In the days and weeks before the new iPad was announced, the media was rife with rumors about what Apple fans could expect from the new device. But few might know that Apple employees were among those who waited anxiously to find out what their own company had planned. In Inside Apple: How America’s Most Admired — and Secretive — Company Really Works, Adam Lashinsky, a senior editor at Fortune magazine, provides a rare glimpse into one of the world’s most innovative firms. Knowledge at Wharton recently had an opportunity to talk with Lashinsky about just how far Apple’s secrecy extends, how the company will fare without Steve Jobs and what types of changes to expect under Tim Cook’s leadership.
An edited transcript of the interview follows.
Knowledge at Wharton: Adam, thanks so much for joining us today. I read in your book that Apple didn’t make Steve Jobs, David Cook or any Apple executive or employees available for interviews. You have written Inside Apple, as it were, from outside Apple.
Knowledge at Wharton: How did you manage to do that?
Lashinsky: I interviewed many, many, many people who worked at Apple at some point, their partners and suppliers, and other people who had dealt with them in one way or another. My [focus] for the research on the book was … the last 15 years. Since I wrote a book about how Apple operates, I wanted to talk to people who were there while they were in their radical, wonderful transformation [dating back to] 1997. I spoke with very senior people and very junior people and everybody in between. My perspective on that is that their perspectives were as valuable to my task as any I would have gotten had I had senior-level interviews with Apple executives.
Knowledge at Wharton: Apple is so closely identified with Steve Jobs. He was such a larger-than-life personality and so closely identified with the company’s identity. How has Apple changed since he passed away last year?
Lashinsky: So far, Apple has not changed much at all. Because there is such intense interest in the company, the people who watch Apple are grasping at straws to try to discern a change. There have been little things. Tim Cook, the new CEO, instituted U.S. philanthropic matching grants shortly after he became CEO and before Steve Jobs died. More recently, Apple has announced that it is going to begin paying a dividend for the first time in many years. People want to latch onto these things and say, “Ah, this is the new Apple.” I don’t believe it for a second. These are changes, sure, but Apple was changing all the time. I think the culture, their ways of doing business, their tone, their behavior, everything is in place for the time being, [exactly] the way it was when Steve Jobs died.
Knowledge at Wharton: Do you think it should change?
Lashinsky: I think Apple will change. It will have to change if for no other reason than because it is so much bigger and so much more complex than it was 15 years ago when Steve Jobs came back to the company that he had co-founded. Should it change? Sure. They will have to adapt to a new reality of being big, of having more scrutiny. For example, their secrecy will become more and more difficult over time, and I suspect they will try an intelligent approach to adapting to that difficulty rather than just trying to hold things off as long as possible.
Knowledge at Wharton: We’ll come back in a bit to the issue of secrecy about which I have a few questions. But for now, why don’t we talk about Tim Cook and his leadership style? Do you have a sense of how Cook is putting his stamp on Apple and how he should, in some ways, think differently by not emulating Jobs in everything he does?
Lashinsky: One thing that Cook has going for him is that he is not Steve Jobs, and my impression of the man is that he is not confused at all about this. He is extremely different from Jobs in almost every way. He is not an emotional person. He doesn’t have a creative or artistic background the way Jobs did. He’s passionate about Apple, he’s passionate about business, he’s passionate about operational excellence. I think eventually he will put his stamp on Apple, in that it will be more professional, it will do more things and it may be more evenhanded and less quirky. But I think he will do these things over time.
Knowledge at Wharton: In what ways is he different from Jobs?
Lashinsky: Cook is different from Jobs in almost every way: educational background, demeanor, the things that they are personally interested in. Cook is a workaholic, as was Jobs, but he is somebody who doesn’t have a lot of outside interests. He is interested in fitness and in sports and in not much else. He doesn’t seem to be interested in the finer things in life. Jobs led a relatively simple life for a multibillionaire but he did have some expensive habits and tastes. Jobs was a product person, and there is no indication that Cook is.
Knowledge at Wharton: Interesting. Let’s come back to the question of secrecy. As we all know, Apple’s corporate culture is notoriously and even obsessively secretive. What do you think are the pros and cons for Apple?
