I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.
—Steve Jobs
In the early days, Steve and I had often talked about how well the Macintosh team was performing because they were focused on a single product. He didn’t like the technology decisions being made by the teams developing the new Apple III and Lisa computers, but at least each of the teams was focused on a single product. Steve’s dream was that he would eventually see the product-focused team become the standard throughout Apple.
Meanwhile, Steve recognized that the company had achieved amazing success despite never having a CEO with sound credentials for running a company, such as Apple. He set his sights on finding a seasoned business leader who understood consumer marketing. The man he found, John Sculley, certainly fit that description.
If you are familiar with the Apple story, you know that Steve and John at first got along like a pair of long-lost brothers. Journalists wrote about the two that it was as if they were “joined at the hip.” They were learning from each other and were each other’s greatest admirer. Those glory days lasted some two years.
But Steve had forgotten about his dream of keeping Apple a product-focused company. He had succeeded in picking a leader who understood consumer marketing, but there were two great flaws in his choice. John’s marketing expertise was in selling soft drinks, and he knew nothing about technology. Worse, John would never be able to think like a Pirate. His entire working life had been spent in The Navy—naturally enough, since virtually every American company, large and small, was run that way, and even today all but a few still are (think Google, think Facebook).
When John arrived, Apple was already in deep trouble. But of the three innovative development projects, both the Apple III and the Lisa had flopped in the marketplace. With those products folded, there was no longer any innovation going on anywhere at Apple except in the Mac group. The mouse, PostScript, the laser printer—all these new technologies—came out of Mac.
Apple was caught between an old technology, the Apple II, and the new technology, the Mac. But when the Mac had been introduced, it had created a situation that, in hindsight, is laughable—though Steve chose to overlook it at the time. At almost the same time the Mac reached the market, a new Apple II was also introduced: the Apple IIe. Sales of the IIe soared and became the cash cow that was funding all of Apple. The Macintosh—the novel machine that was years ahead and would change the nature of personal computing—was at first a hard sell. In those early months of its existence, lacking software programs, there wasn’t really very much a user could do with it. So, initially, Mac sales were slow, very much below what Steve had forecast.
The task John Sculley faced was how to phase out the old products and replace them with the new product, the Mac. At the core of this problem was the ultimate conflict that led to the Jobs-Sculley clash.
Despite the mammoth free publicity from newspapers, magazines, and TV news/interview shows generating excitement about Steve and his new product, months after the Mac had been launched sales were far from what had been projected by the Apple sales organization. Steve wanted to know why. I met with him and discussed what to do. I felt the only way was for him to confront the sales managers in the field and find out for himself why sales weren’t better. I knew that he could not challenge the direction that had been set by John Sculley and by marketing VP Bill Campbell without firsthand information. He took me with him on a fact-finding trip to New York, so we could find out from the East Coast sales execs, face-to-face, what was going on. (Steve wanted to hit the East Coast because a majority of Apple sales came from the eastern region of the country.)
We stayed at one of Manhattan’s most elegant (and most expensive) hotels, the Carlyle—which Steve liked because John F. Kennedy used to stay there. It was also right across Central Park from Steve’s new apartment, still under renovation, next to where John Lennon of the Beatles lived. (Steve once invited actress Diane Keaton, who lived in the same building, to visit him. Curious, she went. She was impressed that the apartment occupied the top three floors of one of the building’s towers, but complained afterward that Steve had talked on and on about nothing but technology. The visit did not lead to anything more like a regular date.)
We were in New York to accomplish three things: visit stores selling Apple products, meet the East Coast sales managers, and meet with the software developers who had not yet delivered their promised software programs for the Mac.
First we visited several of the big computer stores. This was when Steve saw the problem for himself: the Mac was a great draw, attracting people who had heard so much about it and wanted to see it for themselves. That part was wonderful. But Steve eavesdropped as people who came in thinking they might buy a Mac were given reasons they would be better off buying a PC—the real reasons being left unspoken: that the store and the sales reps made more money selling PCs than selling Macs.
