product development - apple vs google

SCHOOL OF MANAGEMENT

MN4204 CHANGE, COMPLEXITY

& INNOVATION

Submission date: 12 noon on Friday 30 April 2010

MN4204 30/04/2010 Felix Boehme

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Product Development: Apple vs. Google

Critically assess the organisation and performance of the product

development process of two or more firms.

Introduction: What is product development and why is it important?

Product development is the first stage of the product life-cycle. It is the process through

which companies develop new products to sell to new or existing markets and to increase

their competitive position through product differentiation. As markets tend to expand and

contract over time, product development is a necessity for most firms in order to survive and

remain relevant (Collins Dictionary of Economics, 2006). This necessity has become

considerably more apparent in recent years as product life-cycles have become increasingly

shorter and firms have come to rely more heavily on new products as sources of revenue

(Trott, 2008, p. 389).

Generally, the product development process can be seen as progressing from an initial

product concept over several stages of screening and testing through to the final product

launch (Collins Dictionary of Business, 2006). There are, however, great differences

between companies as to how this process is organised in detail. This lack of a common

approach to product development can be attributed to the existence of various disciplines

within the firm, such as marketing, production, design or engineering. Each of these

disciplines will take a different perspective on product development. Marketing, for

example, will focus primarily on the customers‟ needs and how these can be met, while

production will focus mainly on how the new product can be manufactured most effectively.

Therefore, organisation of product development processes varies greatly across firms

depending on which perspectives are given more emphasis (Trott, 2008, pp. 389-399). The

objective of this paper is to compare two very different yet equally successful approaches to

product development, namely those of Apple and Google. As we shall see, the two

companies embody two opposing philosophies of product development. One software

developer and blogger summarises them this way:


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“‟Apple‟ means design for what you believe. Design from your gut with less of a need for

data from iterations to guide your design decisions. You design for what you believe is right,

and in the process you might create or invent new markets.

„Google‟ means design minimally. Make small assumptions then release and see how people

use it by collecting data. Then make further decisions based on that data” (Thompson,

2010).

This essay is structured in three sections. The first section outlines some of the research

results on factors influencing the performance of product development processes; the second

and third sections describe Apple‟s and Google‟s approaches respectively and assess these

against the theoretical framework. It is going argue that neither approach is flawless and

conclude that there is not one right way to organise a company‟s product development

process.

Theory

There are various theories on what makes a successful product development process.

Equally, there is no common view of what success actually means in this context. One study

(Hopkins, 1980) defines a new product as a success „if it met management‟s original

expectations for it in all important respects‟ (Abdel-Kader & Lin, 2009, p. 26). Another

study (Millson and Wilemon, 2002) defines success in terms of „how well a new product

effort exceeds or falls short of expectations stipulated by the new product developing firm.‟

The authors look at „four measures of new product market success‟ in terms of– profits,

sales, the ability to enter existing markets, and the ability to create and enter new markets‟

(Abdel-Kader & Lin, 2009, p. 27). These success measures will be used in this essay in

order to assess the performance of the two companies‟ product development processes.

In terms of success factors for the performance of product development processes, there are

various useful papers on the subject, however this essay is going to draw upon one study by


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Brown and Eisenhardt (1995) in particular as this consolidates much of the past research

findings. The authors identified six drivers of process performance as depicted in Fig. 1.

Figure 1 – ‘Factors Affecting the Success of Product-Development Projects’, from Brown and Eisenhardt (1995),

p.346

The first factor is team composition. The authors suggest that cross-functional teams that

have worked together for a certain amount of time and include so-called gatekeepers, who

communicate frequently with people outside the team and bring new information into the

process, produce the best results in terms of productivity and lead-time. Secondly, frequent

and open communication internally as well as externally increases the amount of

information available to the team, thereby increasing process performance. This includes the

third factor (sixth in the original text), namely customer and supplier involvement. Fourthly,

there are two types of team organisation of work which lead to equally successful product

development processes, albeit in different environments. Extensive planning and

overlapping product development stages are described as appropriate for „stable

environments and relatively mature products, such as automobiles and mainframe

computers‟ where product development is a highly complex task. Frequent iterations of


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product designs, extensive testing of those designs and short milestones, on the other hand,

were found to be more effective in highly dynamic industries with short product life-cycles

and high uncertainty, as these tactics provide more flexibility than extensive planning.

