In 1983, Apple co-founder Steve Jobs was looking for a new CEO to run his burgeoning company. He tapped John Sculley, the CEO of Pepsi-Cola and the marketeer who had devised the Pepsi Challenge, which helped the soda company take on Coca-Cola. Jobs wanted someone who could help upstart Apple challenge all-powerful IBM. To convince Sculley to take the job, he asked the Pepsi exec: “Do you want to spend the rest of your life selling sugared water, or do you want a chance to change the world?”
Sculley helmed Apple through a turbulent decade between 1983 and 1993, attempting to take on IBM in the PC business and launching products that confused the market—the most notable of which was the Apple Newton. The first handheld personal digital assistant (PDA) device was a massive flop, but one that Sculley said was simply ahead of its time.
Quartz spoke with Sculley to discuss his recent book on why now is the right time to launch a culture-shifting business, what those businesses may be, how management strategies at tech companies have shifted since he took over at Apple, and why he thinks the Apple Newton wasn’t a complete failure. (This interview has been edited for length and clarity.)
Quartz: One of the big themes of your book is that the time is ripe now to come up with these great moonshot businesses. Why now?
Sculley: I always focus on the derivative effects of technology, not just on the technologies themselves. So we have right now cloud computing growing exponentially—both in terms of performance and its ability to reduce the cost of storage—and being adopted in industry after industry.
We have Big Data analytics, which used to be structured data, but now we’re into unstructured data, which means we can track millions of different attributes for each individual—that was never even conceivable a few years ago.
We’re in the era of mobility. Mobility is everything today—it used to be an adjunct to what people did, and now it’s central to what everyone does.
And we are just at the beginning of the internet of things, and the estimates are anywhere from a 20 to 50 billion connected devices by the early 2020s. So all of those things are interesting, cool technologies, but the more insightful observation is that the derivative effects of these technologies is the power shift that it’s caused: People that used to look to large, entrenched, incumbent organizations are now realizing that they can find the opinions of customers and see what people really like.
That’s causing a power shift to customers in control. It helps explain companies that become giant success stories that spend hardly any money on advertising or marketing but have scaled to incredible size. Facebook Messenger—there’s almost a billion users and they don’t even advertise. Same thing with Google, with Amazon. It all goes to this power shift from incumbent organizations to customers in control. And it’s going to continue to happen—we’re just in the early days.
Will there come a time when anyone can disrupt any industry?
I wouldn’t say anyone—the barriers to entry are low, but the reality is, you can go to Silicon Valley and see far more talented people with far more ideas than you see successful companies. There are many other issues that determine whether someone’s going to be able to turn a cool idea, even if they’re very talented, into a successful company.
But the time for transformational change has never been better. If you think about healthcare, for example, we all know in the US that it’s completely unsustainable in terms of the cost to be able to provide the services to the people who are covered, not to mention wanting to add more people who don’t have insurance. And you get no clue in terms of how to rethink delivering healthcare services by paying any attention to the politicians or the lobbyists.
Disruptive innovation is going to take place by taking the derivative effects of those same technologies I just talked about and rethinking every part of the healthcare ecosystem. I’m involved with several different companies that are working in various ways to do that. And it’s not just my companies—it’s many, many new companies that are being formed and working on things that are part of this $3 trillion health spend.
Fintech is another example—what’s going on with how the whole banking system is being deconstructed and then reconstructed into more lightly regulated fintech companies. London is becoming the international center for many of these fintech companies. Manufacturing would be another perfect example; the industrial internet (which GE is really focused on); smart cities—this is not a one-off phenomenon like an Uber or Airbnb, which are everybody’s examples of how the world is changing. It’s going to happen in industry after industry, all over the world, and it’s already happening now.
When you see companies like Airbnb and Uber that have transformed the markets they’re in, it seems like a lot of people in Silicon Valley rush to copy their model—an Uber for X. Do you think this will have an affect on the disruption you see coming?
Copycats probably won’t succeed. But that doesn’t mean that this isn’t a very good time to do this. Look at the courier services that have been developed—there are probably far more initiatives with courier services that are going to survive.
But there’s always been more people trying to build transformational companies when they see some role model examples of huge success. Uber and Airbnb are perfect examples of the power shift to customers in control, but that doesn’t mean you just have to build copycats of Airbnb and Uber.
In your book, you have a series of 10 principles that all companies should follow. One of them is: “Transformative businesses are never successfully run by consensus. There has to be a clear decider.”
That seems to have been the case when you were brought in at Apple, and at other large tech companies, like Google, which brought in Eric Schmidt as CEO. In recent years, that trend seems to have shifted to the COO role—think Sheryl Sandberg at Facebook. Do you think the role of the professional CEO will continue to exist in tech, or are we shifting away from that?
Well, I have a huge respect for what Sheryl Sandberg has done at Facebook. I believe that that’s a better way to think of bringing in a professional manager than the way that I or others were brought in 30 years ago.
The longer you can keep a founder in the role of being the leader of the company, the better. But we learn from experiences. When I came to Apple, it was in the very early days of Silicon Valley as we know it, and I was the first person to come from an entirely different industry—of big-brand marketing—to Silicon Valley.
We learned along the way. I like the model much better of if you’re going to bring in a professional manager as the COO and try to keep the founder in the leadership position for as long as you can.
I think we’ve learned a lot in 30 years.
And perceptions can definitely shift in a period like that. Rather like how we think of the Newton! It’s been given a bit of a bad rap, especially given that what you were thinking in the 1990s—where technology was going, and that everything was going to be mobile. You seem to have been proven right. Apple has tablet-shaped computers—even with styluses now! Will we end up having similar thoughts about current Apple products, like the Apple Watch?