He and I also saw that most of the sales clerks were poorly trained and were not knowledgeable about what made the Macintosh so superior, so much easier to learn and use. We ran into one sales clerk who didn’t even know how to operate a Mac. Steve tried to get him fired but the store manager wasn’t going to take orders from someone who didn’t pay his salary, even if that someone was Steve Jobs.
While we were in Manhattan having dinner one night and discussing Mac sales, I said no one really knows what the Mac is. I offered to bet Steve $100 that no one in the restaurant could say what a Macintosh was. He took the bet. Sure enough, our informal poll proved I was right—not a single person knew or admitted to knowing about a computer called Macintosh. (Some said it was a variety of apple, which Steve had to count as a wrong answer.)
Of course, Steve, like John Kennedy, never carried money with him. I never got my $100.
The next part of the trip was to meet with the Apple sales managers for that region to get their stories. They said it was a tough sale because the Macintosh lacked a hard drive, didn’t have enough software, and the display wasn’t in color. Steve wasn’t satisfied by their explanations.
Afterward, I pointed out to him something that struck me during the conversations: the Mac wasn’t just competing with Windows machines; it was also competing with our own Apple IIe. The IIe was a major sales success, so hot that the sales reps didn’t have to do much to move the product, and they were making very high commissions. The scads of people who loved their Apple II were upgrading en masse to the relatively inexpensive IIe. Why should a rep spend time pushing the harder-to-sell Mac, when getting the stores to sell the IIe was such a dream?
Steve had found some of the answers he was looking for, but nothing he heard offered the possibility of an easy fix.
After those meetings, next on the agenda were meetings with the software developers, including Microsoft, as well as some companies that have since faded from the equation, such as Lotus and Aldus. Steve wanted to pressure them about their not coming through yet with their promised software for the Mac. He was not in a good mood over the lack of progress.
I was looking forward to meeting Mitch Kapor, founder of Lotus, because of his unusual background. He had been raised in New York and after studying psychology became a music director and disc jockey at a radio station. He was headed for teaching philosophy at MIT but had been doing some computer programming on the side, which led to his becoming involved in the development of VisiCalc, the first-ever spreadsheet program. It had become an incredible success on the Apple II and is sometimes credited with being the program that turned the personal computer from a hobbyist machine into a useful tool for everyone.
For all its success, VisiCalc was somewhat clumsy and clunky. Two years before the Macintosh was introduced, Mitch left VisiCalc to start his own software company, Lotus, and created a competing program called Lotus 1-2-3, which quickly became the leading spreadsheet software. This was the first bundled package that had a spreadsheet and a database manager in one application, and many today believe this program laid the groundwork for Microsoft Office.
When Mitch showed up at the Carlyle for the meeting, I found him more or less as I had imagined him: in his midfifties and clean shaven, he was casually dressed. He had a reputation of being quite laid back, so I was curious to see how the easy-going Mitch would get along with the outspoken Steve.
Mitch complained that the Mac operating system software was so poorly done that it was very difficult to write applications for it. He also complained that with the sales volume of the Mac so low, Lotus couldn’t afford to spend a lot of time on the new app.
Steve was not happy. He accused Mitch of being swayed by a loyalty to Microsoft and said that by acting out of greed, he was selling off the future. The meeting was as cordial as possible but did not end on a positive note. Steve abruptly stood up and said, “Thanks for coming, Mitch. Goodbye.”
When we got back to Cupertino, Steve’s meeting with Bill Gates didn’t go any better. Bill flew down and was ushered into the Picasso meeting room. Steve often kept Bill waiting; I was never sure whether Steve wanted to finish what he was in the middle of first, or if keeping Bill waiting was a tactic to put him at a little disadvantage by making him uncomfortable. Or if maybe it was just some little-boy act of Steve’s, as a way of saying, “I’m more important than you are.”
