Making Big Bets and Controlling Risk - How Apple Succeeds

I get to hang out with some of the most talented, committed people around, and together we get to play in this sandbox and build these cool products. Apple is an incredibly collaborative company. You know how many committees we have at Apple? Zero. We’re structured like a start-up. We’re the biggest start-up on the planet. And we all meet once a week to discuss our business. - Steve Jobs D8 Conference June 1, 2010

Success in Silicon Valley results from placing the right bet at the right time. When analyzing the competitive landscape, knowing who is capable of making big bets is crucial.

Apple is among a select group of firms capable of placing bets big enough to change the world.  How?  Apple’s corporate structure helps to control risk. 

Apple’s start-up mentality begins with a small number of shallow groups - all leading back to one central visionary. There is no confusion what Apple’s groups are: Mac, iPod, iPhone, iPad, iTunes. Everything else comes second and can be folded into one of those categories (don’t forget about R&D and Steve’s “special projects” either).

Apple relies on resource prioritization. Upper management may spend most of their time working on iPhone in the weeks leading up to the annual iPhone announcement, only to shift to Mac in the weeks leading to the annual Fall Mac announcement. Meanwhile, support staff designated to each individual product are busy year-round preparing for future product revisions, all the while guided by strict deadlines. It is for this reason that Apple is quick to kill product lines based on old technology and other unsuccessful ventures. All resources are geared to the future.  

This structure lets the decision makers (upper management) come in contact with everything that is shipped to the consumer (Macs, iPhones, iPads, etc) and more importantly everyone who is in charge of the product (designers, engineers, marketers, etc). Ideas are not bounced off of committees. Finished products are not required to get a certain number of approvals. Decisions are made at the top quickly and decisively. 

How does this corporate structure relate to placing big bets?

Apple is able to translate a big idea (big bet) into reality with very little friction and inefficiency. The biggest risk enters the equation on the demand side - whether consumers want the product.  All other variables (risk factors) are controlled by Apple’s corporate structure - the supply chain is ready to go, designers have run their ideas by upper management, engineers have been given their tasks and deadlines, and marketers know the message to send. The machine remains well-oiled and ready to go.  

Most importantly, this machine can be turned on by the main operator (Steve Jobs) one day and be turned off the next, with little impact on any other product.

Steve Jobs makes bets. Big ones. The iPod was a huge bet. Back in 2001, people had big money invested in CDs and iTunes was still a few years away. Apple took another huge risk with iPad. Would consumers and third-party developers be interested in a tablet form factor? How would iPad cannibalize MacBooks?

Apple needs to take risks to control where technology is heading.  As long as most of the risk variables are monitored and marginalized to a certain extent by upper management (and Steve Jobs) -the consumer is left as the biggest risk. Apple can then rely on its brand power to turn the odds in their favor.