I think that the Apple watch will become better and better over time, for the reason that sensors will get better and better over time. Our ability to use machine learning to take the data that’s captured on different kinds of sensors—and be able to do things with it that are increasingly more useful—will become more likely over time. The hardest thing in technology isn’t figuring out what will happen, it’s trying to figure out when it will happen, and who should be doing what when it happens.
When we were developing Newton, we were betting that what would come next would be handheld computers that would have entirely new interfaces—we were using a stylus and gestures, and a touchscreen—and we believed that there were a lot of things that had to be created before something like that could be realized.
So we helped co-develop what became the ARM processor, which is now in 8 billion smartphones and other mobile devices today.
Newton actually was the first to do personal digital assistant software, which is what Cortana and Siri and Amazon are all doing today. We were the first to do object-oriented programming on a handheld device, we were the first to come up with a microprocessor—the ARM—that enabled you to do object-oriented programming like you had on the Macintosh, but on a handheld device.
But we were way ahead of our time. And I wasn’t an engineer, so it was harder for me to appreciate how difficult some of these things could be commercialized. The first iPhone came out in 2007. If you go back and look at “Knowledge Navigator” from 1987, it looks remarkably like a tablet computer today. To anyone who sees the “Knowledge Navigator” today and wasn’t around in the 1980s, it looks pretty ordinary, but it was considered outrageous when we showed it.
That’s just the reality of being in hi-tech: You take risks, sometimes you’re right, sometimes you’re wrong. In the case of the things we were doing, I guess we were too far ahead of our time for a practical standpoint, but it eventually happened.
Do you see any parallels in the way that Tim Cook is running Apple now to the way you did?
Tim Cook is a superb executive. He’s probably the best executive in the world at running a business on Apple’s scale, keeping true to the vision that Steve Jobs had, recruiting and retaining excellent talent. And Tim’s done a terrific job in a crisis, as he did recently with the FBI trying to get a backdoor into the iPhone.
I have nothing but huge respect for what Tim Cook is doing at Apple.
Do you think the future of Apple is sound? Do you see the same kind of excitement that’s pervaded product launches in recent years continuing?
I think that Apple’s in a different stage today than it’s ever been before. It’s got a huge responsibility to an incredibly large user population that loves Apple’s products, that expects Apple not necessarily to be the first at what they do, but they expect Apple to be the best.
They’ve lived up to that with the iPhone in particular. I happen to be a big fan of the iPad Pro—I think it’s one of the best products Apple’s ever introduced. It isn’t probably as successful as some people had hoped, but in terms of the quality of the product, I use it all the time. To me, it’s a spectacular product, but it hasn’t turned out to be a blockbuster.
Do you think Apple will be in a position to have any of these moonshot moments again?
I couldn’t speculate. I’m not at Apple and haven’t been involved in it for several decades. I’m a big Apple fan, but I have no insider perspective. And I don’t spend a lot of time thinking about it.
I’m much more interested in the things I’m involved with, which is disruption in healthcare, in fintech. I co-founded Theta Interactive—we’re now up to 1,000 employees and we’re the largest independent cloud marketing company in the US, if not the world.
Between healthcare and fintech—and the other ventures you’re working on—what excites you most about the future of technology?
I learned something when I showed up at Apple, I was a veteran of 10 years of the cola wars. In that case, Pepsi had won. We’d gone from a fairly small regional soft drink brand when I became marketing VP in 1970 to becoming the largest-selling consumer packaged goods in the United States.
I thought business was all about competition and winning. And then I remembered one time I was in the Macintosh lab with Bill Gates and Steve Jobs late at night, and Bill and Steve are talking about their ‘noble cause’ to empower knowledge workers with tools for the mind that would make the individual incredibly productive, and they would change the world one person at a time.
I said to myself, “I’ve never heard anything like this.” A noble cause. It was an entirely new way of thinking about business; we’d never talked about noble causes when I was in the soft drink industry. We talked about market share. So that insight that Bill Gates and Steve Jobs had about a noble cause—and remember, most of the time they were arguing with each other, but the one thing they never argued about was the importance of this noble cause to change the world—and so that’s what really motivates me today.
That’s why I’m interested in disruptive innovation in what seems to be an unsustainable healthcare system in the US. It has everything to do with having a noble cause to completely rethink point-of-care, point-of-sale, particularly around the most expensive part of the health system, which is the 5% of the population who are chronic care patients who represent over 50% of the healthcare spend.
These problems are solvable.
Do think there are any countries that could serve as a model for the US healthcare system?
There are some good role models. You can go to India for a cataract operation in one of these very modern, extremely qualified hospitals that do nothing but cataract operations, and it costs $50 per operation.
France has figured out how to build their medical system so it focuses on outcomes as opposed to procedures, the way we’re organized in the US. They’re able to deliver high-quality healthcare for about half the cost of what we do in the US.
Singapore has healthcare for about half the cost per capita of what we have in the US.
From these few pocket examples it is possible to completely rethink the way we deliver healthcare, particularly to the most expensive patients. Part of it is getting people to focus on behavioral health. If you can get people to modify their behavior, you can save billions and billions of dollars in the healthcare system in the United States.
Imagine if you could get everybody to lose 20 lbs., you could dramatically lower the cost of healthcare in the United States by many, many billions of dollars. So maybe that’s not realistic, but it is realistic that we can begin to shift the incentives to the providers, the hospitals, to focus on what are called bundled services (and population health) and focusing on wellness, not just treating people for a sick event.
Those are going to become the role models for how we disrupt healthcare on a much larger scale over the next several years. It isn’t like we have to speculate whether these things will work—these things do work—the real questions is how do you build them to scale?
by Mike Murphy via Quartz (qz.com)