Steve did not like or respect Bill Gates. At almost every meeting with Bill that I attended, Steve lived up to his reputation for being difficult. At this meeting in Cupertino after our East Coast trip, Steve was openly rude, talking down to Bill—literally talking down to him: Steve bounced out of his chair so that Bill had to be looking up at him while Steve spewed in that candid, earnest-but-hurtful way he sometimes used when his emotions were near the surface. Bill made complaints similar to what we had heard from Mitch about the Mac operating system being complex and Mac sales too weak. Steve scolded Bill with a line that became famous: “Bill, you don’t get it: Hardware drives software. Software is the glue for the user; the hardware is just what they see.”
After Bill left and after Steve had relaxed, I said to him, “Steve, I understand your contempt for Bill, but being rude isn’t the answer. The answer is proving you’re right.”
Good advice, I thought, but it would be more than 20 years before it happened.
It was clear from our trip and the follow-up meetings that the computer stores did not have selling the Mac as a priority and that the outside developers did not have creating software for the Mac as a priority.
Steve was left facing a challenge: the only way the situation was going to change was for the Macintosh to see a major boost in sales. But how?
What would it take to get more people buying Macs? I tried to push toward getting the consumer message heard with a suggestion that I thought would work brilliantly. The head of U.S. car manufacturer Chrysler at the time was the charismatic Lee Iacocca. When the company hit a hardship period, unable to sell enough cars, Chrysler and its ad agency created a series of television commercials featuring CEO Lee himself. Standing in front of the camera, with one hand on the fender of a Chrysler car, Lee explained the features and reasons why your car choice should be a Chrysler. The ads were compelling enough to bring a turn-around in the fortunes of the company.
If Lee hadn’t been such an engaging, outgoing person, the commercials would have been a bad waste of money. But he had just the personality to be able to bring it off.
I argued that Steve was at least as compelling a speaker as Lee—we had all seen that from the session when he first introduced the Macintosh to a large audience of reporters and others, as well as on other occasions. He could talk for a couple of hours at a time and hold an audience riveted.
My idea was to do an ad with Steve standing next to a Mac, explaining the great features of this great product. I thought that ad would be a terrific way to stimulate sales and let the customers know about Steve’s compassion for his products.
Steve was more than willing and took the idea to CEO John Sculley. Nothing doing: John shot it down.
Here was another example—I had seen many in my career—of an idea only being considered worthwhile if it came from the sales side of the house. Steve and I sat down with John Sculley and marketing VP Bill Campbell to discuss what major changes could be made to improve the lagging sale of Macs. The decision was that we needed to build an internal sales team to focus on selling to the corporate world. I was instructed to quietly hire 2,000 sales people.
During this time, Steve and I talked a lot about the focus on sales outweighing any focus on the product. Like Steve, I didn’t think pushing the Mac to corporate America instead of to the consumer was wise. At the same time, almost no advertising was being done, so the messages about the groundbreaking features of the Mac were not being heard.
For those who don’t know or have forgotten, on other personal computers at the time, the way you told the computer to write a file to the floppy drive required typing out a command, letter by letter, that went something like:
copy c:/Letters/LtrToJohnApr12.doc d:/JohnFiles/
On the Macintosh, of course, you only needed to drag the icon for the file to the icon for the JohnFiles folder in the list of files on the floppy
To copy a whole directory, you would (if you had managed to commit the various commands to memory) type something like:
xcopy -e c:/Letters d:/Letters
But the explanations of how phenomenally easier it was to learn and to use the Mac were not being heard.
And instead of spending money to get that message out, I was under orders to hire 2,000 sales people to knock on doors of IT managers in corporations that had been buying their computers from IBM for years and weren’t likely to pay much attention to a sales person from a start-up computer company.
The first thing that entered my mind was how in the Army I was sent to boot camp, which had exactly the same kind of goal: training in the needed skills but also converting recruits to a new mind-set. So, why not have a Sales Boot Camp? We found an abandoned school and an ex-Marine drill sergeant.
The challenge was to hire those 2,000 sales people but not let our distributors know what we were doing. We had to recruit all over the United States but keep the effort quiet. This was one time when we made an exception: We couldn’t handle that huge effort in-house, so we put the job in the hands of several recruiting firms, with instructions that they post blind ads and not tell the applicants the name of the company.
