The challenge John Sculley and I should be judged on in five to ten years, is making Apple an incredibly great ten or 20-billion-dollar company. Will it still have the spirit it does today?
-STEVEN JOBS, 'Playboy Interview," February 1985
Those words were spoken in another galaxy far, far away and, by the standards of change in the personal-computer industry, long, long ago-three years ago, actually. Steven Jobs, cofounder of Apple Computer, Inc., was talking about the man he had hired to run his company, one John Sculley, late of Pepsi-Cola.
It was shortly after that statement that everything changed. The computer industry went into a slump, with Apple, in particular, hit hard; Sculley, on the ropes, decided that his friend and mentor, jobs, was too impractical to be calling the corporate shots and, after a much-publicized showdown, forced Jobs out of an active role. Jobs packed up his shares (an estimated $100,000,000 worth) and left the company he and his hacker-genius partner, Stephen Wozniak, had begun in a garage. Then, with the computer industry resurgent, Sculley went on to pilot Apple back to health. Of such stuff are business legends made.
Some quick background data: In 1982, the personal-computer industry was flying high, but its first customers-the so-called early adapters-were quickly becoming sated. To continue its astronomical growth rate, the industry had to start selling-and selling hard. Its new targets were millions of people who hadn't used its technology and who had no intention of buying a personal computer.
A handful of Silicon Valley firms recognized that brilliant young engineers lacked the managerial skills to lure this new market segment. So they looked East. Tapping such established consumer powerhouses as Consolidated Foods and Pepsi-Cola, Silicon Valley companies such as Atari, Osborne and Apple recruited some of the top corporate guns. Most are back East now, and many of their Silicon Valley companies are gone. But one company remains, along with its hired gun: Apple and Sculley.
Hired as chief executive officer in March 1983, Sculley borrowed from his background in marketing to draw media and dealer attention to new Apple products. With his help at the podium, Jobs unveiled the innovative Macintosh computer in January 1984. Three months later, Sculley, jobs and Wozniak showed off the sleek Apple IIc-the latest version of the company's original computer-to an S.R.O. crowd in San Francisco's Moscone Center. That day, dealers committed to 50,000 units-a record in anybody's book.
Then the worm in Apple turned. By 1985, the company was swimming in excess Apple IIs. Macintosh sales were slowing to a trickle as promises of Powerful software from other companies went unfulfilledd. IBM had surged ahead, and it looked as if its standard for computing would be the only one accepted by the business world. And so, after Jobs's departure, Sculley set about overhauling Apple's freewheeling policies, a strategy that featured layoffs in the hundreds "The dark days," he calls that time.
But his strategy seemed to work. Within six months, he had turned excess inventory into cash and had raised the corporate bank account to half a dollars without a penny of- bank debt. The Macintosh Plus computer, a much more Powerful and somewhat expandable version released in early 1986, suddenly became popular with a broader base of corporate users, particularly given the Phenomenon of desktop publishing, in tandem with the high-resolution LaserWriter printer. Apple's stock more than tripled, and the company established itself firmly as the alternative to IBM. In the process, Sculley emerged as the third folk hero in Apple's short history-less colorful than Wozniak, less charismatic than Jobs, but the right Person for his time. On the cover of Business Week, in the running for Chief Executive magazine's top honcho of the year-the very model of a marketing man.
Sculley was born in 1939 and was raised largely in Bermuda (home of his mothers family for 370 years) and then in the Northeast. He studied architecture at Brown University, where he picked up his B.A. in 1961. While using the Wharton School of Finance's IBM punch-card sorters for his research data, he discovered and became smitten with marketing. After earning his M.B.A. from Wharton, he worked for an advertising agency, focusing on market research and planning,since "that's where most of the marketing was being done." Detecting a shift toward more in-house corporate marketing, he landed a job at Pepsi-Cola.
After assigning him to drive trucks and lift cases, Pepsi finally resituated him behind a desk where, as marketing vice-president, he wrestled with such problems as the design of the Pepsi bottle and the introduction of multipacks. Later, he volunteered to take over Pepsi's international snack-foods division, which had been a financial loser for the corporation.
He immersed himself in the job for the next three and a half years, learning Spanish and German to carry out business more effectively. In Brazil, for instance, where Pepsi was running a Potato-chip-and-pretzel factory, local regulations prohibited the importation of some manufacturing equipment the plant needed, so he and his team brought in parts tucked inside suitcases. He was having so much fun running this "adventure," as he calls it, that he turned down several offers of the Pepsi presidency. Reluctantly, he gave in and took the helm in 1977. Under his command, the company issued the Pepsi Challenge and launched other marketing strategies to lift Pepsi into the Position of the top-selling U.S. soft drink.
Then, in 1983, the American business community practically went into shock when this President of a huge, successful consumerproducts company announced that he was resigning to join a somewhat exotic, high-risk company in an industry whose bubble could burst at any instant. And that was when the fun really began.
Sculley has never spoken about the turbulence of the Past few years or of the human drama surrounding job's ouster. To much of the business community, he did what had to be done in a business-first way. To Jobs's partisans, he was a cold-blooded corporate robot. We thought the time was light to take a look under Sculley's cover and examine the circuitry inside, and we asked veteran gadgeteer and free-lance writer Danny Goodman to do the job. His report:
"Most of our interviews took place at Apple's headquarters in Cupertino, adjacent to San Jose. While there is pretty tight security in the lobbies of each building, there are no electric fences or guarded driveways surrounding the compound as there are at other large high-tech corporations in Silicon Valley. In fact, Apple's headquarters resembles a California junior college campus.
"Sculley's office is small and Spartan by Fortune 500 C.E.O. standards. When he's not checking out the latest engineering discoveries firsthand in the labs or scouting Apple's world-wide empire, you'll find him in his office, dressed in jeans or other casual clothes, feet up on the table. During one lunchtime interview session, he munched on a peanut-butter-and-jelly sandwich, washed down by the omnipresent mineral water. He has given up on soft drinks.
