DealsOnTheWeb Daily Deal: 8GB iPod Touch: $229 Delivered
 |
by
April 17th, 2007
"You do not lead by hitting people over the head - that's assault, not leadership."
- Dwight D. Eisenhower
On April 12th, Apple announced that Mac OS X 10.5, Leopard, will be delayed from the original "Spring 2007" ship date. Now it won't ship until October.
Considering that Apple had until June 21st (1806 UT) to ship Leopard, this is only a four month delay. In terms of OS releases, in general, this is no big deal some have said.
Well, yes it is.
It's actually a big deal because Apple had it within its power to avoid this setback. The press release gave a hint why something like this delay came to pass.
OPEX Bugaboo
Apple, despite being a large and wealthy company these days with likely more than 18,000 employees, is actually a very lean organization. And that lean configuration has been maintained, even though the demands of the iPhone, the Apple TV and Leopard would have suggested a moderate increase in staffing.
Despite all better judgment, Apple hates to ramp up to meet these kinds of expansions in the product profile. There are several reasons.
First, Apple hates to increase what's called operating expenses, "OPEX". You'll hear Tim Cook talk about this at Earnings Calls. It's a Silicon Valley obsession that as OPEX goes down, profits go up. Wall Street loves this. Investors love it. CFOs love it.
The effect is that it's virtually impossible for an Apple manager to significantly increase their staffing based on their own judgment. Instead, each year, managers are asked to figure out ways to maintain or reduce their OPEX.
As a result, when a product comes along, like the iPhone, that's based on Mac OS X, human resources remain constant while the demands of coding and QA grow and grow.
Secondly, there is a well-known industry adage that if you want to double the time it takes to finish a coding project, double the number of coders. That's not a humorous aphorism; it's been shown to be true in numerous projects from the past.
However, in this case, the Apple statement reveals more elements of the truth. It's not OS coders that were required but Quality Assurance testers. When a company wants to ship a quality OS, letting the customer be the beta tester is simply unacceptable.
So what's wrong with hiring testers? It's a boring job. Not many people are qualified to be professional, patient, ingenious code testers. It's the bane of software development.
Even so, who wouldn't want to go to work for Apple just to test the greatest OS ever developed by man? Professionals who can do the job are rare, but they're out there in Silicon Valley.
If only the managers had the hiring authority. They don't.
Leadership
There was a time when Apple was in that famous, flat, $6B Valley of Death in total sales. It seemed to go on forever. Apple was, around 2001, a niche company with a niche product line. It was fairly depressing, and everyone at Apple was waiting for millions of customers to someday wake up and realize that Mac OS X was the best OS on the planet and stampede into Apple's arms.
It didn't happen.
It didn't happen because everyone was so happy to have Apple rescued by Mr. Jobs that nothing else got done in terms of preparing for the future. It was if all would be well. Besides, Mr. Jobs has a history of being allergic to secondary managers who are powerful and capable. That ended up hurting Apple.
Then Apple got very lucky. They stumbled onto a product called the iPod that just happened to create a whole new market in which Apple could turn the tables on Microsoft. Market momentum didn't have to be overcome. Instead, good old fashioned business savvy by smart people was sufficient to trample Microsoft.
The iPod success further delayed any suspicion that solid leadership at the ordinary VP level was missing.
On the other hand, with the Macintosh, it was Game Over. There was no action Apple could take that could raise its Macintosh market share from single digits into healthy double digits. Even today, Apple suffers from cyclic sales from month to month, quarter to quarter. Up one month, down another quarter. While sales generally go up over the long term, a fabulously successful company like Apple appears to have no reasonable justification for not having continuous, sustained incremental growth in the computer market. It's a symptom of constrained resources for constrained middle management.
With the iPod, Apple has been able to supplement their income considerably and hide these effects. In 2007, they've assumed the trappings of a consumer electronics company. Consumer electronics companies, live by different standards in the market place.
While Apple Macintosh proselytes have patiently walked through the fire pit, consumer electronics customers are of a different breed. It's great that Apple has restricted choice and simplified the integration between Mac, iPod and Apple TV. But it's not so great that Apple is trying to reinvent two industries with staff that are constantly exhausted and constrained by marketing and finance groups. Product delays in CE are not well tolerated and result in defections in a fast moving market place.
