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SCHOOL OF MANAGEMENT

MN4204
CHANGE, COMPLEXITY
& INNOVATION

Submission date: 12 noon on Friday 30 April 2010


MN4204 30/04/2010 Felix Boehme

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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