John Sculley talks customer control, innovation at the edges and $150 smart phones

| Global Business, Technology

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Sculley

More than a decade the past the typical corporation’s mandatory retirement age, John Sculley appears busier than ever. He’s a board member or cofounder of more than 15 companies, a frequent public speaker and author of a new book, Moonshot!: Game-Changing Strategies to Build Billion-Dollar Businesses. Far from resting on the laurels of his success as a brilliant marketing prodigy at the Pepsi-Cola division of PepsiCo, Inc. – where he conceived of the legendary Pepsi Challenge campaign – or his tumultuous decade at Apple, during which annual revenues grew ten-fold, Sculley is agitating for change. In Moonshot! he argues that the multiplicative effect of empowered customers, cloud computing, analytics and mobility will upend many of today’s established businesses. At the same time, there’s never been a better time to be an entrepreneur. Among the bets he’s placing is Obi Worldphone, a company that’s building a low-cost smart phone for developing markets. He spoke to SiliconANGLE from his Palm Beach, FL home.

You’re active on the boards of at least 15 different companies right now. How do you choose which startups should get your time?

Let’s set some context. The incredible growth of technologies like cloud, mobility and analytics has created a huge shift in the market from producers being in control to customers being in control. So the first thing I look for is big problems that can be solved in a better way by taking advantage of this power shift.

My second criterion is that the opportunity should be cross-domain or derivative of another shift. I have experience in fields like technology, healthcare, finance and consumer packaged goods. Innovation takes place at the edges of these domains as they move together, so I am sometimes able to see something in one domain that might work in another.

I’m also constantly following technology trends and trying to calibrate things that are practical rather than just exciting. I also have the advantage of a network of people I consult to check things out. I don’t have a team out looking for deals. People come to me and my wife, who’s a mathematician and computer scientist, and we decide if we want to get involved. A big part of it is whether I like the people and they like me.

What do you mean by the derivative effects of technology? Can you give an example?

Companies like Facebook, LinkedIn, Twitter and Snapchat have created incredible value because of cloud and analytics. I can take advantage of the derivative effect of what they’ve done, which is that cloud computing has been commoditized. I can apply that to established businesses.

For example, one company I’m involved in is Neft (New England Funding Technologies LLC). It combines the derivative values of both cloud and mobility to enable consumers to improve their credit ratings on the fly by paying off debts from their smart phones. This is an opportunity to literally reconfigure the entire ecosystem of credit financing and solving a big customer problem using a combination of technologies.

How does “customers in control” affect business opportunities?

The system we have today to pay for medical procedures is unsustainable. All of the incentives are steered to paying for services. As poorly drafted as the Affordable Care Act is, it did change the incentives to pay for outcomes, not just procedures. Now hospitals are reinventing themselves. They’re taking on the risk of keeping patients out of the hospital instead of putting them in. That opens up a big opportunity in virtual care, using video conferencing and wearable devices to dramatically reduce the cost of healthcare delivery. The only thing the government did was shift policies toward outcomes. Governments don’t innovate, but they can create an atmosphere for innovation.

Obi SF1The Obi Worldphone SF1

Why do you believe Obi Worldphone will work?

The smart phone industry is eight years old and one company takes all the profits – Apple. The rest of the industry has totally commoditized. While that’s been devastating to many smart phone companies, it’s actually an attractive entry point to a company that can differentiate with design.

People in the developing world can’t afford an $800 smart phone, but the big companies can’t make money at a $150 price point because they have so many expenses. So we’re going directly to the most successful component companies and asking them to work with us to build an affordable smart phone based on commodity components. We’ve brought in people from companies like Apple to create a beautiful design. It turns out it isn’t all that expensive. Basically, we took what is a problem for others and turned it to our advantage.

How are these new middle-class consumers in emerging economies different from those who came before them?

People forget that there was a time when the middle class didn’t exist, so there’s no reason to believe it will develop in other countries the same way it did here. I see a new group of at least one billion people who aspire to the American dream. In many cases they’re highly educated and they work very hard, but their definition of middle class is very different from ours.  For example, Millennials in China may live in condominiums with common areas and they share things. They have completely re-conceptualized what a home looks like. They don’t keep score by what they own. My guess is the middle class will be completely redefined, and probably become less consumption-oriented.

You’re a big fan of having experienced management involved with any startup. Why is that so important?

You have to be prepared to make mistakes and not get rattled. Take Zeta Interactive [a digital marketing analytics company that Sculley cofounded with long-time business partner David Steinberg]. It’s being proclaimed as one of the most successful cloud marketing companies in the world, but we actually started out recruiting student applicants for about 300 schools. We built the business to $50 million and then Congress decided it wasn’t a good investment to give students loans for for-profit schools. So the industry imploded.

David Steinberg knew how to pivot. He didn’t panic. We had to lay off 300 people and raise more capital, but in the space of three years we reinvented the company. Experienced leadership makes a difference.

Are we in another technology bubble?

Exponential technologies aren’t a bubble. Over the next five years we’re going to see incredible successes by companies haven’t even started yet. The exit rules will probably change, though. Big companies are constrained from innovating by legacy, but they understand change, and I think they will look for businesses they can acquire to reinvent their companies. I don’t think you’ll see the race to IPO like you used to, however

You have a knack for seeing around corners. What’s the secret?

Have to have insatiable curiosity and a sense of urgency. Focus on recruiting and retaining incredibly talented people. Guild an organization that moves quickly toward opportunity.

In 2008 the Fed dropped interest rates to zero. For many big corporations that was a motivation to borrow so they could to buy back their own stock. Today those same companies are scrambling to catch up with Amazon, Google, Salesforce and the other that created new businesses with those dollars. The leadership at those big companies was incented for stock price and not future growth. The leadership of the next five years has to think about things entirely differently.

You’re at an age when many executives are kicking back and enjoying the fruits of their wealth. When are you going to slow down?

I’m fortunate to have good health and as much energy as I did 20 years ago. I have no intention of stopping what I’m doing. I’m having the time of my life.

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