Former CEO John Sculley: Apple must adapt or die John Sculley, the former PepsiCo president who served as CEO of Apple during most of the 1980s and early 1990s, says that while Apple is "an extraordinary company," it has not done enough to adapt its products to suit emerging markets. In a video interview with Bloomberg on Monday, Scully – who is perhaps best known for a 1985 …
>The whole tech world would have been a lot better off if he had [killed Apple]
So you don't think Windows benefited from having a competitor in various Mac OSs? Before you answer, remember MS was the company who stopped development on Internet Explorer when it thought it had quashed competing browsers.
That is as it may be, but also remember that Apple wasn't a serious market contender at the time when it would have mattered, namely the late 90s/ early 00s, which is what allowed Microsoft to entrench Internet Explorer as they did. Apple at the time was a tiny percentage of the IT market, primarily geared to the graphic design industry but little else. It was Mozilla and Google's combined efforts, along with a lot of pressure from a lot of pissed-off web devs, which broke that monopoly, not Apple.
The fact remains that Apple has done far more harm than good in recent years. They've created and popularised the walled garden, which every other market player now wants to emulate; established the paradigm that a computer you buy isn't really yours; systematically eroded openness and customisability in computing architecture; unleashed a ridiculous and litigious firestorm that has stifled innovation the world over and benefited nobody but a bunch of greedy patent lawyers. All of which more than counters for any putative benefits their presence as a competitive entity might have created.
"They've created and popularised the walled garden, which every other market player now wants to emulate; established the paradigm that a computer you buy isn't really yours; systematically eroded openness and customisability in computing architecture; unleashed a ridiculous and litigious firestorm that has stifled innovation the world over and benefited nobody but a bunch of greedy patent lawyers."
Best argument I've read on el Reg for a very long time. Well done, sir. Apple may do many things well, but those you mention are a detriment to our industry. And we're here because we love this industry, right? Not because we hate it and want it to die, strangled by the likes of Apple.
> They've created and popularised the walled garden, which every other market player now wants to emulate; established the paradigm that a computer you buy isn't really yours; systematically eroded openness and customisability in computing architecture
IMo Apple is the last man standing in the old vertically integrated computing business model of the 1960s through 1980s. What you wrote above is almost exactly what IBM used to do in the bad old days, but now even IBM has eventually seen the light. However since the widely-cloned Apple II - and with the exception of the attempts at commoditisation that nearly killed Apple - the company has always operated that way.
The dilemma is that the ancient model is - other than the problems of cost and lockin - not at all bad for the customer if done right.
In the Microsoft-dominated world of today we have cheap equipment and moderately priced software but then all round the world IT departments spend a lot of time and money creating their own walled gardens to protect their customers from the undesirable side-effects of openness and interoperability.
Although Apple is not for me they have always done a fantastic job of making computing accessible to non-technical types and what I particularly envy is the absence of a forced-upgrade treadmill.
While I tend to agree about the end result of making stuff accessible, I think we need to be very much aware of _how_ they do it: eliminate choice and variety.
When done well, this strategy can be very effective, but fundamentally the price we pay is not really much different from the price we worry about when e.g. Microsoft or Oracle eliminate (market) alternatives.
I think you're right, though, that the walled garden is what every vendor has wanted since the invention of the computer, as in sole-sourced platforms, leased software, continuing revenue streams. And while IT departments do indeed create their own walled enclosures, they do it in the knowledge that they control it, and I don't know of any vendor that they totally trust!
I have to say, though, that I'm puzzled by the "forced-upgrade" remark. In my experience, Macs and PCs behave similarly in terms of patches, and let's not forget quite how screwed you may feel these days if you invested a lot of money in PowerPC software...
Good question Malcolm... my take is that because the profit of a pure software vendor comes from software sales, SW vendors have to sell us the same stuff over and over again (OK in PC-vs-Mac Apple have the privilege of being a small player so they have the option of growing their business by getting new customers rather than milking their existing customer base). That means that every 3 years Microsoft (for example) comes out with a new OS (and it seems like every 6 years a jarringly different UI). It's designed to make previous versions look obsolete, much like American cars of the 1950s and 1960s. Thus novelty gets priority over stability. (and in my career as a dev, I've known the feeling of fighting for time to improve the software quality in the face of marketing demands for new features).
