Apple: Peeling back the wall of secrecy

Apple is riding a wave of popularity and success seldom seen in the tech industry -- or any other industry. With the company's recent white-hot success, including today's release of a new model of the market-leading iPad, it's easy to forget that it wasn't always this way.

The company's history is well-known to anyone even remotely interested in Silicon Valley lore. Apple was launched in 1976 by the affable and brilliant Steve Wozniak and the charismatic visionary Steve Jobs in a garage in Los Altos, California. Its first line of PCs, the Apple II, is credited with igniting the personal computer revolution and became a mainstay in schools and homes throughout the 1980s. The Mac, introduced in 1984, forever changed the interface between humans and computers, bringing to the mass market advances that today we take for granted, including the mouse, the graphical interface, and tiled windows.

The 1990s, however, were not so kind: Innovative products like the Newton failed to catch on, the Mac languished as an overpriced, niche PC (with less than 5 percent market share), and a misguided strategy to allow manufacturers to clone Macs pushed the company to the precipice of irrelevancy and bankruptcy.

Jobs's 11-year exile ended in 1996, when Apple purchased his NeXT Computer company. Back in control of his baby, he slashed product lines and employees, focused on form and function, and soon introduced another hit, the bulbous Bondi-blue iMac. With some cash in the bank and a rejuvenated fan base, Jobs orchestrated a string of hits -- iPod, iTunes, iPhone, and iPad -- that have swelled Apple's bank account to more than $100 billion and made it the most valuable company ever.

But what do you really know about Apple and how it operates? If you are like most people, and even most of the company's 50,000 employees, you know precious little about what goes on inside 1 Infinite Loop, Cupertino. Competitors, analysts, investors, employees, the press, retailers -- everyone -- are kept in the dark about what's coming until the very last minute.

Hoping to shed light on how Apple operates, Fortune magazine reporter Adam Lashinsky interviewed numerous former and current executives and employees. His findings, which have surely upset Apple, were published in his book Inside Apple: How America's Most Admired -- and Secretive -- Company Really Works.

Yahoo! talked with Lashinsky in late February, the same day Apple sent out invitations to a event that turned out to be the unveiling of its newest iPad.

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Given the timing, we asked Lashinsky to talk about the findings in his book in the context of Apple's mysterious product-development cycle.

As you read this interview, long lines are snaking around Apple stores, consumers receiving their iPads via FedEx are breathlessly tweeting their joy, and tech blogs, newspapers, and the evening news are eagerly covering Apple's latest big product release. Indeed, today marks the culmination of months of detailed planning, exquisite execution, and masterful media manipulation. As uncovered by Lashinsky, this is how Apple does it.

Yahoo!: Talk about the genesis of a product formation at Apple. How does a product idea get bubbled up? At what level is it being approved?

Adam: Apple has relatively few products, first of all. For many years, the company would say that it could fit all of its products on a conference room table. That's not completely true anymore. But in spirit, it is true that Apple has a simple lineup compared with so many other companies.

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The products that Apple has had over the last 15 years have been part of a larger strategy,  part of this digital-hub strategy, starting with the Macintosh, extending out to iTunes and iPod, and so on. So each product has to fit with the previous products. And the very first thing that happens once Apple is going to do a product is to do the design of the product. This is very unusual compared with other companies. The design is so preeminent.

Yahoo!: You give an example in the book about the designers walking into a meeting, and everything sort of gets calm for a minute, because these are the princes and princesses of the company.

Adam: That's right. And it would be outrageous at Apple for a financial person to be involved in that conversation before the design person. At many companies, the financial person would say, "Well, we can't afford to do that" or, "This would cost X." And at Apple, they say, "This is what we want it to look like. You figure out how to pay for it."

Yahoo!: The chief designer there, Jony Ive, kind of works in this secretive Willy Wonka-ish lab room down in -- I don't know where it's at actually, but very tight security obviously, and very tight group of people that have access to this place. And Steve Jobs liked to spend a lot of time in there touching and feeling what was being worked on.

Adam: They have all the latest equipment and prototyping machines, and they're big into building models, as other device manufacturers would be. And the designers will build multiple prototypes and play around with them. And yes, Jobs liked to visit and hang out, because he found it inspiring to see what the designers were working on.

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Yahoo!: One thing that's fascinated me with Apple is their ability to understand engineering and the materials that are used in products. They always seem to be really on the cutting edge of not just the latest input/output port or something like that, but just the materials that get used; they seem like they're three years ahead of everybody else.

