What is Apple University and Why More Companies Should Follow Suit?
In early 2014, Fortune/ CNN Money declared Apple as the world's most admired company in their top 50 list in early 2014. In Mar 2014, Brand Finance declared Apple the most valuable billion dollar brand in the world. Apple is also currently the world's top company in terms of market valuation. Under CEO Tim Cook, the company has been enjoying record sales in mobile device categories. While those who knew him would say that now deceased Apple co-founder Steve Jobs was not big on things like succession planning, some would say that Cook's feat would not be possible without a succession plan -- one which analysts and ex-insiders say included a number of product ideas. The plan also included an internal educational initiative -- known as Apple University -- reputedly to enable the company executives to learn to function like him after his passing. (Jobs passed away in Oct 2011.)
Apple Inc: Facts and Figures
What little is known of Apple University comes mostly from journalist interviews with former Apple employees, analysts and others in the know. First, some stats on Apple:
• As of Feb 2014, Apple had the highest market valuation of any company worldwide. Fighting for 2nd place were Google and Exxon Mobil, with Microsoft in 4th. The company was 2nd in the world in valuation in 2011 -- the year Steve Jobs passed away.
• For Apple's FY2013 (Fiscal Year 2013), ending Sep 28, 2013, total gross revenue was a record $170.9B. This is a 9.18% increase over FY2012 revenue ($156.53B), a nearly 58% (57.88%) increase over FY2011 revenue ($108.25B), and a nearly 163% (162.9%) increase over FY2010 revenue (~$65B).
• As of the end of Oct 2013, Apple had just over $146B ($146.8B) in cash and marketable securities.
• The record revenues for FY2013 include record sales of iPhones and iPads.
• 150M iPhones sold, an increase of 25M from FY2013, and bringing total unit sales to 421.3M phones.
• 71M iPads sold -- another record -- for a total of 169.2M iPads since the first release in 2010.
• In the Fiscal Q4 2013, 69% of net revenue was from iPhone (52%) and iPad (17%) sales. If iPod net revenue of 2% is added, then Apple made 71% of net revenue for that quarter from mobile devices.
• Apple has over 80K (80.3K) employees worldwide (as of Oct 2013), including retail operations, which employ about 42.8K employees.
These sales figures have translated into a number of top rankings in various media outlet lists. In Mar 2014, Brand Finance declared Apple the most valuable billion dollar brand in the world. (Their methodology estimates what a company would pay for licensing its own brand.)
• Apple's value for 2014 was about $104.7B, an increase from the approximate value of $87.3B in 2013.
• The 2nd-5th place brands all had a valuation of over $50B but below $100B.
• 2nd: Samsung Group -- $78.8B in 2014, $58.8B in 2013.
• 3rd: Google -- $68.6B (2014), $52.1B (2013).
• 4th: Microsoft -- $62.8B (2014), $45.5B (2013).
• 5th: Verizon -- $53.5B (2014), $30.7B (2013).
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What Made Steve Jobs and Apple Stand Out?
What is it that made this man the tech visionary many declared him to be? What was it that he did that turned Apple from the crumbling wreck it once was, upon his return to the company in 1997, into the now number one company in the world in terms of market valuation? That is part of the focus of a secretive internal program at Apple known as Apple University. "Steve Jobs ran one of the greatest theater companies on earth." -- Robert Bruce, Copyblogger.com Indeed. What made Steve Jobs, co-founder of Apple, arguably brilliant was that he was unconventional as far as running a tech company, and he was a top-notch showman. Aside from the products, this is possibly one of many reasons why Apple fans are so passionate about the company.
Here are some characteristics and practices that define Apple, thanks to Jobs' leadership:
• Quality first before quantity -- a mantra that current CEO Tim Cook echoes frequently.
• Create something different -- One could argue that there were music players before the iPod, phones before the iPhone and tablets before the iPad. However, Apple entirely re-invented these categories. Before their collective appearances, there was nothing like the iPod, iPhone or iPad in the way that they function, and their mobile app ecosystem.