"Sculley's passions appear to run deep for Apple and the future that it can help shape. He talks constantly about Apple's 'mission' and 'vision'-terms that draw a wary eye from the corporate establishment. He's convinced that he is bringing a vision into focus and providing talented people. with the resources to achieve that vision. When I asked him if he'd rather be a great inventor or a patron, Sculley replied, 'All of us want to be Leonardos, but some of us have to be members of the Medici family, too.'
"When it comes to the patron's demands, he admits, 'I'm not embarrassed about setting very demanding standards. At the same time, I'm a little bit of a pushover, because I do care a lot about People. If You didn't care about individuals, how could you possibly care about building computers for individuals?'
"It was the subject of his relations with individuals-in particular, the famous encounter with Steve Jobs-with which I chose to start the edited version of this interview. Incidentally, the first draft was edited on a Macintosh word processor, then was transmitted over a telephone to my Playboy editor, who gave it its final shape-on an IBM-compatible computer."
PLAYBOY: You've been at the center of one of the great business stories of our time: You left a traditional soft-drink company to run a new-age computer company; you got into a celebrated shoot-out with Apple's cofounder Steve jobs; then you brought Apple back from the brink. Let's start with the jobs part of the story, since you haven't talked about it before. How did you come to force your mentor-and friend-out of the business he'd created?
SCULLEY: It was a very difficult time. Steve Jobs was the one who hired me away from Pepsi-Cola. He was the one who said to me, Do you really want to be selling sugar water for the rest of your life when you could be changing the world?
In my first couple of years at Apple, we were constantly debating, but we had this shared idea of how things were going to be in the future. We believed that the technology was going to become transparent to the user; that the focus on the individual was the key to real productivity, even in the large institutions; that graphics as going to become a very important factor for computers. You had to have a recognizable way of getting information. Just spewing out print-outs wasn't going to work. If we didn't make all of this interesting to people-if work wasn't fun-then the computer really wasn't going to live up to its potential. So there was never any conflict on those ideas.
PLAYBOY: Then what happened between you?
SCULLEY: The conflict was in how the company ought to be run.
PLAYBOY: What were the two views?
SCULLEY: Steve's view was that it had to be decentralized, because the only way to hold on to entrepreneurial-type people was to give them the chance to, in effect, run their own little business inside a large corporation. My sense was that a more overriding issue was to have one Apple. We were competing too much with ourselves. We had to have an organizational approach that would centralize the process of management by making sure that product development was working on building products for the market place and not competing with other parts of Apple.
It came down to the level of confidence we had in each other. Steve didn't have confidence that I could run Apple, because he didn't think I knew enough about the product operations. I didn't think he knew enough about operations and management. That's where the major disagreements were.
PLAYBOY: As the new guy and the outsider, weren't you the long shot to be the survivor of any conflict between you and jobs?
SCULLEY: Well, Apple is a company that no one could lead without the support of the board, the executive staff and the managers. Because hierarchy is far less important in a third-wave company, it's the networking and informal communication that really determine what gets done.
It came down to a question of which one of us had the support of those groups in the company.
PLAYBOY: When you saw you were going to go head to head with Jobs, did you lobby for their support?
SCULLEY: No. It had nothing to do with lobbying. I'd been hired by the board to do a job, and the members wanted me to do that job. They didn't want Steve interfering with my doing it.
PLAYBOY: How did the board get involved with the conflict?
SCULLEY: It began when I told Steve that I was going to tell the board I didn't think he should be the general manager of the Macintosh division. I thought he ought to be the chairman and focus on setting the vision for the corporation. He should create the next base of technology and maybe lead a team that would build the next great products, as he had done with the Macintosh. This was back at the end of March 1985, when it was clear that the two of us were on a collision path.
I told Steve I was going to bring this up with the board and I wanted him to know it ahead of time. Then I told the board that this was my recommendation. Their alternative was to find a new C.E.0. later on. I felt this company was going to get into serious trouble and it was impossible for me to carry out my job. So I was, in effect, telling the board that they were going to have to make a choice.
PLAYBOY: In effect, you were trying to kick Jobs upstairs.
SCULLEY: I wanted Steve to continue to be chairman. I wanted him to lead a newproduct team, focus on new technologies and let me run the company, which was what I had been hired to do. And when I recommended it to the board, they agreed.
PLAYBOY: Did jobs agree?
SCULLEY: He agreed-reluctantly. He wasn't very happy about it, to say the least. He asked for as much time to make the transition as possible. I felt that that was only fair, because he was a cofounder of the company and the principal visionary.
Then it became clear in the following month or so that Steve wasn't comfortable going off and doing that. He wanted to run the operations, and he was still intent on getting me out of the company. The only way he could have a chance of staying in any operating role was by getting me out. It came to a showdown between us.
PLAYBOY: By then, the feud was being reported avidly in the press. But the board made the decision to back you, right?
SCULLEY: The board felt they had already made that decision.
PLAYBOY: You mean by agreeing to your original recommendation?
SCULLEY: By then, Apple was getting into serious trouble. The attention of management had to be on getting the company turned around, not on having the two top people argue over who was going to run the company. We had to not only reorganize the company but accelerate the decision that had been made in the board meeting: that Steve move out of operations.
Rather than do that over a number of months, which would have taken until the end of 1985, I accelerated that immediately. Steve was left with the role of chairman, but he didn't have any operating responsibilities. Obviously, he wasn't very happy about that.
PLAYBOY: Jobs was your friend. Didn't he feel betrayed by you?
SCULLEY: Apple was Steve's whole life. It was almost impossible to separate the two personalities. Macintosh was like a son to Steve. And then to have the person he had brought in-I wouldn't have come here without Steve's persuasion-be the one who finally pushed him out was an incredibly difficult thing to handle.
PLAYBOY: How did he handle it?