Lashinsky: Let’s start with the pros of secrecy. Secrecy, taken to its extreme as Apple does, makes Apple an incredibly focused and disciplined company. Its people do not typically multitask; they focus on one thing. They don’t get distracted because they are trying to pay attention to somebody else’s business. They pay attention to their business and only that. Apple does a very good job of not letting its competitors know what it is working on, and Apple does a very good job of not confusing customers by causing them to anticipate what the next new thing is going to be and then causing those customers not to buy the products that are on the shelves now. There is obviously a negative to this secrecy. Apple is so secretive internally, they keep secrets from each other. At some point, you would assume that this would hurt morale, that it would make people not feel good about working at a place where they are treated like horses fitted with blinders on, not supposed to look right or left [but] just charge forward. Playing for a winning team or having a winning team has covered up what we might otherwise expect to bubble up [as] poor morale up until now.
Knowledge at Wharton: We have heard from some people that Apple has been known to hire people into fake jobs. Did you find any of that in your reporting?
Lashinsky: Yes, I refer to these as “dummy positions.” In other words, you are told that you are coming to work at Apple. You may even be told broadly what kind of project you might be working on, but you are not told specifically what you are being hired for. The fact that you have been vetted and that you have been hired to work at Apple should be good enough for you for the time being, and furthermore, even though we have hired you, frankly, we haven’t decided if we can trust you yet. And once we figure out that you can be trusted, then you will find out the specifics of your position.
Knowledge at Wharton: Is Cook as obsessive about secrecy as Jobs was?
Lashinsky: There may be reason to believe that Cook is more obsessed with secrecy. We will find out, but as secretive as Jobs was, he would go ahead and spill the beans when he felt like it. He would give press interviews, and he would explain what was going on at Apple. He did this in an orchestrated, calculated way and with great, great effect in terms of publicity and promotion. So far, there is less evidence of Cook behaving that way, but we don’t have as much time to look at. It has been an extraordinarily difficult time. In his short tenure as CEO, he has had to deal with, first, the resignation of a founding genius, his boss, and then, that person’s death.
Knowledge at Wharton: Right. The details of the iPad 3 were known before the launch. Do you think this was an intentional change in strategy?
Lashinsky: Well, it is interesting you refer to it as the iPad 3 because that was one of the rumors…. Of course, Apple chose not to call it the iPad 3; they chose to call it “the new iPad.” It is not unusual in past years for aspects of new products to leak out ahead of time. I think the dribble has become a little bit more of a flow, so no, it wasn’t a huge shocker. There were still surprises with this announcement. If we looked at the transition from iPad 1 to iPad 2, we might have assumed that the iPad 2 would be phased out. It is not going to be phased out. Of course, the name also was a surprise, but no, I don’t think it is terribly shocking that we knew that they were going to go to a better screen resolution. These things will come out because suppliers can’t be kept completely quiet.
Knowledge at Wharton: Apple has an unconventional organizational chart right at the beginning called “Apple’s core.” Help us understand how you think Apple’s hierarchy works? Do their people operate in ways that are independent of the organizational chart, and if so, how?
Lashinsky: Apple is a military-like command-and-control organization where people lower down in the organization manage up. They are constantly preparing their boss who may be preparing their boss and their boss for a presentation to the CEO or to the executive team. People below manage up, and people at the top manage down. Information is held very tightly at the top, and the only information that seeps down is the information that senior management wants to seep down, which includes, by the way, rapid and thorough feedback on product development that is underway. The org chart is such that the CEO does not have to reach far down into the organization to get very good information. I presented the org chart of our design at Fortune magazine as a circle. This does not mean necessarily that this is how Apple draws the org chart. They don’t draw an org chart because they don’t like org charts. They don’t want to disclose what it looks like. But the circle enables me to show how close the CEO is to everybody who is doing the work in the organization. You ask, do people operate independently of the org chart? There is an individual contributor culture in Apple, and there is a history of people being pulled off one group and moving to another group. This would not necessarily be the vice presidents in the inner- or outer-ring of senior management. This would typically be talented engineers whose skills would be required elsewhere.
Knowledge at Wharton: Despite having almost $100 billion in cash, Apple doesn’t have a history of acquiring other technology firms, unlike companies like Cisco or Oracle. Is this a prudent strategy in the IT world?
