Last month I read the Walter Isaacson biography of Steve Jobs. So Jobs and his relationship with his former boss, John Sculley, were fresh in my mind on November 28 when I interviewed John Sculley from Palm Beach.
Sculley shared his views of Jobs, how Jobs created the iPod and the iPhone and Tim Cook. He also told me why he thought he rose to the top of Pepsi and his greatest accomplishment at Apple.
How Sculley Became Pepsi's President
He attributed his rise at Pepsi to his "insatiable curiosity." As he explained, "You will have good luck if you have insatiable curiosity. When I joined Pepsi in 1967, I was the first MBA they hired. I took a job in Pepsi's Pittsburgh bottling operation. I visited supermarkets; I observed the displays in the stores; saw how products sold and when they were out of stock. I observed, learned, talked with everybody, and volunteered. And I spent time after work at the Bigelow Health Club because I was not strong enough to lift seven cases of Pepsi up and down the stairs to the basement of a Pittsburgh pub."
At that point, Sculley got a lucky break. He explained: "The CEO of Pepsi and the chief operating officer of Coke were out of the country. McKinsey was doing a study of Pepsi's management practices and decided that Pepsi was behind the times. I was head of Pepsi's product research and development. That day a report came out that the FDA had banned cyclamates because they caused cancer."
"Pepsi decided that I was the person to go on the CBS Evening News with Walter Cronkite to talk about this. I explained how Pepsi was going to substitute cyclamates with saccharine and why it would happen fast. People at Pepsi started asking 'Who is John Sculley?' If you are prepared, observe, and have a strong work ethic, lucky moments will find you. If I had not been curious, I couldn't have talked about how the changeover to saccharine would work in simple terms," he said.
Sculley ascended Pepsi's ladder fast because he helped accelerate Pepsi's sales and market share. He was VP of Marketing at the age of 29 or 30 and did Pepsi's first consumer research. Pepsi delivered to 550 homes and after nine weeks it watched how they behaved and what they bought. He found that no matter how much the houses bought, they always emptied out their supply. Sculley said, "Why don't we sell really big bottles?" So he worked with DuPont to develop 2 liter plastic bottles for Pepsi.
In the early 1970s, McKinsey helped Pepsi introduce Universal Product Codes (UPCs) that enabled the company to track each of the 2 liter bottles -- something that had never been done before. The bar code automatically registered into the supply chain. Sculley said, "How do we get supermarkets to devote more shelf space to Pepsi? We analyzed the data and learned that Pepsi bottles turned over five times before the stores had to pay. I went to the stores and said, 'Pepsi is your new bank.' The stores said, 'Why?'. When I explained what we had learned about the high bottle turnover, they increased shelf space for Pepsi by 300% to 500%."
Sculley's Three Years Working With Steve Jobs
Sculley got Steve Jobs' attention by reversing Pepsi's market share deficit against Coke. "In 1970 when I became VP of Marketing, Coke outsold us 10 to 1. By 1980, Pepsi outsold Coke. It was industrial design -- tilting back the shelf so it's easy to load and reset the shelf, end-cap displays, and the Pepsi Challenge. We were changing the ground rules and thinking differently."
Apple was ripe for Sculley's entrepreneurial approach. As he said, "When I met Steve Jobs, he understood it. In technology everybody thought the future of computing was making machines for engineers. But Steve wanted to make them easy to use for creative individuals -- what he called 'a bicycle for the mind.' He said, 'Teach me how you did it at Pepsi.'"
Sculley is most proud of his contribution to Apple's advertising. "The number one thing we did at Apple was to pivot marketing from 'I make products' to 'It's about the experience.' We made the Macintosh Superbowl ad. When we were outsold 10 to 1 at Pepsi, Coke owned reality. We realized that we had to own the customer's perception because perception leads reality. At Apple we sold the experience and we would build the product to realize that perception. It's not the product, it's the experience of Amazon Prime," he said.
After Apple's board fired Jobs (with a push from Sculley, according to the Isaacson book) Jobs came back in 1997 -- beginning a great run of products including the iPod, iPhone, and iPad.
Sculley on the iPod
"Steve didn't design the iPod but he had the insight and he recruited the talent [to design and build it]. Toshiba made a miniature disk drive that could store a lot of music. The iPod was cool and easy to use. Of course it wouldn't have worked without the iTunes store -- at the time you had to buy music in albums instead of individual songs. Steve sold it as 'How would you like to have 1,000 songs in your pocket?'"
Sculley on the iPhone
"Steve looked at the same data and interpreted it differently. In 2007, wireless networks were going from 2G -- which would enable texting and email -- to 3G -- which he realized would let people send photos wirelessly. He decided to make the iPhone all screen so it would be possible to take a picture, send it, and see it on the iPhone. He also created the App Store. At the same time, Kodak -- which had invented the digital camera -- was working with WalMart to vertically integrate to lower its costs. Kodak didn't see that 3G would change the ground rules."
Sculley on Tim Cook
"How does Apple continue to lead? Tim Cook has added $260 billion to Apple's market capitalization. People still love the product. Where is the next big innovation? We're seeing innovation at Facebook, Google, and Amazon. Will Apple follow on what it does so well? The Apple Watch was not that. Jeff Bezos and Mark Zuckerberg -- who has a great partnership with Sheryl Sandberg -- are similar to Steve Jobs -- brilliant visionaries. Cook is not a founder."
Indeed Sculley's comment about Cook reveals a critical insight -- as I wrote in my book Disciplined Growth Strategies, to sustain growth, companies must harvest maturing growth opportunities and bet on new ones. Jobs did that, Cook has not.