We had a tough educational process through hiring outside recruiters. We had to convey to the recruiters what a Pirate is and what an A-player is, and then make sure we had done a good enough job that they would really adhere to your standards. To do this right is no small challenge, but we found it’s possible to do if you’re sufficiently committed to the effort.
Then we had to bring all the new recruits to Cupertino for orientation. Obviously they had to become experts in all aspects of using the Apple products. Less obvious but just as important was bringing every one of them up to speed on the Apple culture, because people would be judging the company by how the sales reps explained, spoke, and behaved.
We monitored very carefully every step of the way, making sure each recruit was, despite the military atmosphere, becoming truly attuned to the Apple culture. Attitude counted more than textbook knowledge. We felt very confident about those who made it through.
And we were in business. The course turned our recruits into sales reps who were totally immersed in the Apple Way, completely product oriented, and ready to hit the street selling.
But while the recruiting and culture-training efforts were successful, the program would later backfire. It was the beginning of the end for Apple’s product-driven Pirate culture.
In preparation for the major sales conference in Hawaii, when that new 2,000-person sales force would be introduced to the Macintosh, each of the VPs was asked to make a presentation about their part of Apple, along with any information that could help the new sales recruits understand the company and its culture.
I put together a presentation that included a videotape assembled from footage and still photos that captured the heart and soul of the Apple culture, the people, and how we worked together.
At the end of my speech and the video, I got a standing ovation from the audience. When I walked off the stage, Steve Jobs was standing in the wings. Offended by an item in the video that included him, he growled at me, “Jay, that was the worst presentation I ever saw.”
What a come-down from the standing ovation. And regardless of what had annoyed him, the attack was overboard. After I caught my breath, I said, “Steve, I have two words for you: f__k you.”
I walked away. About 20 yards further on, I encountered John Sculley. He said, “Jay, that was terrific.” Nice, but it didn’t ease the pain I was feeling from Steve’s comments.
My five staff members who had helped me put this together had heard all this and were devastated. I ordered a tour guide and a limo filled with food and drink, and took my staff off for a fun day on Oahu for the celebration I felt they deserved. We toured, swam, surfed, snorkeled, ate, drank, and had a great day.
At the end of the day I was asked, “Who do we charge this to?” I said, “Steve Jobs.”
When we got back, I received a call from Apple’s accounting department asking what this charge was for. I said, “It was Steve’s way of rewarding us for the great job we did at the sales meeting.” The lady said, “Okay.”
The final installment of the incident didn’t come for another couple of weeks. Steve and I were meeting to talk about bonuses for the Mac management. As we sat down, Steve said, “Jay, I have two words for you: I’m sorry.”
His apology meant a great deal to me, especially since it was one of the only times I remember him ever apologizing to anyone for anything.
It had been the only time in our countless debates, arguments, and disagreements that Steve really got to me in a way I have never forgotten.
But Steve’s blowup at me was far from the worst friction of that sales meeting. It was there that the Jobs-Sculley conflict over Mac sales came to a head, with a confrontation between the two, in front of other people, that was worse than anything you see on reality television.
Leaving Hawaii to come home from the meeting, Steve changed his flight so he would not be on the same plane as John. A week later, Steve made a comment in his Monday meeting, in front of his staff, criticizing John for the problems in Mac sales.
I pulled Steve out of the meeting and told him, “You and John need to resolve your issues—we can’t have the chairman of the board and the president of the company engaged in open warfare.” I saw only one solution that was good for Apple, a solution only Steve, as chairman of the board, could make happen. “Walk over to John’s office,” I said, “and tell him he’s out!”
He wouldn’t do it. This was the first time I saw Steve in an avoidance posture. For some reason I’ve never understood, he did not want to confront John. And, ironically, John didn’t want to confront him.
I set up an evening meeting for the three of us in Steve’s office. (In his biography of Steve, Walter Isaacson says John grabbed me as a witness and went to confront Steve. That’s not at all what happened. I was the one who set up the meeting, I controlled it, and at this point there wasn’t any confronting.) Steve started in about changing the whole company into a Mac-style organization, product focused and moving toward the new technology. John strongly defended the current Apple organization.