Worse, in an age of partnerships, it isn't really an option to tell AT&T, sorry, the iPhone is going be late and your own investors and customers are going to raise hell. Welcome to the CE industry.
And yet, Apple's organizational structure didn't change to meet these new challenges. The assumption was that whatever worked in the past must be good for a consumer electronics company as well. In short, Apple has pretty much the same organizational structure that weathered the $6B Valley of Death during which the executive team longed for salvation.
Apple could have avoided this Leopard delay with good old fashioned management leadership. They could have allowed themselves to grow and mature a little. They could have empowered their key VPs to figure out what it would take to ship Mac OS X/Leopard on time, with excellence and exercise some authority. Unfortunately, many of Apple's key VPs aren't Lieutenant Generals. They're Lieutenant Colonels.
The Fallout
Now, Apple is going to take some serious hits from analysts, investors, and even the PC camp.
Confidence that Apple is putting the pieces into place to become a major consumer electronics giant is being shaken.
PC customers who may have been tempted to move to Leopard, touted as the salvation of the PC customer, will now start to get the idea that all modern OSes suffer from these symptoms.
No good can come from Apple's failure to plan ahead, ramp up, and allocate its money and resources more vigorously.
Climbing out of the Valley
Alas, Apple's psychology and operating style is trapped in the $6B Valley of Death syndrome and not moving into a 21st century consumer electronics company that's poised to move from $25B to, perhaps, $40B in just a few years.
To get there in good shape, Apple will have to spend some money on something besides a half billion dollar new campus, forget the ghosts of the Michael Spindler and Gil Amelio eras, empower their VPs, and let their VPs become responsible for their own products, staff and OPEX.
Every individual has his management limits based on skills, temperament, and experience. Any guy or gal can start a home business and manage $250K a year. When the business grows to $1M, outside expertise is often required. A manager who can run a $10M private company is out of his league as the CEO of a publicly held $100M company. And so on, up the scale.
In a few years, Apple could be easily six times bigger than it was in 2000. It's high time for the kinds of people, organization and authority that is calibrated to that size consumer electronics company.
Let me put it more bluntly.
Leopard will be late. It's stuck in the Valley of Death. It's going to require some cast-iron, sonofabitch, take-no-prisoner "Generals" on the product teams with power and authority to make sure this kind of failure doesn't happen again.
If Mr. Jobs will allow it.
John Martellaro is a senior scientist and author. A former U.S. Air Force officer,he has worked for NASA, White Sands Missile Range, Lockheed Martin Astronautics, the Oak Ridge National Laboratory and Apple Computer. During his five years at Apple, he worked as a Senior Marketing Manager for science and technology, Federal Account Executive, and High Performance Computing Manager. His interests include alpine skiing, SciFi, astronomy, and Perl. John lives in Denver, Colorado.
Hidden Dimensions Archives.
Observer Comments
but there are two sides to the coin, and as an investor, I'm glad I don't take this grim view.
Is it a snag? Yes. Is it "life threatening" for Apple? Heck no. A 4 month delay for what is actually a very SMALL company at 18,000 (compared to Apple's rivals that number in the 100s of thousands), this isn't that big. In fact, Apple still is a niche player. Probably THE niche player as it goes. It does try to be all things to all people, yet doing so on a lean budget and OPEX.
Apple doesn't have to aspire to greatness, it's already there in terms of products. It will have to continue to grow some in personnel it expects to keep up with the demand for products.
Talk about a bad growing pain? Awe, darn!
While this article provides some valuable insight, I think it makes assumptions that do not necessarily apply to the case at hand. First, it assumes that because Apple could not meet its schedule that the reason was that not enough staff was hired to perform quality control.
That is a very big assumption. The case could be that Apple effectively planned the utilization of its resources, however, something occured that was not planned. For instance, my theory is this: Apple did not plan to announce the iPhone at Mac World. If correct, a lot of things makes sense and follows from this.