SCULLEY: When we were walking through the Stanford hills talking about it, Steve said "I feellike somebody just punched me in the stomach and knocked all my wind out." He went on, "I'm only 30 years old and I want to have a chance to continue creating things. I know I've got at least one more great computer in me. And Apple is not going to give me a chance to do that.
I said, "We'll give you a chance to create the next great computer, but you're not going to run the operation. The company is in a precarious position, and right now, all our energies have to be focused on getting the company turned around."
Those next few months were really difficult ones for Steve.
PLAYBOY: And for you?
SCULLEY: From my standpoint, all of my energies were then focused on getting the company turned around, To this day, Steve and I still haven't spoken.
PLAYBOY: Will you two ever reconcile your differences?
SCULLEY: The relationship we had and the relationship Steve had with Apple were so personal that the pain is deep. I don't have any reason to believe that Steve agrees with the way Apple is being run today. Now he's gone and started his own company [Next Inc.],
PLAYBOY: The idea that you'd end up on top at the most famous company in Silicon Valley was pretty improbable from the start, wasn't it? You didn't exactly start a business in some garage; you were in marketing at Pepsi.
SCULLEY: Yes, it's a long distance between high fizz and high tech. But I wasn't even headed for business in the first place. I began as an architecture student, but I discovered marketing one summer I worked at an industrial-design firm. I worked on the Crest tooth-paste package at the very time that Procter & Gamble had gotten the American Dental Association seal of approval-we put their words right on the tube. Marketing as we know it today was just being discovered back in the late Fifties and early Sixties.
PLAYBOY: You eventually transferred to the University of Pennsylvania's business school to study marketing. What did you do with a Wharton M.B.A. under your belt?
SCULLEY: I went to an advertising agency, working on market research and market planning.
PLAYBOY: What made you go to Pepsi?
SCULLEY: By the late Sixties, marketing was beginning to shift from agencies to companies. Lots of companies were trying to emulate the success of Procter & Gamble. I realized that I was going to have to go to a company to pursue marketing.
PLAYBOY: Pepsi must have welcomed a Wharton M.B.A. at that time.
SCULLEY: I was the first M.B.A. that Pepsi had ever hired. They didn't know what to do with me. They said I should go on a training program and learn the soft-drink industry. I went to Pittsburgh and drove a route truck there. I wasn't strong enough to lift the cases, because in those days we had to wheel six or seven cases at a time up and down stairs, going down into these taverns. So I had to work out at night to get strong enough to lift them. Then I was sent to Phoenix to put up Pepsi signs. And then I went to Milwaukee, driving trucks.
I went back to New York, and still nobody knew what to do with me.
PLAYBOY: Someone must have figured it out. By 1970, you were promoted to marketing vice-president.
SCULLEY: It was a high-wire act, you know. I was clearly thrust into a job for which I wasn't ,fully qualified at that time.
PLAYBOY: Are grocery-store shelves different today because of things you did for Pepsi back then?
SCULLEY: Well, there's the story of the bottle. The first assignment I was given as marketing V.P. was to come up with a better-shaped bottle than Coca-Cola's. Pepsi had been working on this for years, but every time they came up with a bottle, it ended up looking like the Coca-Cola bottle. That's the shape that fits in vending machines, runs down bottling lines most efficiently, has the lowest breakage and is most comfortable to hold.
I thought about this for a while and said, "I think we're trying to solve the wrong problem. Why are we trying to make a better bottle? It's a pretty neat bottle. What we should be doing is figuring out how to get more product into homes."
PLAYBOY: What did you do?
SCULLEY: We ran a consumer survey. We placed cases of Pepsi-Cola in people's homes, coming back each week and replenishing the stock to find out how much they could consume.
PLAYBOY: And what did you find?
SCULLEY: The amazing thing we discovered was that there was no upper limit. We were also putting other products in there, but they weren't getting used up. Tooth paste-how many times can you brush your teeth in a day? But with soft drinks, as many as we could move in there, that's how many would be consumed. That struck me as a very important fact.
So we developed large multipackstwelve- and 24-packs of cans, one- and two-liter bottles, twin-packs and fourpacks of one-liter bottles. We just went crazy coming up with all these packaging concepts. It worked.
PLAYBOY: You were promoted quickly and served overseas before coming back to the States to become president of Pepsi.
SCULLEY: Yeah. I was having a ball running this international operation. Finally, I reluctantly agreed to come back in 1977. I did that for five years before I came to Apple. During those five years, we pushed Pepsi into the number-one-selling soft drink by one measurement. We started up a food-service division; we introduced new products; we ran a successful Pepsi Challenge campaign and numerous other things. It was a period of robust growth for Pepsi.
PLAYBOY: While you were at Pepsi, did you get your hands on a personal computer?
SCULLEY: The first time I saw a personal computer was around 1980. I went out and bought an Apple II, because I was interested in finding a low-cost information system for Pepsi-Cola bottlers.
I remember opening up the computer and looking inside. I said, "There's nothing there!" I couldn't believe it. I'd been a radio and electronics hobbyist as a kid.
PLAYBOY: And you wondered where all the tubes were?
SCULLEY: Yeah. I had loved all the tubes. I loved the excitement of finally getting something powered up and seeing the tubes all light up. The more stuff that was in there, the more sophisticated the product.
PLAYBOY: But it wasn't until 1982 that Apple approached you.
SCULLEY: Yes, through an executive recruiter. My first reaction was "Gee, those guys at Apple are doing something neat. But why in the world would they want to talk with me?"
PLAYBOY: When did you meet Steve jobs?
SCULLEY: My first meeting with Steve jobs was here in Silicon Valley, over lunch. Mike Markkula, who was then C.E.O. of Apple, was the one who was actually doing the search, because he wanted to retire. So I spent the morning with Markkula, then we had lunch with Steve.
PLAYBOY: What went on during that meeting?
SCULLEY: Steve was very quiet. He listened to what I had to say. At the end of it, I was telling them about my ideas, how I approached marketing and business. I think he was somewhat intrigued by the fact that I was not caught up in the hierarchy or traditional things associated with corporate America.
