To Grow Your Business

GAME CHANGERS

To Grow Your StayBusiness, Forever If you know where and how to look, innovation opportunities are everywhere, says former Apple and Pepsi CEO John Sculley.

BY PAUL GILLIN PORTRAITS BY JOSH RITCHIE

60 INSIGNIAM QUARTERLY | Spring 2016

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INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. SPRING 2016 ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION. At an age when many executives are playing golf or writing memoirs, John Sculley is sounding he adds. Kodak, for example, could have owned the alarm. digital photography, but it was too focused on defending its legacy business. The former CEO of Apple and Pepsi-Cola Such commentary is almost de rigueur from says many of today’s corporate giants are an up-and-coming tech entrepreneur; it’s less about to be bulldozed into oblivion unless expected from a veteran of big, established or- they take action—now. ganizations. But Sculley has long understood Cloud computing, mobility and machine the power customers wield over a company’s intelligence will soon trigger an explosion of fate. More than 40 years ago, he watched a innovation, he says. Entrepreneurs can start grandmother sip cola samples from two un- companies with a fraction of the resources marked paper cups. To her surprise, the life- that were necessary just a few years ago, and long Coke drinker discovered she preferred they can move with unprecedented speed and the taste of Pepsi. That insight led to the Pepsi agility. Forces like the sharing economy and the Challenge, one of the longest-running and rise of a new breed of middle-class consumers most successful marketing campaigns in his- in developing countries will fuel the next tory. generation of billion-dollar companies. Those The Pepsi Challenge was a pre-Internet ver- that aren’t ready, willing and able to blow up sion of the customer conversations that now existing business models and face a new reality permeate social media, the same ones that may not survive. can make (or break) companies. By blunting the force of big marketing budgets, the new The Customer Plan democratized media environment levels the Underlying all this transformation is the new playing field and gives small startups a way to power of customers, now firmly in control of compete against established competitors. the way companies and markets behave. Em- The upshot for any executive fending off powered by ubiquitous Internet access and new players is simple, Sculley says. “Your rea- social media, customers now have unprece- son to exist has to be around solving big cus- dented access to information to evaluate their tomer problems.” choices, and they trust each other’s opinions over marketers’. Making the Right Connections “It’s fundamentally changing every business,” The mark of a true leader is the ability to Sculley says. “Forget about the business plan identify connection points, those intersec- and focus on the customer plan. A business plan tions between disciplines that yield oppor- looks back and tries to improve on what you’re tunity. With experience in tech, consumer already doing. A customer plan asks whether marketing, health care, and cloud and mobile you can solve any really big customer problems.” platforms, Sculley looks out for connections Yet, most big companies are so focused on across sectors and then backs companies he protecting the day-to-day business that they believes are positioned to make the most of don’t spot new, customer-driven opportunities, those intersections.

62 INSIGNIAM QUARTERLY | Spring 2016 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. SPRING 2016 ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION. “Forget about the business plan and focus on the customer plan.” —John Sculley

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From the C-suite to As the Affordable Care Act takes hold in Boardrooms the United States, for example, Sculley points to massive opportunities in a provision of the John Sculley has had a remarkably long and varied law that shifts the criteria for insurance pay- career, marked by C-suite stints at two of the world’s ments from inputs to outcomes. Health care most iconic companies. providers were long paid according to the Most famously, he served as the CEO of Apple Computer Inc. during a tumultuous decade during procedures and treatments they administered which founder Steve Jobs was ousted from the com- (inputs). That gave them every incentive to pany by a contentious board of directors, who later schedule lots of office visits, tests and thera- ousted Sculley as well. (Actor Jeff Daniels portrayed pies, even if their value to patients was ques- him in the 2015 film Steve Jobs.) tionable. Now health care providers are paid Nevertheless, during his 10-year tenure, Scul- for results, which means that doctors, hospi- ley oversaw a tenfold growth in Apple’s revenue, tals and plan administrators are scrambling to stabilized the business, launched the iconic Macintosh find ways to keep patients out of hospitals and computer and conceived of the legendary “1984” doctor’s offices. Super Bowl ad that burnished Apple’s anti-establish- The connection point is technology that can