The evidence: First, Apple like never before was hit with rumor sites, analyists, and respected publications, like the Wall Street Journal, acting as if it was a sure thing that the iPhone would be announced at the January show. If Apple hadn't released something, Apple's stock, which built up for the expectation, was going to take a big hit. Think what you want, but Apple, like all companies, want to protect their stock price. Especially at a time when the company is being investigated by the SEC. Second, Apple's pre-announcing the iPhone was highly out of character for Apple. The reason Apple stated does not make sense: namely it pre announced because of its upcoming FCC filing. Fact is, companies like Apple can and do have various means at there disposal to hide their names for such filings. Third, when Apple announced, Cisco was very surprised that Apple abruptly ended what up until that point had been harmonious negotiations. Why would Apple suddenly do this, when Cisco and Apple quickly worked out a deal after Apple pissed Cisco off. Certainly, it could have worked out a similar, or even better deal before announcing. Fourth, contrary to Apple's claim that the iPhone was largely completed, most reviewers noted that the OS still needed work and Apple closely supervised the reviewer's time with the iPhone.
Assuming, Apple unexpectedly pre-announced the iPhone because of market pressure, or some other unthought of reason, Apple would have had to suddenly shift resources from Leopard to the iPhone because the same engineers would be creating the development of the OS on both products. Apple now would be under tight time constraints because it had two pre-announced products when it only originally planned to publically announced a shipping time frame for Leopard. Now that APple announced both products, Apple understands that the market would forgive Leopard being late, but not the iPhone. It is also possible that engineers thought when both products were announced that the deadlines could be met.
If Apple pre-announced unexpectedly, or under advice from the engineers, poor staffing management is not the issue. For instance, when I plan to go to work, I usually leave myself an extra twenty minutes to account for unexpected delays. If my vehicle was suddenly hit by another car, and I thus became unable to make it to work on time despite my responsible time management, you would not say I managed my time poorly. Similarly, if Apple faced a signifcant enough unexpectancy, poor staffing mangement would not be to blame.
Keep in mind, Apple likely would have had the proper staffing to meet its needs if it did not pre-announce the iPhone because it could have limited resources on the development of the iPhone's OS and pushed back the internal ship date since it would have been an unannounced product.
Tue Apr 17, 2007 9:16 am Subject: Surprising analysis - That was me
Sorry, didn't realize I wasn't logged in and I don't like to post anonymous.
One additional comment to point 2 is that I think a lot of the community complaining about this is we like our new shiney Apple toys. So anytime one gets pushed out that we already know about, we complain. But again, put that in perspective.
-Mobi
So Apple's problem is that they need more empowered management leadership? That's very specific. Very insightful. I assume the shortage of talent in Northern CA was taken into account here? As others have pointed out, this is all just assumptions based on opinions which are obviously based on limited information.
I agree with the Guest who talked about keeping tight control over hiring. Your comment about doubling release times if you double your engineers typically results from hiring a bunch of idiots. The key is to take your time and only hire talented individuals. This shows that quality (both of your products and your organization are a priority). I appreciate those who take that approach. Beware the types that would hire anyone just to say they met their staffing requirements. Beware the types that would push crap to market before its ready just so they can say they met their target date.
I guess what I am trying to say is that MY opinion is that this shows Steve is still in control and willing to do what it takes to strike a balance between AAPL's business goals and keeping quality as a top priority. In other words, the Leopard delay shows the STRENGTH of Apple's leadership. But this isn't based on any inside knowledge of Apple, so take it with a grain of salt.
....With the title. Some of the assumptions in the article are debatable and highly opinionated. But if you simplify the whole situation, it boils down to:
"The dog ate my homework."
Apple didn't start working on the iPhone in January... they have been working on it for over 2 years (Steve claimed when he announced the product). Leopard has been in the works for likely just as long. How is it NOT a leadership failure to get products released on time? Isn't that what leadership is all about? They knew what they were up against, even if the rest of the world was in the dark about the iPhone until January.
I don't think the sky is falling, but blowing a product release date by that far is a pretty big deal in just about any company, and it is a sign of poor planning IMO.
Tue Apr 17, 2007 11:22 am Subject: Incisive Analysis - Well Done
As a close follower of Apple news and views, I have not read an article this interesting or telling of Apple in years. I read up on things Apple daily.
Remember folks this is only an indication of what Apple has come clean on in terms of what has fallen off their plate.
They are behind in almost all of their major computer product cycles. Pro laptops and towers are all seriously overdue for a product refresh. Pro laptops should have received a form factor refresh last year and now the towers are overdue. Apple didn't come clean on this one but the community silently and collectively has cut them slack. Apple's banked a lot of karma over the past decade but they are spending it wildly right now. John Martellaro's article here is the first I have seen that gets right at the core of the matter. Superb analysis John. Be prepared for the kind of vitriol that is reserved for John C. Dvorak. Jobs is probably pounding his desk right now maniacally yelling "Fire that bugger, FIRE HIM!!"