The Old-school model (and here I'll take a non-Apple example, the HP 3000 series) has a reputation that stands or falls on the quality of the system as a whole. Every 3 years the HP salesmen would come offering us *more power* with minumum user-visible change - though in the HP 3000 world there was similar pain with an architectural transition.
I'd say like the long-gone HP of Bill and Dave, Apple aims to make products for the long run where the customer can quite happily use a machine with the OS it came with, for 8 years, and without any maintenance or reinstallation whatsoever.
Whereas in the PC world there is still too much of "new shiny - don't think about the bugs - new shiny". Of course Apple have now provided a handy counterexample in the form of the Maps debacle...
Since Apple *have* obtained such a huge market share in mobile, I wonder if they will start inventing ways of milking their existing customer base...)
Ah, I get what you're saying. I think it depends very much on the set of users; I have large numbers that are on XP and/or Office 2003, and see no reason to change, even though the end-of-the-road is fast approaching for XP.
"You've got to upgrade!"
"Why?"
"Microsoft is ending all support for XP, including security patches".
"Good. I never liked those updates they kept sending."
Oh yes, that would have been great. Microsoft with an even higher market share, they would have behaved properly and not taken advantage of that situation would they? (duh).
Contrary to what Google will tell you the computer and phone business is still largely a Microsoft and Apple competition. Google just add obvious or pointless gimmicks to their phones, the rest is as old as the hills, icon grids and GUIs.
Yeah. I was thinking this. He got rid of the guy who saved the company in the end. So his opinion is worthless..
But hey, it doesn't seem to matter how useless you are once you get to CEO level, because it seems to go roughly like this: "Hey, you lost X billions of dollars? Never mind, have a few million this year anyway"
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Don't let rose tinted glasses confuse you. Sure Saint Steve saved Apple on his return, however part of Scully's problems were down to the fact he was trying to run a fractured company with nervous paranoid workers, all of which was down to the way Steve Jobs ran things in the first place.
(now without poor grammer and spelling mistakes of the last two attempts ... I hope)
Worthless? Hardly.
He knows a vast amount more about Apple than any of us do, INCLUDING what didn't work, what Jobs did right and less-right (obvs Saint Steve never did anything _wrong_, just less right).
Worth remembering, fanbois, that Sculley championed the Newton, which Jobs killed, and then trumpeted the glory of the iPhone. It is obviously heresy to suggest that Saint Steve might have realized that extremely portable digital organizer-type things do, in fact, have a market.
Also worth remembering is that Sculley, not Jobs, was the one that established Apple as a premium brand (by adding 25% to the price of the first Mac).
Sure, I wouldn't think he's the guy to run Apple, but his knowledge -- even if just his knowledge of what doesn't work -- is worth millions more than the Piro's!
He compares $500 and $100. Those are very different. Apple cannot create a $100 iPhone. There are $100 Android phones, but no one carrying a GS3 or other high end Android phone would consider it to be a smartphone.
What's wrong with a $300 price point? Still less than half the price of an iPhone 5, and $150 less than an unsubsidized two year old iPhone 4, but something that could still be an iPhone. Apple doesn't need to compete for market share in the $100 device segment. That segment is without value for anyone except maybe Google (they can still deliver ads to these guys) The owners of these bottom end phones aren't going to spend enough money on apps to become "sticky" to the Android ecosystem if/when they're able to afford a more expensive phone in the future. Most will still be a customer only for low end phones a decade from now. No one is going to make money off them, and Apple loses nothing except meaningless market share by ignoring them.
>What's wrong with a $300 price point?
That it might eat into the sales of their iPhone 4 (with its higher margins) is a possible reason, plus the less immediate cost in terms of their image. If the $300 device is too clunky, ugly or feature-limited, it might put buyers off considering another iPhone in the future. True, Samsung have phones from £10 to £400 (though use 'Galaxy as a sub-brand for the pricer ones), but Apple benefit from keeping their message simple- as demonstrated by my dad pointing at any touch-screened phone and asking "Is that an iPhone?"
