by
April 17th, 2007

"You do not lead by hitting people over the head - that's assault, not leadership."

- Dwight D. Eisenhower

On April 12th, Apple announced that Mac OS X 10.5, Leopard, will be delayed from the original "Spring 2007" ship date. Now it won't ship until October.

Considering that Apple had until June 21st (1806 UT) to ship Leopard, this is only a four month delay. In terms of OS releases, in general, this is no big deal some have said.

Well, yes it is.

It's actually a big deal because Apple had it within its power to avoid this setback. The press release gave a hint why something like this delay came to pass.

OPEX Bugaboo

Apple, despite being a large and wealthy company these days with likely more than 18,000 employees, is actually a very lean organization. And that lean configuration has been maintained, even though the demands of the iPhone, the Apple TV and Leopard would have suggested a moderate increase in staffing.

Despite all better judgment, Apple hates to ramp up to meet these kinds of expansions in the product profile. There are several reasons.

First, Apple hates to increase what's called operating expenses, "OPEX". You'll hear Tim Cook talk about this at Earnings Calls. It's a Silicon Valley obsession that as OPEX goes down, profits go up. Wall Street loves this. Investors love it. CFOs love it.

The effect is that it's virtually impossible for an Apple manager to significantly increase their staffing based on their own judgment. Instead, each year, managers are asked to figure out ways to maintain or reduce their OPEX.

As a result, when a product comes along, like the iPhone, that's based on Mac OS X, human resources remain constant while the demands of coding and QA grow and grow.

Secondly, there is a well-known industry adage that if you want to double the time it takes to finish a coding project, double the number of coders. That's not a humorous aphorism; it's been shown to be true in numerous projects from the past.

However, in this case, the Apple statement reveals more elements of the truth. It's not OS coders that were required but Quality Assurance testers. When a company wants to ship a quality OS, letting the customer be the beta tester is simply unacceptable.

So what's wrong with hiring testers? It's a boring job. Not many people are qualified to be professional, patient, ingenious code testers. It's the bane of software development.

Even so, who wouldn't want to go to work for Apple just to test the greatest OS ever developed by man? Professionals who can do the job are rare, but they're out there in Silicon Valley.

If only the managers had the hiring authority. They don't.

Leadership

There was a time when Apple was in that famous, flat, $6B Valley of Death in total sales. It seemed to go on forever. Apple was, around 2001, a niche company with a niche product line. It was fairly depressing, and everyone at Apple was waiting for millions of customers to someday wake up and realize that Mac OS X was the best OS on the planet and stampede into Apple's arms.

It didn't happen.

It didn't happen because everyone was so happy to have Apple rescued by Mr. Jobs that nothing else got done in terms of preparing for the future. It was if all would be well. Besides, Mr. Jobs has a history of being allergic to secondary managers who are powerful and capable. That ended up hurting Apple.

Then Apple got very lucky. They stumbled onto a product called the iPod that just happened to create a whole new market in which Apple could turn the tables on Microsoft. Market momentum didn't have to be overcome. Instead, good old fashioned business savvy by smart people was sufficient to trample Microsoft.

The iPod success further delayed any suspicion that solid leadership at the ordinary VP level was missing.

On the other hand, with the Macintosh, it was Game Over. There was no action Apple could take that could raise its Macintosh market share from single digits into healthy double digits. Even today, Apple suffers from cyclic sales from month to month, quarter to quarter. Up one month, down another quarter. While sales generally go up over the long term, a fabulously successful company like Apple appears to have no reasonable justification for not having continuous, sustained incremental growth in the computer market. It's a symptom of constrained resources for constrained middle management.

With the iPod, Apple has been able to supplement their income considerably and hide these effects. In 2007, they've assumed the trappings of a consumer electronics company. Consumer electronics companies, live by different standards in the market place.

While Apple Macintosh proselytes have patiently walked through the fire pit, consumer electronics customers are of a different breed. It's great that Apple has restricted choice and simplified the integration between Mac, iPod and Apple TV. But it's not so great that Apple is trying to reinvent two industries with staff that are constantly exhausted and constrained by marketing and finance groups. Product delays in CE are not well tolerated and result in defections in a fast moving market place.

Worse, in an age of partnerships, it isn't really an option to tell AT&T, sorry, the iPhone is going be late and your own investors and customers are going to raise hell. Welcome to the CE industry.

And yet, Apple's organizational structure didn't change to meet these new challenges. The assumption was that whatever worked in the past must be good for a consumer electronics company as well. In short, Apple has pretty much the same organizational structure that weathered the $6B Valley of Death during which the executive team longed for salvation.

Apple could have avoided this Leopard delay with good old fashioned management leadership. They could have allowed themselves to grow and mature a little. They could have empowered their key VPs to figure out what it would take to ship Mac OS X/Leopard on time, with excellence and exercise some authority. Unfortunately, many of Apple's key VPs aren't Lieutenant Generals. They're Lieutenant Colonels.

The Fallout

Now, Apple is going to take some serious hits from analysts, investors, and even the PC camp.

Confidence that Apple is putting the pieces into place to become a major consumer electronics giant is being shaken.

PC customers who may have been tempted to move to Leopard, touted as the salvation of the PC customer, will now start to get the idea that all modern OSes suffer from these symptoms.

No good can come from Apple's failure to plan ahead, ramp up, and allocate its money and resources more vigorously.

Climbing out of the Valley

Alas, Apple's psychology and operating style is trapped in the $6B Valley of Death syndrome and not moving into a 21st century consumer electronics company that's poised to move from $25B to, perhaps, $40B in just a few years.

To get there in good shape, Apple will have to spend some money on something besides a half billion dollar new campus, forget the ghosts of the Michael Spindler and Gil Amelio eras, empower their VPs, and let their VPs become responsible for their own products, staff and OPEX.

Every individual has his management limits based on skills, temperament, and experience. Any guy or gal can start a home business and manage $250K a year. When the business grows to $1M, outside expertise is often required. A manager who can run a $10M private company is out of his league as the CEO of a publicly held $100M company. And so on, up the scale.

In a few years, Apple could be easily six times bigger than it was in 2000. It's high time for the kinds of people, organization and authority that is calibrated to that size consumer electronics company.

Let me put it more bluntly.

Leopard will be late. It's stuck in the Valley of Death. It's going to require some cast-iron, sonofabitch, take-no-prisoner "Generals" on the product teams with power and authority to make sure this kind of failure doesn't happen again.

If Mr. Jobs will allow it.

John Martellaro is a senior scientist and author. A former U.S. Air Force officer,he has worked for NASA, White Sands Missile Range, Lockheed Martin Astronautics, the Oak Ridge National Laboratory and Apple Computer. During his five years at Apple, he worked as a Senior Marketing Manager for science and technology, Federal Account Executive, and High Performance Computing Manager. His interests include alpine skiing, SciFi, astronomy, and Perl. John lives in Denver, Colorado.

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