A few months later, I was up in Maine and I got a call from the recruiter. He said, 'John, they really want to see you again." That's when the process began. For the next few months, Steve Jobs would fly to New York or I'd fly out here. We spent time getting to know each other. It wasn't until March 1983 that I finally made the decision that I had never thought I would make: to abandon everything I'd done in my entire business career and start over again.
PLAYBOY: What persuaded you?
SCULLEY: The fact that I would have wondered for the rest of my life if I'd missed one of the greatest adventures anyone could possibly have. I'm a romantic at heart. The recruiter, Gerry Roche, said to me "Think of Silicon Valley as Florence in the Renaissance. It's the place where anybody who is excited about doing something to change the world wants to be." Gerry had a great ability to size me up and know what turned me on.
PLAYBOY: When did you first meet Stephen Wozniak?
SCULLEY: I didn't meet Steve Wozniak until much, much later, because he had stepped outside the company at that time. I think it was probably six or eight months after I joined Apple that I met him.
PLAYBOY: Did it strike you as odd that two such different personalities could have formed a company together?
SCULLEY: I was taken aback the first time I met Wozniak, because he is just a truly nice, gentle person. I was interested in the contrast between Steve Jobs and Steve Wozniak. jobs thinks like a pioneer and is a visionary, whereas Woz just loves technology. All he wanted was for everyone to have as neat a time with the Apple II as he'd had with it. The idea of building a company or changing the world was less important to him.
PLAYBOY: And where did Markkula fit in all of this?
SCULLEY: There were really three founders, not two. Mike had a very strong business head. One thing that impressed me about Apple was that while the popular image was of two young boys starting a company, it was actually backed by one of the most sophisticated, experienced boards of directors you could find. A lot of the credit there went to Mike for being able to attract the kind of board that Apple had.
PLAYBOY: Once you made your decision to head West, what did your colleagues at Pepsi think?
SCULLEY: They thought I had absolutely lost my mind. They kept saying, "Think of the C.B. radio, think of the Hula-Hoop, think of all those other fads." And I said, "It's not a fad." Even in the most difficult moments, I've never regretted it and never had a second thought about my coming out here. I always wanted to be a great builder more than I wanted to be a great businessman. My excitement is in building cathedrals; and I felt that when I came to Apple, I would have the chance to build cathedrals. There were so many things that would have to be invented if this industry was even going to begin to live up to its potential.
PLAYBOY: You had no doubts about the risk you were taking?
SCULLEY: I think there were people at Apple who had doubts.
PLAYBOY: About someone from the outside?
SCULLEY: Yeah, about me. When I first came in, I was looked at as the East Coaster, the Connecticut Yankee in King Arthur's court. Remember, this was Camelot.
PLAYBOY: You represented "the suits."
SCULLEY: I never wore suits, but people probably thought I went home and put one on there. [Laughs] But I didn't. I usually wore an Oxford shirt, buttondown collar, khaki pants and Docksides. That's East Coast casual. It was still different from the sandals, Jeans and T-shirts that the rest of Apple was wearing at the time.
PLAYBOY: So some of the rank and file were suspicious of you. Were you suspicious of them?
SCULLEY: Well, it was a lot more than 3000 miles from East Coast corporate America to Silicon Valley. It was an entire generation, because the average age at Apple at that time was 27. I was 44.
At a point in life when most business people are starting to figure out how they can get more time to spend on the golf course at the local country club, I was poring over textbooks, trying to learn digital electronics. I had to learn an entire new language. I left my family back on the East Coast for the first five months while I lived at a local high-tech hotel. I hung out with all the hackers and technology people I could and kept absorbing as much as I could. Steve Jobs and I were inseparable.
PLAYBOY: Once you got to know Apple a bit from the inside, how did it compare with the mythology built up in the press?
SCULLEY: I found that Apple was every bit as exciting as anything that had ever been written about it. I also found that because it's a company that had been driven from its inception by vision more than by policies, it was often difficult to tell the reality from the dream. I'd be talking to people about something as though it existed. Then I would discover that it didn't. It existed in people's heads, in their imaginations, but it didn't exist in reality yet.
PLAYBOY: What else took you by surprise?
SCULLEY: One thing was that so much of what Apple did revolved around what Steve Jobs wanted to do. His personality permeated the whole organization. What he was interested in at any moment was what the company would be focusing on.
PLAYBOY: Jobs headed the team that developed the Macintosh, so for a while the Apple II-your bread-and-butter computer-got such short shrift that in 1985, many of your most talented people bailed out. Wasn't there a point at which Apple seemed to be unraveling?
SCULLEY: That was a terrible mistake, and I have to take responsibility for it. It was done unconsciously. We were having trouble getting the products together for Macintosh on time. Overlooking the Apple II was really more oversight than anything else, Plus, I underestimated just how incredibly consumed Steve Jobs was with Macintosh alone. While I mentioned the Apple II in my speeches, it was lost in the extravaganza of the launch of the Macintosh Office concept. This clearly hurt the people who were working on the Apple II. Steve Wozniak was very upset, and it did lead to a serious morale problem within the Apple II division.
We've since corrected all of that with our reorganization of the company. Steve Wozniak reinvested in the company, because he saw that the Apple II was getting as much priority as anything else that went on at Apple.
PLAYBOY: Weren't those also the days when the computer industry had begun to slump?
SCULLEY: The dark days were in early 1985, when the industry went into a tail spin. We had overextended ourselves with too much inventory, too much decentralization. I realized Apple was out of control.
PLAYBOY: Did you think Apple might go under?
SCULLEY: I never seriously thought Apple would become extinct. I had been through turnarounds before at Pepsi. I knew what it took to wind expenses down. That doesn't take particularly unusual skills.
PLAYBOY: Cutting expenses is one thing. But many would say that you went after the unique corporate culture Apple had evolved.
SCULLEY: I knew that if Apple was going to be successful in the long term, there were some things that were going to have to change. We were going to have to have more discipline. I was searching for more discipline, not more control.