• One executive with work experience at both Apple and Microsoft compared the two companies: "Microsoft tries to find pockets of unrealized revenue and then figures out what to make. Apple is just the opposite: it thinks of great products, then sells them. Prototypes and demos always come before spreadsheets."
• Create anticipation -- As per the aforementioned theatrics, Jobs created demand in consumers with his showmanship. Apple's marketing engine made consumers anticipate the next product lines and updates. From an operations and marketing standpoint, this means not only forecasting demand, but also not announcing products too soon, before they're ready to be delivered. For example, when Palm announced a new PDA device in 2001 and did not deliver, they effectively ruined a whole quarter of sales since consumers held off on purchases.
• Involve everyone (as appropriate) -- Design and feel of a product is shared across the company .
• Make everyone responsible -- One lesson that Jobs gives to all a new VP is what journalist Adam Lashinsky (author of the book "Inside Apple") called the "Difference Between the Janitor and the Vice President." The gist is that Jobs points out that a janitor can have excuses for not accomplishing something. The VP, on the other hand, can have no excuses.
• Jobs established a culture of taking responsibility via multiple weekly meetings: Mondays with the executive management, to "review the whole business"; Wednesdays with marketing and communications. "We don't have a lot of process at Apple, but that's one of the few things we do just to all stay on the same page."
• Internal lingo includes a term, DRI -- which stands for directly responsible individual. Everyone knows who the DRI is for a given agenda in a meeting.
• Organizational simplicity -- Apple keeps their organizational structure simple, and there are no committees. "[The] concept of general management is frowned upon." However, there is a "Top 100" group that meets yearly and whose roster changes. This group influences the direction of the company for the next fiscal year.
• Focused roles -- Only the CFO (Chief Financial Officer) has the responsibility of P&L (profits and losses) -- something that is different than most companies, who put that responsibility on many managers. Most companies the size of Apple have no history of nor ability to focus on an objective -- especially one of longer duration.
• Apple leans to specialization of roles. For example, the person in charge of Apple's online store does not control which photographs and images are used on the Web site. The retail store head does not control the inventory.
• Jobs reasoning for this specialization is "a process of having best-in-class employees in every role." Managers are not created at Apple just to have managers.
• Focused divisions and teams -- Jobs has implied that Sony has too many divisions, that would not have successfully created the iPod (an Apple product). One Apple strength is that the company can focus on a few products and initiatives when necessary -- a feat for a company so large.
• According to one observer at Apple, "It's not synergy that makes it work. Its that we're a unified team." This approach allows Apple to change it's direction quickly. "Constant course correction," said a former Apple exec about the approach. For example, Apple management has changed pricing structure in as little as 2 days before a product launch.
• Be fresh, relevant, adaptable -- Despite its size, Apple behaved like a startup under Jobs. For example the iPad version of the Safari Web browser was converted from the Mac version by just two engineers. Whether this trait in particular can be maintained is to be see. Former insiders suggest this is starting to change since the passing of Jobs.
• Invest when necessary -- Jobs had, and Apple has, a do-more-with-less mindset, despite that they have had substantial cash reserves (in the multi-billions of dollars) for some years. Charging high prices or reducing manufacturing costs are usually the keys to profit margins. Apple is known to do both.
• Cost-cutting is also balanced with paying money when necessary. For the iPod Nano (released 2005), Apple prepaid Samsung and other suppliers around $1.25B to buy up a specific memory chip. This thanks to Tim Cook as COO, and Jeff Williams reporting to him.
Steve Jobs is said to have been a controlling personality, had a minimalist design aesthetic, and been a perfectionist. Those are only some components of what arguably made Apple so successful. Glimpsing his mortality in light of his long-term illness, Jobs set about creating Apple University -- a learning program for executives that could teach his approach, should he pass away. Jobs had been running Apple like a startup, which allowed him to apply his management philosophy on every aspect of the company. His timing for Apple University was right, as executives and engineers, both, were starting to leave for other opportunities. He wanted a program where remaining Apple executives could learn to think like him. Yale professor Jeffrey Sonnenfeld says that creating "instant Steve Jobs" will not be an easy task. "The essence of genius is that it's a misfit quality. Misfits don't fit well into institutionalized assembly lines." Apple University's details have kept mostly under wraps for the past several years, but its purpose includes the imparting of the lessons that Jobs learned along three stages of Apple: its founding, his loss of the company, and his return in 1997 to revive Apple.
