Under the divisional structure the modus operandi is that once an internal threat is detected, the incumbent division unleashes antibodies to destroy the smaller and less powerful opponent. [...] My hypothesis is that in the absence of product/divisional level power bases, the threat is not felt and the political power to respond is not available. In a functional organization there is no “business leadership”, where the P/L “belongs” to one person. Only the CEO has life-and-death power over products and their decision is “purchased” through discussion with functional heads who stand to benefit as much as to lose from disruptive change.
I strongly recommend reading the whole thing, in addition to listening to episodes 90 and 91 of The Critical Path, especially in light of the reorganization plan Microsoft announced today. Apple's success in maintaining a functional organization, rather than a divisional one, may be its greatest accomplishment.