PLAYBOY: By that, you mean something other than fiscal discipline?
SCULLEY: Yes. Such as accountability. A few people can let everybody else down. Apple was a company that had never had to think about accountability. The really big issue had always been "How do we get more product out there, since people are lined up in front of the computer stores waiting to take the stuff home?" This wasn't true anymore. People weren't lined up in front of the dealerships anymore, for our products or anybody else's. The dealers were going into bankruptcy.
PLAYBOY: Was it a shock that Apple was now going to have to sell computers?
SCULLEY: Well, the shock was, I think, that it happened so fast. I think we always knew in the back of our minds that there were going to be changes. It was one of the reasons that I had been brought into Apple. But none of us thought it was going to come as fast as it came.
PLAYBOY: Where did you start?
SCULLEY: I knew that we were going to have to sell to a different kind of customer from the one Apple had traditionally sold to. The company had been founded by people who built the kinds of products they wanted for themselves, and they sold to people like them-enthusiasts. Yet that market was getting more and more narrowly defined. At the same time, the personal-computer industry was moving from stand-alone products to products that could connect into systems.
PLAYBOY: Wasn't that getting away from Apple's original idea: one person, one computer?
SCULLEY: Well, no. That one computer wasn't going to be a stand-alone box anymore. That computer had to have the ability to connect with the rest of the world. To accomplish that, it was going to take a radical shift in the sort of research and development that Apple had been doing, even in the kinds of products that Apple was going to be selling.
PLAYBOY: You were telling this to a bunch of engineers and designers who prided themselves on building "insanely great computers." How did they take this new philosophy?
SCULLEY: They reacted in horror at first. They felt that I was going to turn Apple into a systems company, another big, boring computer company. And that's not why they had come to Apple.
So it took a long time to convince people that our primary goal was still to create tools for the individual. Whereas the traditional computer-systems company was more interested in connecting machines to machines, we wanted to connect people to people. Whereas the traditional computer company still looked at the giant mainframe computers as the center of everything, with the personal computer a peripheral, our vision was to create a system but to have the mainframe peripheral to the personal computer.
It took the better part of a year to talk these ideas out. It meant that I had to learn and appreciate the passions of engineers; it meant that they had to learn and better understand the perspective of a marketing person.
PLAYBOY: A lot of the old guard didn't agree with you. Many of them left.
SCULLEY: That's true. We lost some very good people along the way. But we also held on to some very good people. We took advantage of the industry slump. We've been able to attract some world-class computer scientists over the past year.
PLAYBOY: This was also the year high tech became glamorous again-computer stocks shooting up, the U.S. Congress getting tough with some Japanese chip manufacturers and both Apple and IBM launching a new generation of products. But in 1981, when IBM first followed Apple into the PC business, Apple took out full-page ads welcoming IBM; the IBM-PC practically blew Apple away. Are you as cocky today?
SCULLEY: As it turned out, the original welcome was like Little Red Ridinghood's welcoming the wolf into her grandmother's home. There is a very fine line between being self-confident and getting cocky about it. We have all learned a lot.
PLAYBOY: Is Apple prepared this time for what IBM has put into its new machines?
SCULLEY: It was only a matter of time until IBM came out with a new generation of products. It was obvious that IBM was coming up against the wall in terms of its operating-system technology. With more powerful chips available, it was going to have to make a change-over.
PLAYBOY: But you'd claim that Apple beat IBM to the punch.
SCULLEY: We pushed everybody at Apple almost to the point of burnout for the past 19 months. We had to reposition the company and develop second-generation products prior to any IBM announcement. When IBM's announcement came out, it was anticlimactic. You could already buy something from Apple. But it was only a statement of direction from IBM.
PLAYBOY: You mean because its new highpowered operating-system software won't begin to appear until next year?
SCULLEY: Well, I wasn't going to say it, but I will anyway: IBM's announcement was like General Motors' saying it's going to change every car in its line-but when you get one, you discover there's no gasoline available that will run it. What IBM has announced are hardware boxes they can ship now but [whose full potential is] dependent upon sophisticated systemsoftware technology that won't be available for a couple of years. This gives Apple a big window of opportunity over the next two years, because we have it all. We don't have to talk about statements of direction or promises in the future. That's the kind of information that really travels best by word of mouth, from people who are using the products.
I think that's one of the reasons our stock jumped five points the day IBM made its announcements and its stock went down
PLAYBOY: Wait a minute. Apple's stock dipped in the two days following your newproduct announcements.
SCULLEY: Yes. Hmmm. I suppose that's not a good measure. But in any event, our stock seems to be holding up strongly. And our sales continue to get stronger, even after the IBM announcements, which again shows the power of word of mouth.
PLAYBOY: When you talk about Silicon Valley, you talk a lot about visionaries and madmen, almost as if those of you in the computer business were on some sort of cosmic mission. Doesn't all this sound a little . . . flaky to the East Coast establishment?
SCULLEY: Corporate America is becoming very curious as to why all the net increases in jobs in America are occurring in small businesses, not in large corporations. Its leaders are curious as to why the innovation of really neat ideas is occurring with entrepreneurs, not in the departments of these large organizations-not just in computers but in genetic engineering, biomedical technologies, retailing, almost any field you want to choose.
Perhaps the most remarkable observation is that building a company on vision, as opposed to building it on policies, is exactly the way those giant corporations began in the first place. As they have gone through generations of management and sanitized the vision down to a systematic process, many of those companies have forgotten what their original vision was.
So a lot of leaders of corporate America, because their industries are being deregulated, because of the competition in a global dynamic market place, are having to rethink the visions of their companies. And I think we're going to see a lot more espousing of vision.
PLAYBOY: The question, though, is whether the Apple created by Steve Jobs's generation-quirky, experimental, individualistic-will end up being swallowed by traditional corporate values, or whether some of Apple will rub off on the business culture at large.
