John Sculley and the Derivative Effect

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    John Sculley, ex-CEO of Apple and Pepsi, has recently written a book titled ”Moonshot!” No, it has nothing to do with HP’s products of the same name, though it does actually tie to what HP is attempting. Sculley is kind of a hero of mine, for a very strange reason. He was the guy who fired Steve Jobs and, up until Jobs was fired, his potential was unrealized. That experience forced Jobs to mature and, in my opinion, had he not matured, we’d never have had the iProducts, which transformed several technology industries, including photography. Sculley’s book is about not only disruptive amazing products, or Moonshots, but the derivative effect of these products and, to a certain extent, how blind large companies are, particularly tech companies.

    It actually contains a number of incredibly useful lessons and I was honored to be able to talk to Sculley about his book. Here are some of my thoughts from that interview.


    We can use Apple as an example: What generally plays big is a firm that finds a need that isn’t being met and then meets it at scale, as Apple did with the iPod. What we get from most firms is more of a feeding frenzy to see who can copy that innovative company most effectively, as in the different flavors of Zune, Microsoft’s failed response to the iPod.

    Sculley calls himself a rainmaker; these days, he enables small companies through his contacts to find funding and staffing and, it appears, mentors them through the birthing process. Sculley’s book covers these disruptive solutions and their derivative effect. For instance, the derivative effect of the iPhone was a radical change in how folks take pictures, and it contributed to the death of Kodak.

    I not only recommend the book, I think it should be on the reading list of anyone who wants to be on a board. It covers an impressive cross section of practices that seem to be lacking in boards at the moment, like properly staffing an executive team. Had he been consulted when HP hired most of its last four CEOs or when Yahoo selected its last three, for example, both those companies would be in far better shape.

    When I chatted with Sculley, he gave me some examples of young Moonshot companies that bear watching.

    Moonshots: PeopleTicker and RXAdvance

    Two companies creating Moonshot offerings that Sculley highlighted were PeopleTicker and RxAdvance. PeopleTicker monitors the real-time regional pay rates and bill rates of part-time workers. This is an interesting area because it is growing so rapidly, largely because firms are pushing more people into the “temporary” classification, to avoid the health care insurance costs of the Affordable Care Act (ACA). Politicians don’t see this massive, and increasingly pissed off, audience because, outside of PeopleTicker, it isn’t widely reported. Sculley argues that this is the core group of supporters that Donald Trump is talking to and that other politicians just don’t see. This helps explain why they are so angry; their wages have been dropping and their elected representatives don’t even see them.

    RxAdvance is taking Silicon Valley technology and applying it to health care to massively reduce costs. Approaching half a billion in revenue this year and expecting that to more than double next year, this firm focuses on driving 40 percent of the administration costs out of the system. It is my view that one of the biggest issues with the ACA is that it was implemented backward. Health care costs were excessively expensive and that needed to be fixed first before the ACA was government funded. RxAdvance is working to fix this after the fact and, apparently, it is becoming very successful, largely thanks to applying cutting-edge technology tools like analytics to an obviously unmet need to lower health care costs.

    Each of these firms represents Moonshots: amazing new ideas to address clearly unmet needs.

    Wrapping Up:  Find an Unmet Need and Manage the Market

    One of the things Sculley is known for is the Pepsi Challenge; that was his baby. The campaign forced people to realize that Coke, dominant at the time, might not be their favorite. Coincidentally, understanding why the Pepsi Challenge worked was part of my graduate marketing studies. The professor used it to showcase how easily people could be manipulated to believe something was better (the vast majority of people not only can’t actually tell the difference between Coke and Pepsi, a significant number couldn’t even distinguish 7-Up).

    This goes back to why Jobs’ Apple was so very different. While most companies shotgun out products, hoping one will appeal to a target customer, and do massive focus group studies to create and modify their offerings, Jobs’ Apple created one product and focused on convincing people that was the one they wanted. He basically took the Pepsi Challenge to a whole different level.

    In the end, my takeaway is that you not only have to find a gap where clear customer needs aren’t being met, but you need a way to herd people to that product and to hold off copy cats that will attempt to take that market away from you. In other words, you’d also better have strong marketing talent or maybe John Sculley on speed dial.

    Check out Moonshot! It is an easy and very informative read.

    Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm.  With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+


    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.
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