To my surprise and shock, Steve started to sob because of what he saw as John’s incompetence. “You don’t get it! You’re ruining Apple and the Mac!” Steve choked out between sobs.
John got up abruptly and walked out. I was left there with this sobbing chairman, wondering what would come next. But what passed through my mind was that he had just given John ammunition to say Steve was unstable. The only previous time I had seen Steve well up in tears was when he was telling me late one night about a failed relationship with a woman he really loved.
At a meeting of the executive staff, Steve confronted John, insisting he was the wrong person to be running Apple. John was stunned. He knew Steve had started gathering forces to try to push him out of the company and replace him as CEO. And now Steve was attacking him in front of the top people of the company. Stunned, John announced he wanted each person to say whether he supported John in continuing to run the company. It was an emotional moment for everyone present. Most spoke about how much they admired Steve; some even said how much they loved him. But each in turn then said he wanted John to continue running the company.
I was the one lone voice for Steve. (This was another miscue in the Isaacson book: He makes it sound as if no one in the room spoke up to insist that Steve, not John, should be running the company.) I knew how difficult he could be, but I also knew that he had a vision of what Apple could be and a vision of where computer technology was headed. John had neither. I said that the company needed Steve in charge, that the company’s survival depended on it.
But the consensus ruled.
I want to clear the record about what happened next. The board of directors, under pressure, came to recognize the need to look into the facts about Steve as the leader of the Macintosh group. The board appointed two of its members to quietly interview people in the Mac group and others around Apple who had direct contact with Steve. Based on that report, which included details of Steve’s frequently abrasive, verbally abusive behavior, the board voted to remove Steve from his position in charge of the Macintosh group and give him another assignment—one that would not involve being in charge of a specific team.
When Apple CEO John Sculley sat down with Steve to discuss the decision with him, Steve was so was upset at being told that his Macintosh group was being taken away from him that he got up and walked out.
Although he would always refer to it afterward as his having been fired, that wasn’t what really happened. Still, here was a situation where the cofounder of the company was being removed from leading the team he had headed through the creation of a ground-breaking product; to me, that’s equivalent to being fired, even though he was being offered a different position.
Steve called me about 2 AM that morning, again sobbing. He said that he had lost his company and now he would be on the sideline of the great Mac revolution. He said he was going to leave for Europe and might decide to spend time as a world traveler. The unspoken message was that he was angry or humiliated or both, and he didn’t want to stick around to be hounded by reporters and embarrassed by questions of the Macintosh team members.
I told him, “Steve, without you, Sculley and Apple are now on the sideline.” During that phone call, I decided to speak with the board members, one by one, hoping I could convince them to give their support to Steve and terminate John’s contract.
A few days later, after all my (fruitless) meetings with the board members, Steve called me and invited me to lunch at his home in Woodside. He served up a pleasant meal—vegetarian, of course—and then we took a walk around the grounds. With his boyish enthusiasm, he said, “I can’t believe you stood up to Sculley and then went around him to the board.”
Then, again, the tears began flow. He said, “No one else at Apple really cares. Thank you for standing up for me.”
I said, “Steve, I really want Apple to succeed, and I think it will with you. But without you, I believe they’ll eventually fail.” I went on to say that he needed to make amends with the board and change his leadership style.
His response was painful and misguided. “Thanks,” he said. “I think what you’ve done will change the minds of the board.” But I had already told him the responses I had gotten ranged from negative to noncommittal. Not a single person had held out any real hope of a vote for Steve.
As I was leaving, he said, “Jay, I know you have put yourself in harm’s way with Sculley.”
“Sometimes that’s what happens when you stand up for your principles,” I answered.
Steve had stood up for his, as well. Now the door was shut to him at the company he had cofounded. He would take no active role in managing the company or developing its products until the turn of fate that brought him back. He would launch NeXT and would buy the computer graphics group that became Pixar, but he would have no direct connection with Apple for the next 12 years.
