impact Samsung in the short-term, but could hinder its long-term planning. Lee's mentor and Samsung Electronics vice chairman Choi Gee-sung is expected to take a leading role after the arrest. Fortune

Theranos is low on cash
By the end of 2016, the embattled blood testing company had about $200 million on hand, which is less than a quarter of what Elizabeth Holmes's company raised. The company also said in a recent conference call with investors that it hasn't set any money aside for a number of pending lawsuits it faces.  WSJ

Zuckerberg publishes letter decrying isolationism 
The manifesto posted by Mark Zuckerberg says "Progress now requires humanity coming together not just as cities or nations, but also as a global community." And at the heart of this effort, he sees Facebook as a way to bring the community together. While the manifesto was light on specifics on how this would be achieved, it's counter to what many critics claimed about Facebook following the election, which they say prevents people of different minds from interacting. USA Today

Jared Kushner complains about CNN coverage...
....to a Time Warner executive. In the meeting with executive vice-president of corporate marketing and communications Gary Ginsberg, Kushner specifically mentioned certain CNN personalities, like Van Jones and Ana Navarro and said that the critical coverage of the Trump administration isn't fair. Time Warner is the parent company of CNN. New York Magazine

Building Better Leaders

People who are happier in the office...
...are often exploited by other employees, according to new research. Many see outwardly open happy people as a sign of ignorance, which could send the wrong message to customers or your boss. Knowledge@Wharton

Strong leaders aren't afraid...
...to praise others in public. Alex Charfen, CEO of his business consultancy firm, includes in every daily meeting the question "who got caught being awesome?" to give employees a chance for public acknowledgement. Fortune

In order to build resiliency...
…focus on all your possibilities. Those that are resilient see many different options to fix the current situation that they're in. SmartBrief

Administration Statements

Trump claims he "inherited a mess"
In a confusing, confrontational and sprawling news conference, in which Donald Trump mentioned Hillary Clinton 12 times, the president claimed he "inherited a mess." While that's up for debate, he followed the claim with the stance that his administration was running smoothly. This is counter to reports of infighting, fake statements and leaks coming from his inner circle. Washington Post

National security advisor pick turns down the job
Vice Admiral Robert Harward said he would not become Trump's national security advisor, citing family reasons. Harward was Trump's initial pick to replace Michael Flynn. Fortune

EPA employees have been calling Senators...
...to convince them to reject Trump's secretary nominee Scott Pruitt. The Attorney General for Oklahoma has sued the EPA on several occasions, leading many employees to fear that Pruitt will destroy their work. It's an unusual act of defiance by agency employees, but Pruitt is expected to clear confirmation today. The Hill

Up or Out

The White House is expected to name Crossroads Media founder Mike Dubke its Communications Director. CNN

Fortune Reads and Videos

Kraft-Heinz says Unilever rejected merger proposal
The $143 billion offer would make it one of the biggest deals ever. Kraft-Heinz hopes to keep line of communications open to forge an agreement.  Fortune

Florida man tries to sink Target's stock...
...by planning  to set off explosives in several East Coast locations, according to a criminal complaint. Fortune 

Grocery stores encouraged to get rid of "sell by" dates on food
It adds confusion, says food groups, which are encouraging stores to only use "Best If Used By" or "Use By." Fortune

Amazon looks to parachute packages down from flying drones
The company filed a patent for a system that would allow the package to float down after being released by the drone. Amazon says it takes too long for the drone to land and take off. Fortune

Happy Birthday

Michael Jordan, former basketball player and owner of the NBA's Charlotte Hornets, turns 54 today. Biography

NFL Commissioner Roger Goodell turns 57 on Sunday. Biography

GE CEO Jeff Immelt turns 61 on Sunday. CNNMoney

Produced by Ryan Derousseau

Share Today's Power Sheet: 

Read More

Great ResignationDiversity and InclusionCompensationCEO DailyCFO DailyModern Board