What Makes Apple Different?

One of the most remarkable things about Apple's (Nasdaq: AAPL  ) rise to greatness has been the relatively small number of people who have driven its success. Steve Jobs was obviously the mastermind, but those directly beneath him hold an unusual amount of control over product design.

The secrecy-laden process Apple uses is one of the things responsible for its success and also what makes it so unique in the product world.

A peak inside the beast
The process of how a company innovates is often just as important as what a company innovates. The process allows innovation to take place year to year, generation to generation. In most companies, the ideas, innovations, and inventions come from within the organization, especially after they reach a size where executives are less hands-on in day-to-day lab work.

For instance, at 3M (NYSE: MMM  ) , where I worked as an engineer in all levels of the lab, the process for innovation came from the ground up. An idea came from the lab or marketing, and if it was technically feasible, prototypes were made and it was discussed among multiple groups to develop an idea of market size, project budget, timeline, etc. Once these things were defined, it could be brought before a director or vice president for approval to move forward. This is the same way Google (Nasdaq: GOOG  ) has developed products including Gmail, Google Maps, and Android.

In my experience, (good) ideas didn't come from the top down, and we spent more time fighting to keep promising projects alive than getting help to make them better. Look up any history of the Post-It Note and you'll see that management tried to kill the project multiple times.

Apple is completely opposite, and very unique, in its approach. Low-level workers rarely know the details of the products they're working on until after they're released. The trade secrets and innovation happen at higher levels, all the way up to the CEO.

The level of secrecy at Apple impacts how things are done. At 3M, if I had a problem, I could go talk to another group about it and find a solution. As Fortune recently pointed out, when Apple employees are outside of work, discussing work is discouraged.

The impact
This innovation process allows those in charge at Apple to view the whole picture when developing products. The App Store was developed alongside the iPhone, features from the iOS operating system can migrate to Mac, and the iCloud can work across Apple's products. This would be much harder to do without the stringent controls that push information up to the highest levels.

As a result, Apple can line up critical partners before products are finished, shortening launch times and ensuring that critical services will be available at launch. In a bottom-up product development, the product would come first and things like third-party apps, wireless partners, and even integrated apps would come after most of the development was done.

With the iPhone, Apple was able to sign a lucrative contract with AT&T (NYSE: T  ) before it even showed AT&T a product, giving an unknown product legitimacy from one of the largest wireless carriers. Netflix and The New York Times both had applications at the launch of the iPad, giving it a launching point when some were skeptical it could be a success.

Apple's product development process also ensures a level of consistency and quality across products. But what works for Apple won't necessarily translate to other companies. For a company like 3M, which has tens of thousands of products, the same consistency is impossible.

Meanwhile, Apple makes only a handful of products, even after all of its expansion. So a small number of people can have the bandwidth to be involved with design and building a strategic plan. If Apple made more products, the same level of involvement wouldn't be possible.

The danger
While wildly successful over the past decade, the danger for Apple is that too much power and intellectual property reside in a few people at the top of the organization. Steve Jobs was known to tinker over everything from color to the type of screw used in products, and that worked when he had control of everything Apple did. Tim Cook is a different personality; he's a supply chain expert, not an innovative designer. That responsibility now falls to Jonathan Ive, Scott Forstall, Eddy Cue, and the whole management team.

How Apple handles the transition of responsibility will determine its success.

For more companies that will win from Apple's success, check out our free report, "3 Hidden Winners of the iPhone, iPad, and Android Revolution." The report is free while it lasts, so click here to check it out.

Fool contributor Travis Hoium manages an account that owns shares of Apple, Intel, and Microsoft. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google, 3M, Apple, and Netflix, as well as creating a bull call spread position in Apple and a diagonal call position in 3M. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On March 07, 2012, at 3:15 PM, jdwelch62 wrote:

    And that's why I've only got a 3 year thumbs up CAPS call on AAPL! I think Jobs had the foresight to leave at least 2 to 3 years worth of ideas in the pipeline, but after that... We'll have to see if Apple continues to innovate on their own... :-)

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