Throughout its history until the day Steve left, Apple had been a company organized around product groups—highly independent economic profit centers that operated almost like stand-alone companies.
With Steve gone, John Sculley didn’t waste any time reorganizing Apple according to the way that The Navy companies are always organized. His mantra was captured by an old business adage, “Expect what you inspect.” His approach was about control.
In almost any other company in the world, John’s approach might have been a rousing success. But Steve knew that at Apple, only a culture organized around product groups would be successful. Once Apple was reorganized to become a traditional function-oriented organization, John and the two CEOs who followed him presided over a company that had run off its tracks. The magic was gone.
Months after Steve had left the company, Apple had to lay off over 1,300 employees, shut down four manufacturing facilities, and reorganize to focus on improving and marketing the Macintosh. If Steve’s vision for the company had been listened to, all of that hardship, all of those setbacks, could have been avoided.
Another of the CEOs went a big step further in organizing the company by functions, with only a few high-level executives reporting directly to the CEO. As a result, there was even less connection between the leaders and the product. The people who should have been giving product guidance were just administering a plan. The company lost its product focus, concentrating on programs and software updates instead of on making killer products.
Steve later griped to me about organizational priorities, broad issues, and business in general but it was obvious that the conversation was really about Apple.
Why does one company after another turn out mediocre products? Steve understood that the sales staff brings in the money. But when Apple started being ruled over by a leader whose sole expertise was in sales and marketing, Apple’s corporate thinking changed completely. Corporate priorities and the communication of ideas became centered on how to move product into the hands of the buyer. Executive meetings dwelt on revenues, profit and loss, and stock price performance, rather than on the features and the excellence of the product.
In fact one decision that was totally rejected by the Mac Pirates was not sticking with the original goal of selling the Mac for $999. The decision to make the selling price $2,495 was based on providing a fat marketing budget.
Decisions like that, made over and over at Apple to the point of nearly scuttling the company, weren’t unique. Companies continue to make that same mistake.
Only when the product is truly superior—hopefully so superior that the product sells itself—do the sales and marketing people take a back seat to product development.
That’s a mistake. The mantra must become, “The product is king.”
I had seen the problem of the sales force controlling company decisions while I was working at IBM. I told the story to Steve, in hopes of making him speak out more forcefully to the Apple decision-makers.
Sales was the real power behind IBM’s success and had been the driving force since Tom Watson Sr. became the company’s first CEO. I illustrated the fact to Steve by telling him the story of a run-in I had with the man who was the IBM head of sales, John Akers, when I was manager of a company unit in California.
John went to the IBM executive committee and recommended that I accept the transfer of 200 programmers from Manhattan—people who were on the rolls of the sales department but, John said, were not needed in sales.
I visited the Manhattan facility, talked to a number of the programmers, and found that none of them wanted to move to California, and especially not to the part of California where my unit was located, an area the programmers considered a “cultural wasteland.” It was clear to me John’s plan would not work.
However, he convinced the executive committee, and I was told to make it happen. After a struggle and many concessions, we got about half of them to come to California; the rest quit and left the company.
After the crew from Manhattan had gotten settled in, one of the New York programmers came to me with the suggestion that we try the idea called vanpooling. IBM would buy some vans—vehicles that could hold a driver and seven passengers. For each van, one employee would accept responsibility for finding seven others to ride with him each day; he’d keep the van at his own home and the eight of them would split the gas charges.
This would save money for the employees who had to commute, plus help the environment by having fewer cars on the road. It was a great idea that had special appeal for the new employees who had come in from New York.
The idea had to get corporate blessing. I flew back to IBM headquarters and made the pitch. I was told the idea was so novel that it would require approval of all the division heads and would have to be approved, as well, by the board of directors. John Akers was one of those who had to approve. He reluctantly agreed it was a good idea and gave his half-baked approval.
I would find out in time that John was only agreeing because he thought it would give him leverage in getting approval for an idea he had been pushing for years without success. He wanted IBM to lease a car for every one of the IBM salespeople.
