How I Got Here Sep 13 2011

John Sculley on Apple's Jobs and the Experience of a Lifetime

By janet guyon

In 1983, when John Sculley was 43, he had a choice. He could remain head of Pepsi-Cola Co. and jockey with several other executives to be named successor to then-PepsiCo Chief Executive Donald Kendall in a typical corporate executive shootout. Or, as Apple's Steve Jobs put it to him then, he could give up selling "sugar water" and "come with me and change the world."

Sculley's choice would prove life-changing for both Jobs and the East-Coast soda executive. He took the gamble to join Apple as its CEO, never knowing that Jobs, then 28, himself wanted the job, but had been denied it by the Apple board due to his temperamental nature and relative lack of managerial experience.

What began as a close and happy partnership degenerated into an irreparable business dispute. Jobs left Apple in 1985 only to return 12 years later after Sculley had been fired for refusing to license Apple's operating system and subsequent management nearly bankrupted the company. Since then, Sculley has been making personal investments in private, new ventures.

FINS talked to Sculley, 71, about the time in his career he calls "the experience of a lifetime," his meteoric rise at Pepsi, the satisfaction of taking risks and what he's up to today.

Janet Guyon: What are you doing now?

John Sculley: I am a mentor to several entrepreneurs who are building very successful private companies and I am helping them as advisors as they build their companies. All of them are in companies that are at transformational moments. My role is largely to help them understand their opportunities and risk by seeing the business in more than one way.

I invest in these companies personally and act as a rainmaker, helping them by opening doors, recruiting talent and closing deals. I focus on opportunities in health care, financial services and Internet-based businesses. I look for opportunities that are poised for a transformation of their sales channel to create a better customer experience.

It is the most fun and the best time I have had in my life. I don't have to manage any of these companies -- being the executive in charge is incredibly stressful even in the most successful companies. Being a mentor allows me to take a deep dive into what is important, but without the responsibility of making the decisions and actually running the company.

JG: Did you have mentors? Who were they?

JS: I had mentors, but mentors are very different today than they were in my era. They weren't nearly as involved and hands-on as a good mentor is today. Mentoring in the past was looking at someone as a role model and saying "I want to be like that person."

Mentoring now is much more of a day-in-day-out friendship and conversation, so it's entirely different.

There is no bright line for me between work and fun. Most people my age are retired; I just don't have any interest in being retired. But I also have no interest in being the chief executive officer.

One of my first principles is, I only do business with friends. One thing I learned in business is you have to be able to trust people and friendship is an outcome of trust.

The advantage of being a mentor now is I don't have any other agenda, I don't want anybody's job. I never think about superimposing my vision on a CEO I'm mentoring.

JG: Let's go back to 1983, when you made the decision to go to Apple. Many people on the East Coast thought you were crazy to give up the chance to run PepsiCo and move to Silicon Valley, which was much less developed than it is today.

JS: Let me give you some context.

I had graduated from Wharton and I was the first MBA that Pepsi ever hired. I joined Pepsi when it had under $600 million in revenue, it was still a very small company. I was put into jobs that I wasn't really qualified for because the Pepsi management bench was very thin. It was like a high-wire act experience because I didn't know what I didn't know. But these were great opportunities for me and I managed to succeed.

So I became head of product development in my twenties and we developed the first plastic bottle. I became vice president of marketing when I was 30. Then I became head of the U.S. company-owned soft- drink bottling plants.

But my real interest was working in an entrepreneurial-type business.

So I asked to be transferred from heading the U.S. sales and marketing operations to a start-up business, which was called PepsiCo Foods International. My job was to build the Frito-Lay business outside the U.S. That was the best job I had at Pepsi, until I was brought back in 1978 and made CEO of Pepsi-Cola Co., the soft drink subsidiary. I loved international business and never really wanted to come back to head Pepsi-Cola in the U.S.

After five years, we had passed Coke as the largest selling consumer packaged goods company in the U.S. and I still longed to get back to something more entrepreneurial.

So when I was contacted by Gerry Roche of Heidrick & Struggles about Apple, I was very intrigued. The timing came at a moment when I was thinking of what I wanted to do next.

The other context is I had seen one of the first spreadsheets developed for an Apple II computer after being invited to Harvard Business School to talk to a class about the Pepsi Challenge. When that product was commercialized in the early 1980s, I bought every Pepsi bottler an Apple computer and told them they could have it for free as long as they sent us their sales reports on a floppy disk every week. This greatly condensed the time it took us to get sales reports.