Fifthly, the project leader‟s position in the firm‟s hierarchy, his influence in obtaining

resources and his clear vision for a final product that is going to combine the firm‟s

competencies and strategies with market needs have been found to have a strong influence

on product development process performance. And lastly, Brown and Eisenhardt mention

the financial and political support of senior management as well as their „subtle control,‟ that

is granting enough autonomy to the development team while maintaining a focus on the

product vision and the firm‟s overall strategy, as an important factor. Financial performance

is then influenced by the process performance resulting from these factors as well as the

product concept‟s effectiveness and the overall market conditions such as size, growth and

competitive rivalry (Brown & Eisenhardt, 1995).

Having outlined the underlying theory, this paper is now going to describe the product

development processes of Apple and Google respectively and assess each process using the

concepts developed above.

Apple‟s product development process

Apple‟s product development process can only be characterised as design-driven. It is for a

good reason that all of the company‟s products carry the words „Designed by Apple in

California.‟ All major products Apple releases to market are developed by the same team of

a dozen to twenty designers housed in the company‟s headquarters in Cupertino (Breillatt,

2008). Steve Jobs has been described as the designer in chief and the one making ultimate

decisions (Turner, 2007). He spends half of his week getting involved in the development

process and making sure the final product is exactly what he had in mind. This is possible

because of Apple‟s focus on only a few major products. While other electronics companies

with comparable revenues sell hundreds of products, Apple‟s catalogue only spans about 30


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major ones. This gives the company the ability to focus on perfection and to control every

major and minor feature of each product (Breillatt, 2008).

When developing a new product concept, the company relies entirely on its designers‟

vision. According to Steve Jobs, Apple does not conduct any market research, saying this

would only distract from its designers‟ vision. The company generally operates behind

closed curtains and does not speak publicly about future products. There are, however,

occasional leaks of information to the market, which some believe are intentional in order to

gauge the market‟s reaction to these ideas (Breillatt, 2008). Before the iPad was released,

there had been no official announcement on behalf of the company that they were actually

developing such a device until the day the finished product was presented. Yet speculation

had been running high for several months prior to that. Possibly another example of this

covert form of market research could be the recent loss of a next-generation iPhone in a bar

near the company‟s headquarters. The phone subsequently found its way into the hands of

one of the tech-blog Gizmodo‟s writers who published multiple stories and videos about the

device which garnered much attention and feedback in the social media. It will be interesting

to see if Apple makes any major changes to the final product based on this.

In relying so heavily on its own designers‟ instincts and judgment, the company puts much

effort into scrutinising these ideas and making sure the applications and products that do

reach the market are absolutely perfect. To this end, each designer is required to produce ten

different pixel-perfect mock-ups for every single screen and feature. These ten ideas are then

reduced to three which the team will spend several more months refining until the single

best concept emerges that will be taken to production. Throughout the entire development

process, the design and engineering teams hold two complementary meetings every week.

The first is a brainstorming session where new ideas are generated; the second is a

production meeting where the aim is to determine how these ideas can be implemented

(Breillatt, 2008).

In addition to that, the teams meet with decision-making executives on a bi-weekly basis to

educate them on the project‟s progress and direction. This ensures that the executives have

realistic expectations of the final product and have ample opportunity to give feedback. This


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minimises the chances of a project being rejected at the last minute because it is not what the

executive expected (Breillatt, 2008).

Assessment

In the first quarter of 2010, Apple reported revenues of $13.5 billion. While the company

does not specify how much of these revenues come from new products, it does state that

40% of total net sales were attributable to the iPhone, which was first introduced three years

ago and has been upgraded to a newer version every year since then. The company does not

reveal the profitability of individual products in its financial statements. Therefore, it is not

possible to assess this criterion in detail. Given that the company has just reported a 90%

increase in net income over the same quarter of last year, however, one can assume the

profitability criterion as fulfilled (Apple, Inc., 2010). With the iPod as well as the iPhone,

the company has also proven its ability to enter existing markets, the third measure of

success. And finally, the iPad is proof for the company‟s ability to create and enter new

markets. Apple has also been overwhelmed with the growth in iPhone sales in the past year,

as well as the rapid adoption of the iPad, which has forced the company to delay the release

of the device in Europe by a month in order to fill the underestimated demand in North

America and produce enough devices for a European launch. By any measure of

performance for product development processes, Apple can therefore be said to be

successful.