Tue Apr 17, 2007 11:45 am Subject: I tend to agree with the article
Especially since John has worked at Apple and does have some insider insight of the company. Add the well known fact that Steve J does drive his employees hard to make the best they can, has a reputation of being a very tough negotiator and the article makes sense.
It is time, I believe, for Steve J to start moving the company to where he can be successful when he is no longer around - I doubt if he will work until he's 80. While I know that Apple can't rapidly increase the size of their engineering and software divisions I would like to see the VPs being allowed to hire exceptional people when they become available, which would require considering OPEX only as a percentage of revenue and not a specific dollar amount.
On the iPhone side, Apple has a huge contractual commitment with ATT and that has to take priority over Leopard. Since the iPhone is the first major product where Apple doesn't control the whole widget I wouldn't be surprised if part of the problem might be on the ATT side, with Apple needing to make some rapid responses to make everything work.
As for the January announcement of the iPhone - I believe it one of the smartest things Apple has done. Unlike the iPod, someone wanting the iPhone will need to be "out of contract" with their current carrier. For people on a 2 year contract that 6 month pre-announcement allows 25% to move to a month-to-month basis so they can buy an iPhone when it comes out. Double that percentage for those on a one year contract. retailers call this Open to Buy and it is a new and critical factor for Apple to address.
The iPhone commitment makes Leopard a secondary priority until the iPhone release. Not a great situation, but unavoidable for now. I have no doubts that Leopard will ship in October, even if a Secret feature or two is withheld until later.
John's talking about the whole widget. The article targets the *why* behind the delay, not the implications of the delay. I agree that any delay is bad for business (even if the ultimate effect is not so bad) because of the underlying perception. Just look at the stock price languishing to see perception turned into tangible reality. Future delays can be reduced or eliminated by analyzing this particular delay, and addressing the underlying *why*. In this case, it's what we call "span of control" in the military. Apple is covering a $25b business with a $6b span of control leadership structure.
Tue Apr 17, 2007 12:04 pm Subject: Hiring more coders, Making hard decisions
QuoteBiff wrote:
I agree with the Guest who talked about keeping tight control over hiring. Your comment about doubling release times if you double your engineers typically results from hiring a bunch of idiots. The key is to take your time and only hire talented individuals.
Not really. The effect in software engineering (and many other projects) is well-known. If you hire more coders/software engineers, no matter how good they are, the engineers who were already working on the project will have to spend time helping bring the new people up to speed, decreasing the time they have to spend working on the project. More people also means more time spent in communication, in general. Even hiring new people takes time away from the project for managers who have to interview and choose employees, who then may not start to work for weeks. Also, the new people will be less productive to start with, so the cost and manhours spent on the project will increase.
So, John is correct in that regard. However, I suspect that the same principle applies to QA and testing as to coding, as it has little to do with specific skills or tasks. The principle, while discovered in software engineering, applies to any development and testing project. It also applies, though to a lesser degree, to manufacturing, though the limitations there can also be equipment and facilities.
Biff's overall point was quite good, nevertheless.
Quotebrett_x wrote:
I don't think the sky is falling, but blowing a product release date by that far is a pretty big deal in just about any company, and it is a sign of poor planning IMO.
First, you don't know that. As others have said, John's article is based on speculation. Neither he nor any of us knows what really goes on in Apple--nor in most corporations, for that matter.
Second, it is impossible to plan for every possible factor. If one tried to do that, nothing would ever get done. There are always significant unknowns, including, to paraphrase Rumsfeld (a great example of incompetent leadership), the unknowns you don't know about.
Leadership is not tested when things are going according to plan but when something goes wrong. That's when the difficult decisions have to be made. If Apple was faced with problems, someone had to decide where to put limited resources (which cannot be increased quickly). Apple decided to concentrate on the iPhone, perhaps for the reasons that others have explained well. (This is also probably one reason that Apple is so loathe to announce products until they are ready to ship. The Apple TV was delayed--why, we don't know for sure, perhaps because of manufacturing delays outside of Apple's control, but it is a lesser product compared to the iPhone.