Here's what we know so far about Apple University:
• Apple analyst Tim Bajarin: "One of the things that Steve Jobs understood very well is that Apple is like no other company on the planet. It became pretty clear that Apple needed a set of educational materials so that Apple employees could learn to think and make decisions as if they were Steve Jobs."
• The tenets that Jobs feels are important for innovation and sustained success include "accountability, attention to detail, perfectionism, simplicity, and secrecy."
• The Apple University program kicked off in 2008, with Steve Jobs hiring Joel Podolny, former dean of Yale University's School of Management -- after Jobs' second medical leave. Podolny has also taught at Harvard and Stanford.
• Active courses are said to have started in 2009.
• Jobs was involved in creating the curriculum.
• Over time, Podolny hired a number of other academics.
• Once such was Richard Tedlow, a business historian at Harvard, who started as a consultant writing internal case studies about Apple's important decisions, to be used as part of the curriculum.
• Tedlow joined Apple full-time in 2011, leaving behind 23 years at Harvard.
• Morten T. Hansen, from UC Berkeley's School of Information, joined Apple University in Jan 2013, making for the third academic to join since the founding of the internal program. Hansen will continue to teach one course per semester at Berkeley. At Apple, all he would admit to doing, in an interview with a Norwegian newspaper, is giving "seminars and advice." He also indicated that there were many talented people at Apple, many of whom contributed to running the company.
• Hansen estimated that about 800 of the 70K employees (as of Jan 2013) were in leadership positions or slated for that role.
• Lecturers for Apple University have included Tim Cook and Ron Johnson, as well other highly-placed executives.
• The curriculum is mostly secret, although one course is "What Makes Apple Apple."
• Case studies include the decline of former top grocery chain A&P, and the reason why Apple consolidated manufacturing into one Chinese factory.
• The actual inspiration for Apple University is taken from the founders of HP -- Bill Hewlett and David Packard -- and their "The HP Way" core values. Jobs worked there as a summer intern in eighth grade, around 12 years of age, and was later offered a job by Bill Hewlett.
Apple also has a number of other education-related programs, under their Learning & Development organization. This includes iTunes U -- where schools can publish lecture material -- and a number of hardware and software certification programs, as well as free workshops and classes at Apple Stores.
Why Other Companies Should Follow Suit
Apple is not the first company to have a corporate campus. Pixar, another company founded by Jobs (and sold in 2006 for $7.5B to Disney), has its own Pixar University. Much further back in time, GE (General Electric) had a corporate campus. IBM is well-known for encouraging learning amongst employees, as are other large companies. Why have a corporate campus for employees? The primary reason is talent retention. Apple has lost engineers and a number of top executives -- many of whom worked directly with Steve Jobs. For example, Danielle Lambert, former VP HR, resigned in late 2008, just after Podolny's arrival. Lambert's husband, Tony Fadell, SVP iPod and Special Projects, also left and later started up Nest home automation, which Google bought in Jan 2014 for $3.2B.
• Employee turnover is costly, from the outgoing process to the advertising of openings and the hiring of replacements.
• When employees leave, that can impact projects, which could further affect the bottom line.
• The Hay Group predicts that 2014-2018 will see a spike in employee turnover globally, due to the improving economy.
• They expect that employee turnover will rise from to as high as 25% by 2018 in some regions of the world.
• Expectations are that over 160M (161.7M) employees will leave their employer in 2014, rising to 192M in 2018.
• Some industries have a very high turnover rate. It's been estimated that in Silicon Valley, for example, most software engineers stick around in a company for 1-2 years.
Having a high quality educational program can be a strong incentive to stay longer -- if managed properly. While Apple is an arguably unique company, and most of the details of Apple University are kept secret -- possibly even within the company -- other companies can benefit by instituting similar programs. Incentive could be increased through gamification, including internal awards, stock, cash prizes and promotions, depending on the level of achievement.
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