Using Brown and Eisenhardt‟s framework for process performance to analyse the source of

Apple‟s success, we first recognise that the team organisation of work is characterised by

extensive planning. The design of each feature is planned down to the very pixel before any

actual development occurs. In addition, it has been reported that Jobs does not allow any

deviation from the initial image of the final product, which makes for the company‟s ability

to produce simple products that are not over-engineered. While Brown and Eisenhardt found

this approach most appropriate for stable environments, Apple has proven that it can work in


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rapidly changing environments as well. This may be attributable to the company‟s ability to

foresee the future direction of its markets.

Steve Jobs himself has been referred to as the designer in chief. Therefore, the company

ticks the boxes for both project leader and senior management. Jobs‟s strong vision has been

quoted as one of the decisive factors behind Apple‟s success. As evidence to this, blogger

and entrepreneur Chris Dixon points out the following: „Steve Jobs co-founded Apple in

1976. He was pushed out in May 1985 when the company was valued at about $2.2B. He

returned in 1996 when Apple was worth $3B. Today it is worth $169B‟ (Dixon, 2009). This

reliance on one individual, of course, holds a great risk for the company, especially since

Jobs is not in best health.

Other weaknesses in Apple‟s process in terms of Brown and Eisenhardt‟s model include the

composition of teams and customer and supplier involvement. The project teams as

described in publicly available sources seem to be composed primarily of the company‟s

designers with some engineers. There is no mention of other disciplines such as marketing

or finance or production entering the groups. While this makes sure design comes first and

all other disciplines do their best to make the designers‟ vision happen, the process might

benefit from alternative perspectives, given that there are substantial findings on the

relationship between process performance and cross-functional teams. Similarly, the lack of

customer and supplier involvement in the process might be a factor for Apple‟s success, as

the company is known for ground-breaking innovation that might be beyond the imagination

of these groups, but it might help make the process more efficient if they were allowed to

enter the discussion in the early stages of product development.

Google‟s product development process

Google, in contrast, is primarily an engineering company. Their product development

process is the complete opposite of Apple‟s. Instead of being meticulously controlled by one

individual, Google‟s process is highly democratic. It accepts ideas from anywhere within

and outside the company and maintains a Top 100 list of ongoing projects and new ideas.


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The project teams are usually comprised of three engineers who work on a given project for

three to four months before transitioning to the next. The teams are typically headed by a

project manager who works with a total of three groups in a certain area, such as enterprise

IT. Instead of extensively planning a new product from the beginning with pixel-perfect

design mock-ups, Google usually tries to release its products into a closed beta early on and

get user-feedback in order to change the product to fit the users‟ requests and usage patterns

(Mayer, 2003).

Contrary to Apple, the company believes that beginning the process with extensive product

specifications inhibits creativity and prevents some of the best ideas from surfacing. Another

belief is that the way to discover truly innovative products is to release „five things and hope

that one or two of them take off,‟ according to Marissa Mayer, the company‟s VP of Search

Product and User Experience (Elgin, 2006). In order to foster new ideas, the company lets its

engineers take 20% of their time to work on independent projects, a practice that has yielded

many of the company‟s most successful products, such as Gmail, News and AdSense (Vise

& Malseed, 2005). Google represents the philosophy that „if you build something users use,

there will be a way to make money,‟ according to Mayer (2003). Therefore, the company

makes new products available for testing on its Labs site and takes into consideration how

many users adopt them as one of the main decision criteria for whether individual projects

should be further pursued or not. It generally does not advertise new services, but instead

believes that the best products will spread by word of mouth (Elgin, 2006).

