Pepsi to Apple ... A;ourneyof adventure)' ideas and the future john A. Byrne with HARPER&ROW ISBN 0-06-015780-1 >$21-95 "Do you want to spend the rest ofy our life selling sugared water do you want 01· a chance to change the world?" When the brilliant, mesmerizing Steve Jobs issued that challenge, John Sculley turned his back on everything he had struggled to achieve at PepsiCo-at the top of America's corporate marines. Pepsi's youngest president at age thirty eight, Sculley had masterminded the "Pepsi Generation" campaign, toppling that icon Coke as the number-one brand for the first time in history, and irrevocably changing the rules of how marketing is practiced. Suddenly, hypnotized by Apple's fabulous success and lured by the chance to be mentor to the man he considered the Thomas Edison of our time, Sculley discarded corporate orthodoxy for a different life. The adventure he has lived, the lessons he has learned, and the depth of his personal revelations depict the romance and drama of life at the top as no other book on business has ever done. Like so many others, Sculley bought into Jobs's dream of changing the world. In the dizzying, gold-rush atmosphere of the high-tech, high-risk life, they rushed to realize their free-swinging dream to take on massive IBM and revolutionize the way we learn, live, and work. Their unusual friendship influenced everything they-and the company-did. "Apple has one leader, Steve and me," Sculley proclaimed. Then, suddenly, the "Dynamic Duo" turned into the Marx Brothers .who couldn't do anything right. Sculley chronicles the painful months during the worst of Apple's troubles, when his close friendship with Jobs turned destructive-of one another, of the company, and of their personal lives. Odyssey recreates their painful boardroom showdown and the aftermath that left people wondering if Apple had had its heart ripped out. (continued 011 back flap) 1087 Pepsi to Apple ... AJ ourney of Adventure, Ideas, and the Future JOHN SCULLEY with ]aim A. Byrne tfj 1817 Harper & Row, Publishers, New York Cambridge, Philadelphia, San Francisco, Washington London, Mexico City. Sao Paulo, Singapore, Sydney Ilhtstr:uions 2, 6. 7, 9: © Pepsico. Inc. . reprinced w/permission; 3: Personal Studio. Waterloo. Ontario; 8. 41, 80: Business \\/'eek, © McGraw Hill, 1973. 1984 & 1987; 12: George Lange; 13: ©Time lnc., 1982: 14.17: Margare1 Wozniak; 16, 21.30,31,34.35. 50. 53, 55, 72, 85. 90: courresy Apple Computer; 22. 40, 67. 87: Ed Kashi: 32: John llarding; 36. 5 I, 54, 56, 58, 71: Julie Chase; 37, 49: .Jeremy Boncllc; 38, 39. 42, 43: © Cheryl Hossum. 1982, New York City; 45: © Cheryl Rossum. 1984, New York Ciry: 47: Advertising Age, © Crane Communications. Inc. 1984; 48: UPI Bettmann; 52: Ray 13cngston; 57: John Greenlcigh; 59: Roland Palm; 60: Carolyn Cackles; 61: Will ,'vlosgrove; 62, 63, 64: Ann Yow; 66, 70: Brad Graverson/ Apple; 68, 69, 74, 75, 76:Julic Chase/Apple; 82: AP Wide \Xtorld; 84: Image Screen; 85: Paul Matsuda; 89: Michael Alexander; 91: U.S. Camera/'Jbni r:rissell. APPt.E and the AJ>PLE t.OGO arc registered trademarks of Apple Computer, Inc. and arc used with the express permission of the owner. 'Ilic statements, opinions, positions, and views expressed herein are solely those of lhc author, John Sculley, in his individual capacity, and do not, :llld arc not intended to represent the statements, opinions, positions, or views of Apple Computer, Inc. Lyrics from Bob Dylan's "The Times They Arc A-Cl1angin' " © 1963 Warner Bros. Inc. All rights reserved. Used by permission. ODYSSEY. Copyright © 1987 by John Sculley. All rights reserved. Printed in the United States of America. No part of this book may be used or reproduced in an)' manner whatsoever without written permission except in the case of brief quotations embodied in critical articles and reviews. For information address Harper & Row, Publishers, Inc., 10 East 53rd Street, New York, N.Y. I 0022. Published simullancousl>' in Canada by Fitzhenry & Whiteside Limited, Toronto. FIRST EOITtON Copy editor: Ann Adefman Designer: C. Linda Dingler /11dexe1: Efan D. Garo11zikf01· Riofra11cos & Co. Pboto insert researched, edilcrl, and desig1111d by Vi11ce11t Virga Library of Congress Cataloging·in-Publica1ion Data Sculley, John. Odyssey: Pepsi to Apple ... a journey of adventure, ideas, and lhe future. Includes index. I. Sculley, John. 2. Businessmen-United States-Biography. 3. Apple Computer, Inc. 4. Computer industry-United S1a1es. I. Byrne, John A. 11. Title. HD9696.C62S38 1987 33!.7'61004165'0924 [Bl 87-45142 ISBN 0·06·015780· I 87 88 89 90 91 RRD 10 9 8 7 6 5 4 3 2 Toleezy for her love and support through everything Contents Prologue ix A Note to the Reader xiii 1. Boot Camp Changing the Ground Rules 20 2. The Cola Wars 25 Why There Are So Few Good Marketing People 53 3. AT elephone Call 56 The Third Wave 92 4. Fish on a Hook 100 The New Loyalty 123 s. "The Guy from Corporate America" 127 The Rise ofS keptical Man 150 6. The Awesome Mac 154 Managing CreativilJ1 183 7. The "Dynamic Duo" 190 Laying Claim to "Share ofM ind" 216 8. A Company in Trouble 227 Managing Through Crisis 262 vii CONTENTS 9. The Brink of Collapse 268 Planning for the Future 292 10. A Real-Life Dynasty 298 Living Out the Genetic Code 318 11. The New Spirit 323 The Geography ofL earning 360 12. AN ew Apple 366 Spinouts 391 Epilogue: A Twenty-first Century Renaissance 396 About the Book 423 Where They Are Now ... 