And that was about all I knew about personal computers when I was recruited to Apple.

JG: How were you thinking about Apple from a career perspective? Did you think that would build your career?

JS: What has always driven me is curiosity. While I knew very little about personal computers, I became very curious about why Steve Jobs and other bright people thought that PCs were going to change the world.

I have always been a risk taker. I like being on the edge of change. I think there are different kinds of executives. There are those who are really great managers. I'm not one of those. I've always tried to recruit people who are better managers than me.

I am an idea-driven person. So I found the challenges of Apple particularly intriguing. What they needed was someone who could keep the Apple II computer, which was a cash machine, commercially alive for three more years because Steve Jobs was still a year away from introducing the Macintosh. In 1983, Apple was outsold by each Atari and Commodore by 2-to-1. The IBM PC had been introduced a year-and-a-half earlier and was gaining momentum.

Keeping the Apple II alive didn't require someone to know much about computer technology, it required someone who knew something about how to market and sell a near end-of-life product.

There are moments of transformation in one's career. When you seek alignment between your own interest to grow and be transformed and you get the opportunity to play a key role in an industry that is in the process of transforming. This was one of those key transformational moments.

JG: You said you aren't a great manager. What makes a great manager?

JS: Really good managers want to turn one-off projects into as much of a routine process as they can. I am a project-centric leader. I like to work on projects and solve tough problems. Whereas a really good manager will say, "How do we replicate the processes so that when a problem comes up like this again we can routinely solve it?"

That is a very different skill set. It takes both to run a successful company.

I always tried to complement my creative problem-solving skills with people on my team who had more process and management skills, so as a team we were very successful. It's important to understand what you are really good at and weak at so you can fill out the leadership team with all the needed talent to be successful.

JG: Was it the right move to go to Apple?

JS: I was fascinated with what was going on in Silicon Valley. I was the first corporate executive recruited from outside the industry. There was very little movement from the East Coast. And it was unprecedented for someone to come to a high-profile Silicon Valley company without a technical background.

On the one hand, it was hugely stimulating, it was a great learning process working with Steve Jobs.

But I wasn't conscious until years later how skeptical people were that I would last. There were actually bets that I wouldn't last at Apple for more than a year because they felt the cultural change was too hard to make.

I never regretted making the move. I would have wondered for the rest of my life what I would have missed. It appealed to all the things that were important to me: small teams, transformational moments, learning entirely new businesses.

I was never recruited to be the visionary for the products. That was Steve's role.

JG: What did you think your role was?

JS: I saw Apple in a market-share battle with companies like IBM. Just as I had been in the cola wars at Pepsi and we did very well, now I was joining the PC wars where we would be the first technology company to market and sell a technical product like we would a consumer product.

What I didn't really understand at the time was that tech products go through dramatic life-cycles, that products which are successful one year can go out of business the next year. That building a successful personal computer company is as much about building a platform that will attract the best software application developers as it is about selling cool designed PCs.

The majority of time I was at Apple, I was basically focused on delivering the same kind of performance metrics that I delivered at Pepsi. So, for example, when I joined Apple we had just achieved $570 million of revenue in 1982 and we were No. 3 in market share. When I left Apple in 1993, we had reached $8.3 billion in revenue, Macintosh was the No. 1 selling PC hardware product in the world, Apple was the most profitable PC hardware company in the world and we had $2 billion of cash.

What I didn't appreciate was that in a tech company there are entirely different metrics that are even more important, like what is the life-cycle of the tech platform you are on? Will there be a game change in the industry that would make obsolete what you are doing?

JG: So the key to success is really knowing your business?

JS: The lesson is you can only understand something when you understand it more than one way. Market share, cash flow, strength of balance sheet, these things are very measurable.

Another way to understand a tech company is through the lens of its technology and where it stood in terms of its patent profile, its business model, and new breakthrough changes in alternative technology approaches.

There is a very thin line between success and failure. Companies that are wildly successful today can be victims of their success only a few years later. You have to have a plan that will not only lead you through success but will help you deal with the challenges when you get in trouble and find yourself on the wrong side of the line between success and failure. In the tech world, you are constantly exposed to changes you have no control over.

JG: Were you a mentor to Steve or was he a mentor to you?

JS: We were learning from each other. He was learning from me about "experience marketing," how to sell consumer products, how you run a much bigger company and how you recruit people from outside your industry.

I was clearly learning from a visionary genius how he created incredible products. Everything he did was about creating magic. That is his great gift.