Assessment

Google has often been criticised for its inability to break away from search advertising as its

primary revenue stream despite the plethora of new services it releases every year. Indeed,

from a profitability and sales perspective, Google‟s product development process has been

less successful than that of Apple. The company derives 97% of revenue from advertising

and does not indicate any further break-down of this number, which makes an objective

assessment impossible (Google, Inc., 2010). When examined from a perspective of the other


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performance measures, however, Google‟s success becomes more apparent. The company

has been very successful in entering and building significant market share in existing

markets with its recent new products, such as its mobile phone operating system Android or

its Chrome browser. It has also been highly successful in creating and entering new markets,

or rather bringing existing markets into the online space, such as Maps, Books or office

software.

More importantly, however, even the financial outcomes have not necessarily fallen short of

management‟s expectations. Google is primarily an advertising company when it comes to

generating revenue. Its network of advertising partners reaches across the entire web. Not

only does the company derive great sums from text ads that appear next to its search results,

but also from videos, banners and text ads displayed via its AdSense system on a large

network of other websites (Vise & Malseed, 2005). Therefore, Google‟s products are not

necessarily aimed at generating revenue themselves, but often simply to bring users to spend

more time online where they can be exposed to the company‟s ads (Elgin, 2006). It can be

difficult to frame the company‟s success in traditional measures, but it is obvious that

competitors pay close attention to Google‟s product development efforts, as any new

product under the company‟s colourful banner has the potential to become a market leader in

its category.

When looking at the performance drivers from Brown and Eisenhardt‟s model, the

differences between the two companies‟ processes become even more obvious. The core

distinguishing feature in which the two firms differ is team organisation of work. Google

clearly works on the basis of frequent iterations and extensive testing, while Apple takes a

more planned approach as discussed above. Google‟s agile engineering approach is in

accordance with the research findings, which classify it as the right process organisation for

fast-paced and uncertain environments.

Each team has a technical leader who is responsible for the technical excellence of the

project. In terms of his position within the company, this may vary from team to team.

However, the hierarchy within the firm is relatively flat with no middle-management (Vise

& Malseed, 2005). Clearly, there are mechanisms within the firm to promote more


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promising ideas and dedicate the necessary resources to those that are deemed worthy of the

investment. How much influence the project leader has in this process may vary in different

cases.

In terms of team composition, there are no apparent cross-functional components and tenure

seems to be very short as project teams rearrange every few months. Senior management

involvement might not be as apparent or direct as at Apple, although the founders still sit on

regular judging panels or GPS (Google Product Strategy) meetings to which engineers pitch

their 20% projects for additional resources (Vise & Malseed, 2005, p. 210).

The obvious strength of Google‟s process is the speed at which products are developed and

overworked to adjust to user needs. A current example of this is the launch of Buzz and the

following adjustments to privacy settings (Carlson, 2010). In terms of its lacking

monetisation, the best counter-argument may be that the company‟s CAGR of revenues over

the last nine years comes to 202%, meaning, on average, sales tripled every year since 2001.

Therefore, the company is in no rush to monetise its new products and can take a long-term

focus in this respect and pursue its mission to “to organize the world's information and make

it universally accessible and useful” (Google, Inc., 2010).

Conclusion

This essay has assessed the organisation and performance of the product development

processes of Apple and Google respectively. It has shown the applicability of past research

to two of the most innovative contemporary organisations with very different approaches to

product development. We have seen that organisation of work does not necessarily have to

be determined solely by the stability of the market in which the company operates, as Apple

demonstrates with its extensive planning approach in a highly volatile environment. We

have also seen that companies with a strong vision can be successful without early customer

or supplier involvement, and that much of this success can be linked to an individual like

Steve Jobs. The main takeaway from Google is that performance measures can be inaccurate

or difficult to determine if the primary objective of new products is not to generate

immediate profits. The company has a highly emergent and democratic approach to product


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development that results in many new ideas being tested and given the chance to become

innovative products that serve its mission to make more information available online. In

conclusion, both approaches have proven to produce innovative products despite some

weaknesses in the development process as suggested by past research. Ultimately, there are

many ways to build a successful product development process without strictly following the

theoretical model in every aspect. The present paper has, however, shown the model‟s

applicability as a guide to successful product development, as many of the proposed factors

can be recognised in the two firms‟ highly commended endeavours.


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