ment image. IMAGES TIMES CO./GETTY K. YEE/NEW YORK MARILYN BY PHOTO create new opportunities for remote diagnosis, His first foray into C-suite was at Pepsi-Cola. After being named the company’s youngest-ever treatment and monitoring. So Sculley, acting as vice president of marketing, his Pepsi Challenge vice chair, along with his brother David, are bring- helped vault the company past archrival Coca-Cola, ing their contacts and experience to help MDLIVE. a once-unimaginable achievement. He was then The health care information company is building tapped as the company’s youngest-ever president a platform that empowers patients, medical profes- and CEO in 1977. sionals and plan administrators to collaborate via Although he left the limelight after exiting Apple voice, video, email and mobile devices. in 1993, Sculley has arguably created more wealth in Another example of cross-sector connec- the last 20 years than he did at that iconic company. tions is how Ford Motor Co. is trying to bring As an investor and board member, he was involved vehicles, home appliances and new technolo- in the launch and growth of billion-dollar babies like gies together. The U.S. automaker announced the MetroPCS wireless carrier and Zeta Interactive, a global digital marketing firm that employs more than in January that it will increase its efforts in 800 people. intelligent mobility services by pairing its Today he sits on the boards of more than 15 SYNC in-car technology with Amazon’s smart startups, many of which he co-founded. They span speaker and virtual assistant products, as well a variety of fields ranging from digital health care as with Wink, a home-automation system management to online tire sales in India. His most that can centrally control smart appliances, visible recent venture is Obi Worldphone, a startup thermostats and lights. By networking all of that plans to sell low-cost smartphones in more than these devices together, drivers will be able to 40 emerging-market countries by the end of this year. voice-control their car and their home. It’s a big gambit. But Sculley can’t resist trying to fill a “We are completely rethinking how we market gap left unaddressed by the dominant smart- approach the business,” Ford CEO Mark phone players—including a company he used to run. Fields said at the 2016 Consumer Electronics

64 INSIGNIAM QUARTERLY | Spring 2016 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. SPRING 2016 ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION. What It Takes to Innovate In today’s dynamic and merciless business environment, being smart is table stakes. Consistently great innovators—as opposed to one-hit wonders—tend to share the following qualities, says veteran executive and entrepreneur John Sculley. Unending curiosity: It keeps you to pivot. In the space of three years A sense of urgency: Innovative young, motivated and agile, and we reinvented the whole company. leaders can’t accept the possibility of contributes to the cross-discipline Experienced leadership makes a losing out on new opportunities. experience that lets entrepreneurs difference,” Sculley says. see connection points and derivative A willingness to fail: Asked about effects. “Innovation takes place at A customer-first mindset: Sexy the most notable failure of his career, the edges as domains move togeth- technology isn’t enough. Many com- Sculley immediately answers: New- er,” he says. panies have floundered after building ton, the personal digital assistant technology without a clear vision of Apple introduced in 1993. Ahead An ability to attract talent: Suc- how it solves customers’ problems. of its time, Newton was derided by cessful leaders are confident enough View every opportunity from the media and analysts and ultimately to surround themselves with people perspective of customer value. contributed to Sculley’s dismissal smarter than they are—and to trust from Apple. But the product also their judgment. Sculley’s longtime A willingness to pivot: Great gave birth to the ARM chip that business partner David Steinberg is innovators know enough to exit today powers billions of mobile an example. When a change in fed- markets before they become dead devices, and some of its features eral student loan policies threatened ends, even if it means absorbing became mainstream on smartphones to destroy Zeta Interactive’s business short-term losses. 15 years later. in its early days, “David knew how