JG: Two years after you came to Apple, Steve left after the board removed him as head of the Macintosh division. How was it for you when he left?

JS: My assumption when I joined Apple was Steve and I would be partners and he would be the visionary.

When I was alone at the top, that was not something I had ever expected. I had to turn to other people to do things that Steve could do instinctively. I didn't have the natural instincts of how to create computer products that Steve did.

After Steve left, we continued to follow his first principles that you build products that start with the user experience and they must be complete end-to-end systems. It was still about magic.

I tried to follow his principles. And not licensing our software platform was an important principle as it gave us the ability to build better PCs and make trade-offs between hardware and software, often giving us a two- or three-year time advantage over competition.

JG: You haven't spoken to Steve since you left Apple, or rather, he hasn't spoken to you.

JS: It is still a very painful story because we were not just business colleagues, we were good friends. We spent a tremendous amount of time together.

I think the separation was driven by Steve being in a real funk because the Macintosh, which he developed, was failing in early 1985. His vision was ahead of its time, the power of the microprocessor wasn't enough to do what he wanted to do and Mac sales were falling off.

We were still very dependent on the profits of Apple II. I felt we had to push profits of Apple II and Steve wanted to lower the price of the Mac to get sales up. We went to the board to decide.

The board made a decision and they asked Steve to step down as head of the Macintosh division. He still remained as chairman of the board.

But that was an incredible blow to the man who created the product, he was extremely hurt and pained by it.

To me, coming from corporate America, I was used to people being moved from job to job, because that's how it worked. Professional executives were reassigned, terminated, promoted all the time.

That's not what you do with founders of companies.

Steve and I had a legitimate difference of opinion. But the emotional blow of the board asking him to step down from his role leading the Mac division was incredibly hurtful to him. I didn't fully appreciate how painful that had to have been.

In hindsight, I think the board could have played a better role mentoring both of us. We might have been able to come up with a solution.

JG: What did Steve do then?

JS: He went off on sabbatical and some months later he came back and resigned from the company and took five executives with him and started the NeXt computer company.

I appreciate more today that Apple was never just a business to Steve. Apple is Steve Jobs and Steve Jobs is Apple. That was entirely different from anything I had experienced coming out of Pepsi.

So that has gone on for 25 years and we have not had contact.

JG: Have you reached out?

JS: In the past I tried, and he never had any interest in re-engaging. He clearly blames me.

JG: How would you handle a situation like that today?

JS: It is almost impossible for a young executive who wasn't in business in the early 1980s to understand how different cultures were, how different communications were, how different organizations were from what we know today.

Companies then were run hierarchically. The way they ran was almost exactly the way they looked on an organizational chart. People only had the information they needed to do their jobs, there was no email, cellphones or personal computers.

Corporate America was not only large and structured, but extremely competitive. People were being measured and competed with one another all the time.

My experience was coming out of the East Coast and a corporate structure.

Steve was a guy willing to create his own rules and a genius at creating his own industry. I had never met anyone like that before. I only have more and more admiration for Steve as time goes on.

I wish Steve and I hadn't had a falling out. I wish I had gone back to Steve and said, "This is your company, let's figure out how you can come back and be CEO." I wish I had thought of that. But you can't change history.

JG: You often call Steve a visionary. What makes a visionary CEO?

JS: Visionary CEOs need permission to fail. But they also need to be so in touch with internal details that they can quickly recognize when something isn't working and then have the leadership talent to adjust in-flight. Unfortunately, successful CEOs usually live in a bubble with people telling them what they want to hear. Successful CEOs often become victims of their own success. It's so easy to misinterpret why you are successful. Good luck is incredibly important.

Visionary CEOs are also optimists, they have incredible curiosity. They never give up. If they fail, they try to learn from the experience and start again.

JG: What would you tell someone coming out of Wharton now?

JS: Go work for a private company and look for an industry which is attracting really bright, talented people who you will compete with and who you will also learn from.

Look for companies that have identified a big, juicy problem to solve and have turned it into a noble cause.

Private companies are small and their only reason for being is to innovate. Large companies exist to scale, so middle managers are empowered to say "No," but not to say "Yes."

And the companies might not be in the U.S. I think a lot of the future will happen outside the U.S., in Asia or in South America.

There wasn't such a choice when I got out of business school, there wasn't venture capital or start-up companies.

If I were graduating today, I would never have gone to work for a large corporation, even one the size of PepsiCo.

Write to Janet Guyon at janet.guyon@dowjones.com



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