SCULLEY: Well, Florence changed the direction of artand literature in the 15th Century, but the entire world didn't end up looking like Florence. If we're successful in these experiences, some lessons will emerge that may be transferable to other industries.
I've said publicly on several occasions that we would find bridges into the world and we would even find ways for some of our products to implement that standard. But there has to be something better out there. We have to have a clear identity. We have to stand for something.
PLAYBOY: But how can you claim that Apple is the repository of small-business values when it's one of the 200 largest companies in America?
SCULLEY: Conceptually, philosophically, we really are quite different from the rest of corporate America. There aren't many Fortune 200 companies that have as many young people running important parts of them as Apple does. There aren't many Fortune 200 companies that have as many female managers as male managers. There aren't many Fortune 200 companies that have given up the formality of the traditional hierarchy, where the work group becomes the epicenter, as opposed to the pyramid of the organization. I mean, how many large companies have titles such as Evangelist, Wizard or Champion?
PLAYBOY: Do those people have those titles on their business cards?
PLAYBOY: What's the job description of an evangelist?
SCULLEY: He takes our platform technologies and helps other companies get excited about developing their products to fit on top of ours.
PLAYBOY: If your card didn't say Chairman and C.E.O., what would it say?
SCULLEY: [Long pause] I guess something like Chief Listener.
I think most of what a C.E.O. in a third-wave company does is listen very well. What you are listening for are the really good ideas. You're listening for whether the organization feels good about how it's doing. Is it in touch with its values? Are the values still relevant? Is it in touch with the market place?
PLAYBOY: How is that so different from the traditional C.E.O.'s functions?
SCULLEY: In a third-wave company, you can't be a remote leader. Decisions are made in a radically different way from traditional corporate America's-or Japan's, for that matter.
In the traditional American approach, it's from the top down, where the top management has a staff that does analyses and projections. The top management makes the decision and then imposes it on the organization. Because not everybody in the organization may understand the decision very well, it takes a long time to implement, though a short time to plan.
In Japan, it's just the reverse. It's a consensus-building process that moves up through a very rigid, formalistic hierarchy. It takes a long time to plan but a relatively short time to implement, because once it reaches the top, everyone has reached consensus on it, and it's well understood.
PLAYBOY: And at Apple?
SCULLEY: At Apple, it's neither one of those things. The ideas can occur anywhere in the organization. But you have to get people to buy into them as being consistent with the vision, values and goals of the company. So top management is not predetermining company strategies. By providing the stability of a clear corporate identity, directional goals, values, a work environment where people can thrive and the resources they need, the top management is adding wisdom. Every part of management is expected to add value.
PLAYBOY: What about the responsibility of business management for cutting expenses?
SCULLEY: I think one of the mistakes of our business system today is that we give business leaders too much credit for cutting expenses and we don't hold them responsible enough for the important things they're doing to build a great company five or ten years out. It amazes me to open The Wall Street Journal and see some executive being praised for laying off people, consolidating factories and turning the quarterly earnings around for the previous year. It always amazed me that I got praise for doing that, because I didn't think that was something to be very proud of. The things that I think we all want to be proud of are what we are doing to build a company that can really make a difference in the world.
PLAYBOY: Have you found any other corporations in, say, the Fortune 500 that share this philosophy?
SCULLEY: You find a lot of corporations much smaller than ours that do.
PLAYBOY: But not the bigger ones
SCULLEY: I haven't found one yet. There may well be one. But it's encouraging that there are so many small companies that can identify with everything I've been talking about. It's the large corporations that look askance at this and say, "Is this guy for real?" Or "Has he been snowed by Silicon Valley and lost touch with reality as he knew it back in corporate America?" I firmly believe that by the time we cross over to the 21st Century, we and smaller companies will be the source of management concepts. Business schools are going to be more interested in those kinds of things than in just giving you case histories of success and failure from the industrial age.
PLAYBOY: We're in an era, it seems, of C.E.O.s as media personalities-Lee Iacocca, Victor Kiam. Is our interest in business leaders a fad, or will it last?
SCULLEY: A C.E.O. as personality or as corporate hero is going to last only if he has something to say. The ones to look at are not the C.E.O.s who are already in their mid-50s to early 60s. They are largely products of the industrial age. The more interesting thing is to look at the C.E.O.s who are emerging and who will emerge over the next five to ten years. My sense is that they're going to be very, very different. They'll have fundamental ideas that they care about.
PLAYBOY: How do you feel about the current rap on American C.E.O.s-that they are consumed with meeting the short-term expectations of stockholders, while the Japanese and others take the long view?
SCULLEY: I believe that we'll see a new generation of C.E.O.s emerge who are driven by longer-term values and goals. Even the computer-trading institutions and pension funds will see the value of those companies' stocks increase more consistently.
The problem is that we select C.E.O.s by a process that weeds out the risk taker, the person who may have taken a chance and made a big mistake. That person often gets penalized in corporate America. Why do we reward people for playing it safe? The result is a leadership that is very cautious and a shareholder body conditioned to expect leaders to make shortterm decisions.
PLAYBOY: Is it too late for the large American corporation to adapt to new ideas?
SCULLEY: Most big corporations carry with them very heavy baggage. Apple can change as quickly as it does because we grew up in an industry that exploded with growth, that was filled with crises at every turn. To survive, we and others had to adjust quickly to changes. It's that to compete in a global dynamic economy in the future, we're going to need as a country a different set of values, values that require a lot more flexibility. That requires a lot more attention to the quality of products. It requires a lot more dependence upon innovation. Those are not three characteristics you find very often if you go to the Fortune 500 companies.
We're in one of those extraordinary moments in time-a transition point between the industrial-age economy and the information age. And the wrong way to interpret the information age is just to say we're going to do the same old thing, because we'll drown in the information. The right thing to do is say, "How do we get innovation into business again?"
PLAYBOY: Why is innovation so difficult for traditional large companies?