Adam: Ive himself is very interested in materials science. He has spent time in Japan with samurai sword master manufacturers, for example. And so as a designer, he considers materials science to be part of his domain. So yes, they've been at the cutting edge of using materials that led to more beautiful products that were able to have curved edges, where the industry was using sharp edges before Apple. And they conceive of the physical nature of the products as being as important a part of the aesthetic as the user interface on the screen.

Yahoo!: Do they look at what their ultimate product would be as far as the performance, the aesthetics, the features it will have, and then kind of reverse-engineer it, like you said? The finance people are cut out of it, all those sorts of people are basically on the back burner until it's unveiled, "This is what we need to make."

Adam: Yes, but I think even performance is subservient to appearance. Now, that's not to say that they don't care about performance or that they don't have ideas about performance, but the first thing is to decide what it will look like.

Now, what you asked me earlier was, How does that lead to the keynote presentation and "one more thing"? Well, Apple plans, first of all, the product manufacturing process with something called the Apple New Product Process, ANPP, which is a written-down process for everything that will happen over the course of the manufacturing and design of the product.

At the same time, they'll have a marketing plan, and there will be timeline that will spell out what all the milestones are for the product, so that every aspect of product manufacturing and marketing and selling will be planned out and coordinated and integrated in advance, leading right up to the moment when the product will be unveiled to the public.

One of the interesting things is that these facts are on a need-to-know basis even within Apple, and they will be kept very close. One group repeatedly frustrated by this is the salespeople. Salespeople don't get the product details until the public gets the product details. And so they are continuously annoyed that they can't prepare their training manuals for how to use the products, because they haven't seen them yet.

Yahoo!: OK, so a product's been approved. They have the ANPP set down. Again, anybody who's involved in that specific product as it goes through the chain, they're the only ones that know what's going on. If you're in marketing and you're not working specifically on the iPhone, you would not know what's happening with the iPhone coming down the pipeline.

Adam: That's right. And it's deeper than that. So if you're working on the hardware of the iPhone, you won't necessarily be familiar with the user interface of the iPhone until a certain point. Your job will be the prototyping and the modeling of the hardware. And that doesn't mean that you're in the know on the software, at least not early on.

Yahoo!: For an Apple employee, is that a good thing or a bad thing? I think it's good to be associated with the final product, but maybe on the way you feel like you're just kind of an assembly line worker, a worker bee, and you know your little piece of it. Is it satisfying, fun, to work at Apple?

Adam: I think people describe it as being very satisfying but not often very fun. It's a work-oriented environment. You focus on your task. You are told to mind your own business. You're discouraged from meddling in other people's business. You follow orders. And there's not a culture of a lot of back patting either. When you're done, you move on to the next project. You're always busy. There are always things to do. There's never enough time. So there's not a lot of celebratory jigs going on.

Yahoo!: At the same time, they're not really out there talking to the press, obviously. They're not going to conferences and touting whatever they're doing at Apple. You just do not see these people. And that goes all the way up. The top execs are not out there, either. They have to take a back seat to Apple and/or Steve Jobs when he was alive.

Adam: That's exactly right. I quote someone in the book saying that "you check your ego at the door when you walk in the door at Apple." Working at Apple is not about you. It's about Apple. And everything that you do, you do for the greater good and glory of Apple. And so if you're going to have a public profile, which you probably aren't -- but if you were to, that would be because Apple management has determined that that's what's best for Apple.

Yahoo!: Back to the product. What is the philosophy that goes into the Apple product? When they're approving that design and the aesthetic and all that kind of stuff, are there some adjectives that kind of scream "Apple"? You know, simplicity, cleanliness?

Adam: Yes. The chief characteristics of an Apple product are simplicity, ease of use, the tight integration of hardware and software, and simplicity, again. And this is really significant. Apple products don't tend to have more features than are necessary. And sometimes people will complain that they have too few features. The iPads 1 and 2 don't have USB connections, and the iPad 1 didn't have a second camera.

Yahoo!: So the product is finished. That's where we're basically at today. They have put out an invite to the members of the press. You've covered these releases. Tell me what it's like to be in that room.