427 Bibliography 431 Index 435 Illustrations follow page 178 viii Prologue Through the glass wall of my office, anyone could see we were deeply engrossed in private conversation. Steve Jobs, the young, brilliant computer whiz kid, the co-founder of Apple Computer, and me. It would have been a familiar sight. He had become my closest friend, a soul mate and a constant companion. But anyone catching a glimpse of us today would have known that something had gone wrong. There were no smiles, no animated gestures, no sense of fun, excitement, or adventure. We spoke qui etly and sadly. A break in our partnership seemed inevitable. It would destroy our friendship, it might destroy our company, and it already had destroyed my confidence. A month earlier, on April 11, 1985, the board of directors had endorsed my decision to remove Steve jobs from his base of power in the company. Several times before I had resisted this decision, but I couldn't resist it any longer. Only a year ago, I had raised a toast: "Apple has one leader, Steve and me." He had confided to me: ''You're like one of the founders of the company. Woz and I founded its past, but you and I are founding the future." Now all we had were vastly different visions of how to give our failing company a future. I was beginning to feel like a pulp fiction character. But Steve had that effect on people-he evoked an overly emotional response. For over an hour, Steve pleaded with me for a second chance. When he failed to gain that concession, he pleaded again-this time for more time. Over and over. Again and again. I refused to relent. ix PROLOGUE Then, overcome with emotion, he suddenly burst from the room. I was left, wanting only to hide. My head bent and heavy, I searched for a corner of the room to awkwardly disguise my pain. I turned my face to the wall. Echoing in my mind was Steve's indict ment that I was the cause of Apple's trouble: "You're wrong for Apple ... I'm the only one who can save the company." The only one ... the only one ... I wept there, wondering how it had come to this. l began a journey, a true odyssey, into this near-fantasy world two years ago. Silicon Valley was then a corporate Camelot: Apple was its Round Table and Steve was its King Arthur. It was so different from what I knew. For sixteen years at PepsiCo, I competed with the best of them in corporate America-where power is measured by the size of one's office. I had led the creation of a "Pepsi Generation" that for the first time dethroned Coke as the number-one brand in the most important market in the U.S.A. I was on the verge of getting all that I had worked so hard for, a serious contender for the number one job in what I thought was the number-one company of the "old world." Then, Steve called. Like so many others, I bought into the dream of this precocious, mesmerizing kid. Together-he as chairman and me as chief executive-we would become the unbeatable team to put a personal computer into almost every home and every classroom and, in so doing, change the world. I was to create an "Apple Generation" and find new markets for the company's "insanely great" products. What I discovered at Apple was a community without bounda ries. A free-form environment, an artists' workshop. At Pepsi, we were warriors. \Ve fiercely competed on a tenth of a percent of market share. And we sold what Steve disdainfully called sugared water. At Apple, we are dreamers. We are driven by a passion to change the world, to make it a better, more productive place for every individual. And we sell, not refreshment for the body, but tools for the mind. "One person, one computer"; that was our dream. It nearly worked. One day we were the "Dynamic Duo." The next, it seemed, the Marx Brothers- unable to get anything right. Our sales dropped with our hopes. A computer slump, the long shadow of IBM, a mixture of poor judgment and bad luck-and x PROLOGUE Apple Computer had plunged into a severe crisis. All of it occurred with dramatic suddenness. Nanette Buckhout, my executive assistant for more than a de cade, eyed me pressed into the corner. "John!" she called, entering my office. "What's wrong? What happened?" I slowly turned toward her, revealing a flood of te<trs from a prur of wea.ry, reddened eyes. She was stunned. At Pepsi, Nanette had known me as a hard-ch<trging, dynamic, and unequivocal executive. She knew me ne<Lrly as well as I knew myself-not as the cool, distant professional portrayed by the press, but as reserved, private, and always under control. Now it was as if I couldn't hold back anything. I closed the office door and slumped into a chair, my hands on my forehead. "Steve wants more time to prove he can change. I told him it's all over. "But, my God, I came here because of Steve, because I wanted to work with him. I picked up and left everything so we could work together. And now he's gone. I'm left here alone. What do I have? Maybe I'm not good enough or competent enough?" "John, I've never seen you like this. I've seen you deal with problems at home, with tough situations here. But nothing like this. You're a broken man," she said, ne<trly sobbing herself. Her words struck me like a bullet. She was right-I was broken. For the first time in my c<Lreer, I was failing. My confidence was gone. Financially, I was ruined: my Apple stock options, worth less than nothing as the price did a free fall, would put me deep into debt if I walked out of the company. With all Apple's problems, I would probably never be offered another job in corporate America. And in the midst of it all, I had to cut off the visionary founder from his own company. For months I had been either unwilling or unable to go through with it. When I finally cut the cord, I felt lost in a world I only barely knew. xi