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Unit 7: Organising

Notes
With Jobs ensconced in the Macintosh division, the reorganisation seemed to work at first.
Jobs devoted his attention to the further development of the Macintosh, which was not
selling quite as well as had been expected. Meanwhile, the Apple II division turned in a
record sales performance with the less sophisticated, but highly profitable, Apple IIe.
Unfortunately, trouble began to develop. The Mac division employees, touted by Jobs as
being superstars, viewed themselves as the Apple elite, since they were developing the
new technology. Indicative of these feelings, a pirates' flag flew over the building in
which the Macintosh division was housed. Morale in the Apple II division was not helped
when Jobs addressed the Apple II marketing staff as members of the "dull and boring
product division." However, with the largest block of stock (11.3 percent) and the job of
chairman, Jobs was an unusually powerful general manager.
Troubles accelerated when sales of personal computers began to slump nationally; the
Mac, in particular, continued to sell less well than anticipated. The situation was exacerbated
by the fact that the Mac division chronically missed deadlines for the development of
crucial parts of the Mac system. Pushed by the board of directors to take greater control,
Sculley finally proposed a new organisation structure that would, in effect, eliminate the
Mac division and with it the general manager position held by Jobs. The proposal (which
was ultimately approved by the board) was aimed in part at reducing the duplication of
position, in such areas as marketing, human resources, and manufacturing, that has been
necessary under the division by products. It called for a functional structure, which included
product operations (comprising R&D, manufacturing, service, and distribution), marketing
and sales, finance and management information systems, legal services, and human
resources. With the Mac division dissolved, Jobs resigned his position as chairman and
left the company.
With 18 months, sales of the Mac, with its technologically advanced desktop publishing
capability and its relative ease of use for computer novices, started to take off. But other
companies, including IBM, quickly began to develop products to match the Mac capabilities.
Although Sculley professed that Job's vision of putting a computer into every person's
hands and thus changing the world remained intact, Apple watchers wondered whether
Apple could keep innovating under Sculley.
To Foster product innovation further, Sculley purchased a super-computer, doubled the
R&D budget, and increased the number of engineers to more than 1000.

Meanwhile, Apple sales had grown from about $580 million in 1984 to more than $5 billon
by 1989. The number of employees almost doubled to more than 10,000 worldwide during
the same period. This massive growth led Sculley to reorganise once again, this time into
major geographic division (Apple USA, Apple Pacific, and Apple Europe) with a separate
division for Apple products. The Apple products division was responsible for all aspects
of product development, ranging from basic research and product definition all the way
to manufacturing, introduction, and coordination of marketing. This integrated approach
was aimed at competing with Japan on price and quality while incorporating the latest
technology and innovation. The major geographic divisions were responsible for selling
and servicing the various products in their respective regions.
Questions

1. Use your knowledge of organisation design to assess the probable effectiveness of
Apple's new organisation structure.
2. What evidence of the differential paradox related to innovation is manifested in this
situation?
Contd...

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