Adam: If you sit back in the room and you think about what you're experiencing, you realize that you're part of an extremely well-orchestrated production, from the music that's playing when you sit down in the room, to the array of the executives in the front row, just like the officials in the old Soviet Union who would be standing near Lenin's tomb at a May Day event, to the fact that these events typically begin at 10 a.m. on the dot.

And then continuing on with whoever's onstage, to the exact words that come out of their mouths -- scripted and timed to the pauses for laughter -- to the images onscreen that are typically filled with beautiful people, and also what people in product marketing refer to as "hardware porn": you know, these loving, revolving shots of these beautiful products.

Yahoo!: You've often got some employees that worked on specific products in the very front, and they're cheering as their products are mentioned. And you've got thousands, literally, of press all blogging madly every single word and every single image that gets put up there. And this is a lesson that traces back to the original Mac in 1984 with a big unveiling. Nobody does it better.

Adam: Actually, what I wrote about in the book is that Jobs may or may not have learned this from one his heroes, who was Edwin Land of Polaroid, who had mastered the big reveal as far back as the 1940s. He would invite both trade journalists and mainstream journalists to his unveilings of new technology, so that he could get maximum coverage.

But, yes, Apple is masterful at getting all the right press in the room -- broadcast, print, and so on -- and making it so that they'll time the reporting of the new product to exactly when Apple wants them to time it, and gives them, by the way, very good information about these new products. And the demos at the unveiling are live demos, so that this isn't vaporware, which is so popular in the rest of the technology industry.

Everyone who attends the event is invited to walk across the hallway into the demo room and see the products that were shown onstage. And then, yeah, various executives and lower-down employees will be milling around the demo room to have friendly scripted conversations with the journalists to talk about whatever was announced that day.

Yahoo!: And that's the remarkable thing, going back to tie two things together: the scripting and the fact that even these top, top execs of arguably the most successful company in the world stay on script. They will be out there, and they will never deviate. Everything that they will say at that point is really just parroting what we already heard from Steve Jobs onstage. They're disciplined.

 Adam: And for a very good reason. As I describe in the book, they've worked very hard on the script, so why would they want to deviate from the script? The script is powerful. You want to say it over and over so that the journalists you're talking to will write it the way you wrote it, so that their readers will read it and repeat it to their friends, so that positive feedback loop will exist in the marketplace -- so that the script, as you wrote it, will start to get repeated by your customers.

Yahoo!: Is there a monetary value you could even place on that?

Adam: Academics have done research on the monetary value of the publicity that Apple gets from its product unveilings. And so this speaks to the importance of the secrecy before the event and also, I think, describes the value of the free publicity that Apple gets from its unveilings.

Yahoo!: So the product is out now. The press has written about it. They're gushing about it, most likely.

Adam: Typically.

Yahoo!: You get people waiting in line for these products. Now, tell me about the packaging of the products, which is also something that Apple does not take lightly.

Adam: No. They work very hard at making the packages for their products beautiful, because they've taken great care to make sure that the product is gorgeous, and what it comes wrapped in should be gorgeous too. So in the book I describe how Apple at one point, with the introduction of the iPod, had a package designer work on making sure that the little piece of tape that you peel back when you open the box was placed just right.

And they worked with hundreds of prototypes to make sure that the way that it was affixed would be exactly right to please the customer when they pulled that tape and opened the box and they see their device stacked perfectly on top of the very elegantly designed instruction manuals, so that you get a good feeling when you take that wonderful thing out of the box and hold it for the first time. No detail is too small for Apple when it comes to presenting its gorgeous products to their customers.

Yahoo!: Because there is a feeling that you get. You just spent hundreds, thousands, of dollars on this thing, and Apple wants to make sure that the first impression is not a cardboard box with some crappy shipping tape that you've got to tear off.

Adam: Correct. And this is one of the many examples of why when you put these things together in the aggregate, Apple can charge a premium for its products; why an iMac might be hundreds of dollars more than an all-in-one PC with extremely similar physical characteristics in terms of the microprocessor, the screen size, the memory -- all these old boring things that product marketers talked about in the PC industry for years, Apple can charge a premium for.

Yahoo!: And customers don't typically complain about the price of an Apple product. They are more likely to say, "I'm going to hold my product and show you and be proud about what it does and how I feel about it, and not worry that it was $100 more for this phone than the phone you have. That's not my concern."

Adam: Apple fans will complain about many things because they're so in love with the product that they will scrutinize it very carefully. But price is not one of those things.

(This interview was edited for clarity and readability.)