But if your Dad does that with _any_ phone, it's clear that this hasn't happened because of Apple only having a few simple models, otherwise he'd only be doing it for those simple models. Rather he's been misled to believe that anything is an iphone, even when he has no clue what they actually look like.
The obvious blame is the vast amounts of media coverage that the platform got, when it's never been number one. Had Samsung (who actually deserve it, being number one) got that coverage, he'd be asking if it was a Galaxy. (Well, there's also this odd effect where for some reason, people always refer to Apple by brandnames - "posted on my iphone" etc - whilst everyone else almost always uses a generic term - "phone" etc.)
> Apple cannot create a $100 iPhone.
Oh, I'm sure they can, but would anyone buy it? It would be like a $5000 BMW, or a $200 Armani suit. Fashion accessories are only worth buying when everyone else can see that they're expensive.
>. Fashion accessories are only worth buying when everyone else can see that they're expensive
But these are only going to be sold in India and China. Do you want to sell a couple of $1000 phones to a few expats and millionaires kids, or do you want to sell 100million $250 phones to the new middle class?
The nice thing about cell phones is that you can ensure that they aren't imported back to the home market to devalue the brand
There is such a thing as being too high-end, people buy BMW and Armani because they can't afford Bentley and Saville row
Simply because on the network subsidised model there's not such a difference between the bundled cost.
Take a UK contract, your base price for any acceptable featurephone handset is probably fifteen quid a month with a reasonable allowance for voice and data. So that's what my son's Galaxy Ace is costing. For twenty three quid a month (same network, slightly better allowances) I have a Galaxy S2 (bought when that was top of the line). For most people, finding seven or eight quid a month extra for a top of the line handset isn't impossible. Over a two year contract that's about £200 difference, but it never feels like that.
That's why there's so few mid market handsets, because you'd only ever buy one if you weren't the person using it!
I'd consider them smartphones (as a Nexus owner). Obviously not as good - but I don't get this idea of labelling them differently just because of that. A £400 laptop isn't as good as my £1500 laptop, but that doesn't mean I don't consider it a laptop. It is, by definition.
"Smartphone" has always been a terribly ill-defined name, and I don't understand why people and the media are so keen to restrict its definition to only some devices; it's pretty much just a marketing term, so if something is marketed as a smartphone, it's a smartphone. The original iphone couldn't even run apps...
And that is why I don't buy them. A Benz on the other hand actually has more useful value, not just image value, over a Hyndai. However, there is no problem with tech brand names. The same morons who give Louis Viton and Gucci (spelling?) all their money will give Apple their money.
No one cares about resale values of tech products - and those that keep their value only do so as there isn't newer stuff coming out to push prices of the older generations down. Amigas have great resale value, but I'm not sure that's much an argument.
As for reliabilty, this is the company that everyone says it's good, because you can take it back to the shop to get it repaired.
Apple never reduced the price of the iPod to compete with rivals, but instead released the iPhone. Sculley hasn't considered the possibility of Apple entering a new (and thus growing) product category... what that might be I have no idea, and if anyone does have a good idea then they obviously will keep it close to their chest.
It might be that such a product category won't exist (we're pretty sorted for AV gadgets), or that another company has enough R&D cash and commitment to get there first.
No commentard has yet made a very strong case for Apple being able to get enough margin from selling a TV set plus gubbins (or at least why it couldn't be an external box) but that doesn't mean Apple don't know something we don't- or are at least putting in a lot of money into trying to find a compelling reason.
We pundits get it wrong (as can CEOs) as shown by Wired's late ninetoes article "Ten things Apple must do to survive"... Apple didn't follow their advice. Engadget wrote an open letter to a pre-Pre Palm and received a letter back to the effect of 'Thanks, good points, we have it hand' and certainly Palm made a good effort of it with the Pre.
>They did however introduce a range of smaller, cheaper iPods.
Very true, but rather than cannibalise sales from the iPod 'Classic', smaller players can complement it. The iPod may already have have docks etc, and use the Classic for the car or lounge, the Nano for the gym or journey to work. In any case, the technology changed- Flash players are now cheap and have far bigger capacities than the earlier HDD-based iPods. Only Apple, Archos and Cowon make HDD-based players these days, with the Archos not pocket sized.