At a meeting of the board and the division heads, I made my presentation, and the division heads were asked to indicate whether they have any problems with the vanpooling proposal. John spoke up and said, “I’ll give my approval to this, provided the board will approve giving sales people leased cars.”
He was asking the company to lease a car for each person in a sales force of over 150,000 people; the economics were staggering. I wasn’t surprised when the board refused to agree to John’s proposal. The result was that John in turn refused to go along with the vanpooling proposal, and because of him, it was shot down.
Once again, sales had ruled a corporate decision.
I was shocked when, a few years later, John Akers became IBM’s CEO. Then, in 1988, John announced a sweeping restructuring of IBM. He created five new highly autonomous organizations that were to be responsible for the company’s innovation, design, and manufacturing. These moves were intended to decentralize the company and give significantly more responsibility to a younger generation of mangers. The new divisions were affectionately called the Baby Blues, a play on a journalist’s nickname for IBM, Baby Blue.
The company’s performance continued to decline.
In 1992 IBM faced its first losing quarter in its 100 years. But I wasn’t surprised that under John Akers, the company went into a steep decline and he eventually became the only CEO in IBM’s history to reign over the company losing money, posting a loss of $5 billion, at the time the largest loss by any American corporation in history.
The old sales tricks did not work anymore, and all the IBM executives were from the sales side, not products or operations. Most of the good product people had left the company.
It was a painful illustration of what happens to a company that does not have vision or that has a CEO who does not understand the true direction of the market.
When John Akers left the post, CNBC named him as one of the “Worst American CEOs of All Time,” stating, “While the rest of the world was moving toward personal computing, Akers remained stuck in the mainframe age, never quite figuring out what to do.”1 IBM was paralyzed by lack of direction. As I put it when I left IBM, “You need to get out of the computer room!” When I spoke about all this to Steve Jobs, reminding him of remarks John Sculley had made as CEO, Steve answered, “Yes, he was a smart, fantastic salesperson, but he didn’t know anything about product. It’s the product, stupid!”
Enter Louis Gerstner as IBM’s replacement CEO, a proven operational executive from American Express who had been credited with the expansion of new users for the card. In evaluating the product, Gerstner found out that most retail stores did not accept American Express cards, nor did airlines. He saw that corporations, which persuaded to issue the cards could be provided a better tracking system for business expenses. So, although not a technical guy, he understood the value of a product and of user satisfaction.
Louis Gerstner not only had to take over a losing business but had to reshape the culture out of the old IBM ways. Incidentally, it had been reported that two other people were approached before Gerstner: Bill Gates and John Sculley. Either of those choices would have been very interesting to watch.
Gerstner decided IBM needed to become a more broad-based information technology integrator that could help its clients move into the new age of computing and give its customers complete IT solutions. Does this sound familiar? Steve had to take the same type of steps to turn around Apple after what I might call his second coming.
The turnaround worked for IBM, and the CEOs who followed have been very product focused. One of them, Sam Palmisano, who took over in 2002, introduced a new strategy involving a hub of information that would shift to services and software, often delivered over the Internet from data centers and connecting with all types of devices, including the PC. It is the approach that has come to be called the cloud and is, of course, the new big movement in technology.
In October 2011, while I was in the process of writing this book, IBM named a new CEO, Virginia Romety, another operational, product person. When asked by a Fortune magazine writer what her priorities were, her reply included continuing to build on the company’s product roadmap.
Clearly, she’s someone who gets it—a leader in the Steve Jobs model.
If IBM had had a CEO of that mind-set when I was working there, I would probably never have left.
To date, IBM has had five Nobel Prize winners and the company is now introducing new products—now mostly software—almost on a monthly basis.
The IBM story provides a great lesson in how a company can completely change direction, become product driven, and make a stunning comeback. At the core of that comeback were the IBM Pirates in the development labs who were committed to creating great new technology for the users.
Notes
1. Portfolio’s Worst American CEOs of All Time, CNBC, undated; www.cnbc.com/id/30502091/Portfolio_s_Worst_American_CEOs_of_All_Time?slide=12.