SCULLEY: Because it's not something that has been rewarded. People aren't rewarded for quality, flexibility and innovation. People are rewarded for market share. They are rewarded for return on investment. They are rewarded for earnings per share. The reward system is out of sync with what it will have to be in the future.
PLAYBOY: What will happen to these giants that can't adapt?
SCULLEY: In a true free market place, some of them will disappear. Even the largest ones will disappear. We've already seen the impact that the Japanese have had on the automobile industry. Now we're just beginning to see the Koreans, the Brazilians and the Yugoslavs decide that that's a pretty good paradigm to follow.
There is intense competition in traditional industries where size was once considered the major assurance that you were going to be successful. I don't think that it will be limited to the car industry.
PLAYBOY: Then you obviously don't think that protective trade legislation will work.
SCULLEY: Most business and Government people are chasing the wrong answers. They're "Do we put in protective legislation?" or "Do we change the tax laws?" or "Do we have to get labor unions to make concessions?" All those things are symptoms of a root cause, which is that our educational system is wrong. It doesn't work anymore.
The jobs that exist in the emerging information economy require conceptual skills. They require people to be able to use and work with information. When we match those requirements against the kind of education that kids are getting today, we see that we're not preparing them for the world they're going to live in.
PLAYBOY: Specifically, what do you see as the problem?
SCULLEY: We should ask why we are training kids to memorize dates like
SCULLEY: Yeah. Why are they worrying about the dates of Presidents, kings, wars and famines, when we can access that factual information at a moment's notice with computers? What we really want kids to do is to simulate an experiment with information.
PLAYBOY: What would such an experiment be like?
SCULLEY: For example, to project what would have happened if there hadn't been a drought in the United States during the Depression. If we could have changed that, what might have occurred if everything else had stayed constant? That's a way you could take an event and bring it down to a scale kids could recognize. So if you're in Oklahoma and you're studying the Depression, you can really talk about things that happened to some of your relatives a generation or two ago.
This is a way of making learning a lot more interesting. Until we move away from the rule-bound structure of our learning system and move toward a flexible educational approach that is more individualized and more interesting, we're not going to break through in terms of providing our kids with the skills they'll need in the information age. It's a national issue. It will probably take a crisis like Sputnik, which got us all marching in the same direction to put a man on the moon.
PLAYBOY: what would be the modern-day equivalent of the Sputnik crisis?
SCULLEY: I've thought a lot about it. In the next 20 years, about 25 to 30 percent of the teachers are going to retire, because we haven't been attracting new, young teachers into the work force. Remember, women were primarily teachers in the past. And as women now have alternatives that are higher paying, the teacher population is getting older and older. About 20 percent of teachers are now in their mid-50s.
So all of these teachers will retire about the same time that I believe the Soviets will land a manned mission on Mars. And that is the same time that it's been estimated that the value of the Japanese stock exchange will exceed the value of all the American stock exchanges.
The combination of those events' converging will suddenly wake people up. We need to put better tools in the hands of students and educators and begin to redefine what learning is all about. Learning could be a lifetime experience.
PLAYBOY: Do you think the Japanese offer a model for a future educational system?
SCULLEY: One of the great strengths of the Japanese educational system is not that their kids have more days per year in school or that they work harder-both of which are true-but that they have elevated the teacher to a much more important role in society than we have. Untilwe do that, we're not going to attract our best people to becoming teachers. Japanese teachers make considerably more money in comparison with other workers than their American counterparts.
Another difference in the Japanese system is that the role of the parents is integral to the education of the kids. The mother is expected to play a very important role, so the kids aren't given the freedom of all the extra time that our kids have during their teen years.
The Achilles' heel of the Japanese system, though, is that they try to make everybody the same. They really try to restrain innovation and creativity. Their reward system is contrary to building innovation. In contrast, our reward system tends to lean more toward rewarding the individual. We recognize individual accomplishment. I believe we've got to strengthen that, whether it's in business, education or government.
PLAYBOY: Do you think there's a lesson there for American businesses being walloped by the Japanese?
SCULLEY: It's ironic, because we think of Japan as a country that has very wellmanaged businesses; but if you look inside Japanese organizations, you will find that they are even more tradition-bound than their American counterparts. They have more hierarchy. They are totally homogeneous. You don't find any female managers to speak of You find very few non-Japanese. They haven't provided the environment for the individual to be innovative and make a personal difference.
What they have done so well is maintain very high standards of quality. They take a long-term perspective. They have learned how to get along without natural resources for a long time. And now, as we shift into an information economy, where natural resources are not the strategies resources but the strategic resources are information and access to a market place, Japan looks really good.
PLAYBOY: Is Apple threatened by the possibility of Far Eastern clones' coming in and taking business away from it-in much the same way that it has taken a good share of IBM's market?
SCULLEY: No. Apple focuses on building products that have meaningful differences, where we are able to be in control of our own technologies, and we make it difficult for someone else to copy them. IBM followed a strategy where they left someone else to find the technologies, and that's come back to bite them. I believe that IBM will start to move toward the more proprietary technologies. [IBM's new PS/2 system is thought to be much harder to done than its PC standard.] It's really in Apple's interest to see Apple and IBM both be successful with proprietary technologies, because it squeezes out die dones.
PLAYBOY: IBM's new machines are a nod toward Macintosh's graphics and ease-of-use standard, while your new Macintoshes openly acknowledge the IBM standard for the first time. Are the archrivals moving toward each other?
SCULLEY: Yes and no. There's no question we want to play in the mainstream of the industry. IBM has been the mainstream of the industry, and for the past few years, we've been pushed aside. But our goal isn't to march in ii nd take over a share of market that IBM had by doing the same things they do. What we want to do is open up markets that weren't there before-solve problems that can't be solved by anyone else's products.
I find it ironic that a year or so ago, everyone was saying we should standardize one computer architecture. We should all be the same. Most people did, and what happened was that the computer industry went into a slump: People stopped buying personal computers, because they didn't do enough of what people really wanted to be able to do.