Show. “With one foot in today and one foot stitutions but rather to streamline operations in tomorrow.” in a way that creates more opportunities for consumers to obtain credit. Deriving Opportunities “There’s an opportunity to literally recon- Sculley also keeps an eye on derivative effects, figure the entire ecosystem of credit finance, structural shifts that open up new markets. from back office to banks to credit card com- For example, the adoption of smartphones panies, using a combination of technologies,” “Your and social networks spurred by Apple and Sculley says. Facebook (among others) means huge open- reason ings in both markets. The New Middle Class One derivative effect of the rapid main- At a macro level, Sculley sees huge derivative to exist streaming of social media platforms, for exam- effects—and innovation opportunities—re- has to be ple, is that “cloud computing has been commod- lated to the new middle class now rising in itized,” Sculley says. Businesses and consumers developing markets. But organizations must around are comfortable with cloud applications and recognize that it doesn’t look much like the data, as they use them every day on Facebook. old middle class in the United States and other solving big “If cloud works for brand-new businesses, how developed countries. customer can it be applied to established businesses?” “There’s a new group of at least 1 billion New England Funding Technologies LLC people who aspire to the American dream, problems.” (NEFT), where Sculley is a board member and but their definition of middle class is very dif- —John Sculley investor, is one attempt to answer this question. ferent from Americans’,” he says. These up- The company exploits the derivative effects of wardly mobile new professionals in cities like cloud computing to turn control of credit pro- Mumbai and Shanghai aim to own houses, files over to the consumer and empower them cars and other luxury items, but their income to enhance their credit scores in real time. expectations are more modest than those of Called mPowerCredit, this online resource not their American predecessors. Entrepreneurs only shortens the frustrating month-long (or willing to redefine their assumptions about longer) lead times credit bureaus need to up- the middle class and figure out ways to reduce date their records, but also reduces loan deni- the costs of so-called luxury items can find op- als, increases borrowing and closes more deals. portunities others miss and reap the rewards NEFT isn’t seeking to displace established in- of huge sales volumes, Sculley says.

quarterly.insigniam.com | INSIGNIAM QUARTERLY 65 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. SPRING 2016 ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION. “There’s a new group of at least 1 billion people who aspire to the American dream, but their definition of middle class is very different from Americans’.” —John Sculley

Endless is one example of a company trying to capitalize on this expanding customer base by building an innovative new computer designed with the needs (and price point) of the emerging middle class in Asia, Africa and South America in mind. The company’s $79 small, spherical PC built for the living room turns your television screen into a computer monitor and ships without a mouse or keyboard. The Endless Mini comes with apps designed to work offline or with limited connectivity. “People want a stable, simple computer that’s easy to use and won’t get viruses,” Endless CEO Matt Dalio told Newsweek. “And they need to be able to use it without the Internet.” A challenge the company may face is that many consumers in the new global middle class may gravitate toward smartphones and tablets in lieu of computers. Naturally, Sculley is trying to claim some ground in this shifting landscape. In heavily in R&D, Obi is building its products on 2014, Sculley founded Obi Worldphone with the the foundation of reference designs created by audacious goal of delivering full-featured smart- other smartphone makers. It’s innovating at phones to the developing world at prices two- the edge by focusing on lowering costs with- thirds lower than established competitors. Why out sacrificing design. Betting the new emerg- smartphones? In countries with a rudimentary ing middle class will want to pay a little extra or nonexistent consumer infrastructure, smart- for iPhone-like usability, the startup plans to phones can be a hugely versatile tool, allowing sell its devices in more than 50 countries by users to easily buy goods, make payments or ac- the start of 2017. cess health care information. The company that Tapping into the advantages of virtual owns the smartphone market holds sway over infrastructure and cloud collaboration, Obi an entire ecosystem. thinks it can make big money in a market ver- Obi’s design gap strategy encompasses the tically integrated competitors won’t touch. power of all the factors Sculley extols to size “We take what is a problem for others and up new markets: connection points, derivative turn it to our advantage,” Sculley says. And it technologies and macro shifts that give birth doesn’t require the powers of some all-know- to new markets. ing business guru. “You don’t have to be a ge- The fledgling company may also illustrate nius to do it.” Intelligence matters, but what it the power of entrepreneurs to out-innovate really comes down to is an insatiable curiosity, market powerhouses. Rather than investing a fear of missing out. IQ

66 INSIGNIAM QUARTERLY | Spring 2016 INSIGNIAM QUARTERLY COPYRIGHT © INSIGNIAM HOLDING LLC. SPRING 2016 ALL RIGHTS RESERVED. REPRINTED WITH PERMISSION. Strategic Horizons Which frontier are you looking to in order to spur growth in your business? Visionary New Markets

Horizon 3: Transformational: Horizon 2: Invent markets and Adjacent: create customers Visible that don’t currently Horizon 1: Bring adjacent Opportunities exist. Core: markets and Provide more, customers into better and different the opportunity products to the portfolio. same customers.