Lashinsky: Apple’s lack of major acquisitions to date is beyond prudent. I think it is almost a truism that if this is the way the world’s most valuable company does it, then it must have been prudent for them.
Knowledge at Wharton: What about the future?
Lashinsky: Well, let’s dive into the past for a moment, and then we can look into the future. You are right: Apple has done relatively few acquisitions. They have never done the kind of blockbuster multibillion-dollar mega acquisitions that Google, Cisco, HP, Oracle, Microsoft and others have done. They typically acquire small companies for the people or for the intellectual property, not for the revenues. I think the academic research would bear out that most of these mega acquisitions are disasters, most of them hurt the culture of the company and few of them create the vaunted synergies that they are supposed to create. I will go so far as to say that I do not see Apple doing a mega acquisition for the foreseeable future, and if they do, it will be a sure sign that their culture has changed radically.
Knowledge at Wharton: Will Apple find it easier or harder to hire disciples without the lure of Jobs?
Lashinsky: Apple will find anything that requires a personal touch to be harder without Steve Jobs. Steve Jobs, for all of his many qualities, was an incredibly charming and charismatic suitor. He could woo talent like nobody else, and he could paint a very compelling vision about why you want to come to work at Apple. Now, part of the script will remain, and it will be accurate, and it won’t necessarily require Steve Jobs’ reality distortion field. Tim Cook and others will still be able to look a recruit in the eye and say, “If you want to come do the best work of your career, if you want to come to the only company that created the iPad, the iPhone and the iPod and so on, then come to Apple.” But I think I infer from your question that it won’t be the same if the message is not delivered by the master. I agree.
Knowledge at Wharton: What do you think is the biggest threat facing Apple today?
Lashinsky: I think Apple’s biggest threat today is its size and complexity. This company has thrived on simplicity. It has mastered the art of simplicity for such a big company, but that will not be an easy trick to maintain. There are other risks. They have good competitors who are watching them carefully. Competitors like Google and Samsung, to name two. They have to get the next major shift in the industry correct, as they have done the last few shifts. I’m not smart enough to know what that shift is, but they will need to. They also just have more balls in the air than they have had at any point in the last 15 years, and they are either going to have to figure out how to continue to keep those balls in the air, or they are going to need some radical new thinking about how to compartmentalize the things that they do.
Knowledge at Wharton: Every tech company today wants to be like Apple. Is Apple so much of an outlier that it is almost dangerous for them to try to emulate it? Should they even try?
Lashinsky: I think if companies want to emulate Apple, they need to take a piecemeal approach to it. They need to write down what they perceive to be Apple’s attributes as I write them down in the book, and then ask themselves, “Can we do this or can’t we do this?” Not every company is going to have the courage to bet the company every three or four years on one major product as Apple has done successfully. I think every company can say to itself, “Are we doing a good enough job of saying ‘no’ when we evaluate a new project? Or have we said ‘yes’ too easily?” Because that is a hallmark of Apple. I think every company can say, “Are we being clear enough in our message, and are we being tight enough about how we deliver it?” I think every company can say, “Have we adequately or sufficiently focused our people on their task? Do we care that our people are off doing this and off doing that? Maybe that is a part of our company’s culture and we are going to continue, but maybe that is something where we want to be more like Apple.” And the list goes on like that.
Knowledge at Wharton: One last question: What was your biggest surprise in writing this book?
Lashinsky: My biggest surprise was my realization about Apple’s internal secrecy. I understood external secrecy. I understood already that they want to keep secrets from people like me. What I didn’t understand until I researched it was how much they try to keep secrets from each other. It’s astounding how little information an Apple employee has. That’s why Apple employees go to a company cafeteria to watch major product launches on closed-circuit television. Because they don’t know what is being announced in public that day. Even if they worked on the product, they will typically only be familiar with some feature or sub-feature [of it]. People thinking about this will see an obvious downside, that it can’t be good for someone’s esteem to be so in the dark all the time. On the other hand, I came to have an understanding of how focused Apple employees are because of this internal secrecy, because of this lack of information. I’m not sure that it is a model for other companies to follow, but I think it illustrates Apple’s excellence really well.
Knowledge at Wharton: Adam, thanks so much for speaking with us today.
Lashinsky: It has been my pleasure. Thank you.