We followed a contrariant approach, and the ideas that we were following that were too radical a few years ago are now being accepted in the mainstream. That wouldn't have happened if we had caved in and had just become part of the standard.
So I think it's important that there be companies that are willing to stick their necks out and be innovators and take a chance. And there have to be rewards for those who take chances and win. Even with something as dormant as the steel industry is in the United States-there are still some specialty steel companies that are doing extraordinarily well, and it's based upon innovation, flexibility and high quality.
PLAYBOY: If you were to find yourself running a traditional corporation tomorrow, how would you start implementing the lessons you've learned at Apple?
SCULLEY: There are two overriding characteristics that are transferable to corporate America. One is the basic concept that work ought to be fun and interesting. Many people misread the informality of Apple and smaller start-up companies as meaning we're not serious about work. To the contrary, it's because we find our work interesting and fun that we are so serious and get so much accomplished.
The second concept is that the network is a more interesting way to look at an organization's work flow than the traditional hierarchy. Hierarchies suggest that information moves up and down and that something happens between those levels. But in reality, that's not the way any company works best. Even the most hierarchical organizations work best when the informal network is carrying messages. All we have done in third-wave companies is to legitimize the informal network that has been around for many decades.
PLAYBOY: Could this have a catalytic effect on other companies?
SCULLEY: What I've discovered-and I hadn't known this untill came to Appleis that third-wave companies are totally dependent upon the network of thirdparty companies they can build around them. This allows us to think of our personal computers as platforms on which others can go and innovate; and, in fact, our experience is that the best innovation has been done not by us but by outsiders.
We didn't invent VisiCalc, as you know. IBM didn't invent Lotus 1-2-3. We didn't invent Pagemaker [the leading desktoppublishing software]. Those were all done by entrepreneurs, and the same thing is true of the impact on education. The impact on almost any market that Apple has been in has been caused by a network of resellers or a network of enthusiasts or a network of developers who are doing things with the platform technologies that Apple creates.
PLAYBOY: College students are big fans of Apple computers and, perhaps, of the kind of working environment Apple represents. How do you feel about the current rage for business training in college?
SCULLEY: When I think back to what my friends and I wanted to do in college, almost none of us ended up doing it. That suggests that it's very difficult to prepare yourself for what your career may be later on. The paradox is that what I'm doing today is exactly what I thought I wanted to do with my life when I was 12 or 13-to experiment with neat technologies and be in a very creative-intensive job. I think you eventually return to your roots. And all of that makes me ponder, What should you do with your time in college?
PLAYBOY: And the answer?
SCULLEY: I don't think I'd worry too much about what specific courses I'd take. I'd worry more about building a set of tools and experiences I could use later on, Try to hang out with people who have outrageous ideas. You never get a better chance than when you're in college to think outrageous thoughts. I would discourage someone &om trying to be too practical in college.
PLAYBOY: But the allure of $60,000-a-year starting salaries in investment banking is tempting.
SCULLEY: That doesn't make it right. People who are in college today are probably going to have at least two careers, maybe three or four. It's much too limiting to narrow yourself to preparing for a particular career. The people who are going to be really successful by the time they're 40 are the ones who never even thought about those things in college.
Remember, there's a certain amount of luck in life. Being in the right place at the right time with the right set of capabilities is as important as almost anything else. Can you think a problem through? Can you recognize an opportunity when it stares you in the face? A lot of people can't.
The distinctions between the liberal arts and the sciences will become less obvious over time. Nobody ever thought someone interested in poetry or the fine arts would want a computer. Yet we're seeing now in universities around the world that computers like the Macintosh are being used by nontechnologists to open up new possibilities. And that's why you see our ads emphasizing a lifestyle campaign in some respects, like "Pepsi generation" campaign-only now for the Apple II.
PLAYBOY: And so we come full circle. What do you see just ahead in your business?
SCULLEY: In the immediate future, desktop publishing will change the way people work, because it offers the opportunity fo individuals to create a document on computer, print out what they see on the screen exactly the same way on a piece of paper, mix graphics and text in a way that was never before affordable and transmit them electronically &om one remote location to another. The old axiom "A picture is worth 1000 words" will never be more true than when we have desktop publishing. It probably is one of the most exciting things to happen in terms of office productivity that we've seen since the original xerography was marketed 25 years ago.
PLAYBOY: And a little further ahead?
SCULLEY: Optical-disk media are going to revolutionize the way personal computers are used. We won't recognize computers in two or three years, I believe, because they will allow us to access information, whether it's pictorial, graphic, sound or text, that we couldn't have even imagined a few years ago. No longer will it be crude stick figures, but we'll see rich, full-color animations.
Another technology will be artificial intelligence. It will change the personal computer from an information machine to a knowledge system where most of the hard work will be done invisibly by software agents that wander through data bases and extract information that's relevant to the individual user.
PLAYBOY: Anything else?
SCULLEY: Yes-the appearance of the computer will change. It won't even resemble the form we have become accustomed to.
PLAYBOY: What will it look like?
SCULLEY: We'll either wear it on our wrists or carry it in our pockets. It'll use radio signals to access information or to send information back to a network. It will be difficult to tell where the telephone ends and the computer begins.
In some cases, we'll find computer technology sewn into the fabric of our clothes or embedded in the appliances in our homes. The personal computers we carry around in our pockets will be in constant contact with sensors embedded throughout our homes and in our automobiles.
It will be a world as different ten to 15 years from now as our world is from the pre-World War Two world. It's going to change that much.
That's why we need some stability. Without shifting our concept of stability away from bricks and mortar toward powerful ideas, we will become a very confused group of people.
PLAYBOY: One last prognostication. In 2087, when your great-grandchildren ask their computer for a one-sentence summary of the life of John Sculley, what will the computer say?
SCULLEY: "He helped turn the dream into a reality." A large part of the dream was already defined before I came, not just by the people at Apple but by other people in the industry. My goal is to help make sure that dream happens. Because if Apple doesn't do it, a lot of us believe nobody will do it.