Falling off the Apple cart

Apple is widely admired today, but its corporate past is widely chequered. One of its former CEOs provides a history lesson in the mis-transfer of executive talent. Clarke Simmons reveals what your company can learn from John Sculley's fall.
At the start of 2007, Apple Computer became Apple Inc. The name change reflects the fact that Apple – which today seems to be on everyone’s short list of hot companies – has migrated from a company that sells computers to a company that sells a wide array of consumer products, such as the new iPhone. But change is nothing new to Apple. Since its founding in 1976, Apple has had numerous up and down periods.Although its co-founder, Steve Jobs, again heads the company, Apple has had other CEOs. One of them, John Sculley, provides a captivating case study offering important lessons around executive selection, corporate culture and, especially, the transfer of management talent.

Sculley’s misadventures at Apple Computer occurred between 1983 and 1993. This episode in Apple’s history forms a cautionary tale of executive derailment. Indeed, every major thread of business management – marketing, product development, operations, finance, governance and leadership – is woven into this classic case of misjudgement and missed opportunities.

Ivy leaguer

A product of the Eastern US establishment, Sculley was born in 1939, one of three sons of a Wall Street lawyer. He went to exclusive preparatory schools before studying architecture at Brown University, followed directly by Wharton Business School. He had the benefit of every advantage except a warm childhood. Shaping influences made him smart, driven, self-focused and ambitious. He has been married three times and has two children of his own.

Sculley joined Pepsi’s marketing department shortly after college through the influence of his father-in-law and friend, PepsiCo chairman, Don Kendall. He was the first person at Pepsi with an MBA. Avoiding both the boon and bane of nepotism, Sculley worked hard and rose rapidly. During 16 years with Pepsi, Sculley redefined industry metrics and sorted out the international division. Sculley successfully led Pepsi-Cola’s effort to overtake archrival Coca-Cola in market share. By May 1973, he was on the cover of BusinessWeek and one of America’s top business leaders. Within Pepsi, however, he was reportedly seen by some as creatively brilliant but “one of its most devious corporate politicians and hatchet men”. In 1977, at just 38, he became president of Pepsi-Cola and a prime contender to become chairman of the PepsiCo conglomerate someday.

Apple of his eye

After an entrepreneurial climb of mythic proportions, in the early 1980s Apple Computer needed experienced corporate managers to sustain its burgeoning growth. Apple needed direction and discipline. This became acute with IBM’s 1981 entry into a personal computer (PC) market Apple had largely created. A former Intel marketing manager, Apple’s then chairman and acting CEO, A.C. “Mike” Markkula, recognized Apple’s management shortcomings, as did Apple’s young co-founder, Steve Jobs.

Apple retained Heidrick & Struggles’ renowned chairman, Gerry Roche, to find Apple a new president. The executive search mandate was for a veteran corporate heavyweight: someone experienced with consumer marketing, interested in technology, adaptable to Apple’s culture, and able to mentor Jobs – someone who could put Apple’s new “appliance” into every home and help it mature as an organization. A side comment made to Roche slighted the footwear of the Eastern establishment and indicated what Apple did not want, “no wing- tips”. This crucial statement of requirements by the board would prove poorly developed and fundamentally flawed. It did not seek what Apple functionally needed.

Starting from a list of nearly 150 names, Roche eventually set his sights on Pepsi’s master marketer, John Sculley.

The seduction of an East Coast soft drink wizard began with a phone call just before Thanksgiving 1982. Sculley, who had an interest in computers, was aware of Apple’s visionary leader and enfant terrible Steve Jobs. In turn, Jobs was enamoured with Sculley’s marketing triumph over Coca-Cola.

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