>They've already done that with the iPad, no reason to think they can't do something similar with the iPhone.
Judging by the cost of the iPad Mini, they have margin enough on it. Again, big iPad for the sofa, iPad Mini for the car glovebox or handbag, or for those who won't stretch to £500 for a toy.
Both the iPod 'Classic' and big iPad are too heavy or big for all situations... thus leaving a convenient gap for a baby brother or two. The same isn't true of a phone, which has got to be portable and suitable for all but the most niche of activities (outdoor expeditions, for example, where weatherproofing and battery life are of prime importance)
I have considered the need for a smartphone if one always has a smallish tablet to hand; a dumbphone + tablet combo has a lot to recommend it (long phone battery life, low cost of phone replacement if lost, internet functions easier on a tablet by virtue of its size) but I can't imagine Apple making an dumbphone- an iPhone that doesn't do apps would reduce the clarity of their message.
Rather than spend money on a creating, testing, tooling up for and then communicating the benefits of a new iPhone design, its more efficient for Apple to just continue selling the previous version alongside the latest and priciest.
>"widely criticized for lacking the technical background to understand what made Apple's products tick"
So has this changed in the last 20 years and he's suddenly the know it all of the tech industry? Or does he still not have a clue?
I'd think that being best known as the idiot that almost ran the company into the ground, that the only advice to take from this interview is to do the exact opposite of whatever he suggests
Sculley worked a Pepsi. A commodity product in a two horse race. It was a mistake to hire him into Apple in the first instance; and that has been proven.
Just because he is a past failed CEO of Apple, why does anyone show the slightest interest in his opinions? He has demonstrated he has no idea how to run Apple - he made too many mistakes.
Why would his recommendations be any better now?
This article is a waste of pixels.
"…who is perhaps best known for a 1985 coup in which he ousted Apple cofounder Steve Jobs…"
Er, no: actually, he survived Jobs' attempt at a coup, then relegated him to a corner by his underperformance, and finally let him get out to build NeXT and drive it to the ground while Apple went through a stage of splendor before its decline.
Jobs was definitely pushed rather than jumped. NeXT wasn't a commercial success, but then neither was it run into the ground. It became the basis of OS X and iOS, so the worst you could say was that it was a technology ahead of its time. Meanwhile,he also ran Pixar, which has been insanely successful and made him one of the biggest shareholders of Disney when he sold it to them.
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Depends who's version of history you follow. In his semi-biography he was pushed, in Pirates of Silicon Valley (which was considered near canon at the time) he tried a coup on John Scully which failed and then was forced out.
Also Pixar is a very bad example as John Lasseter pointed out their success was because they rarely sawe Steve and as long as they used his NeXT boxes he cared little. Supposedly he visited the Pixar offies less than once a year and never gave input.
It's for Apple to decide, but;
"there's no way Apple will be able to gain a foothold in the developing world as long as its products are priced like luxury items"
This true NOT only for developing world, but also for the rest of the world market. Apple uses the same hard drives, video cards, memory RAM, internet adapters and many more components used by PC, but Apple's price is much higher, sometimes 50% higher than the same part for PC. This is bad for business for long run, immoral and cannot last for much longer. People will eventually come to their sense and "vote with their wallets".
PCs built to the same spec are normally similar in price to Apple kit, and sometimes MORE expensive. Take a look at the Ultrabook market for example. Where are all the Ultrabooks that are significantly cheaper than a MacBook Air without cutting corners (like using spinning rust rather than flash)
Umm, facts would seem to be against this propaganda, at least at some feature levels.
Consider a HP Spectre XT Ultrabook 13-2150nr, which I can buy for $900. The CPU is the 1.7/2.6GHz i5-3317U, 4GB RAM, 128GB SSD, 3.07lbs and 12.44 x 8.8 x 0.69 in.
The equivalent Apple is a 13in Macbook Air. CPU is the marginally faster 1.8/2.8GHz i5-3427U, 4GB RAM, 128GB SSD, 2.96lbs and 12.8 x 8.94 x 0.68in. It costs $1200.
So for an extra 33%/$300 you get something that has a CPU that is maybe 13% faster (obviously, that doesn't translate into a 13% faster system, because everything else is the same), is 0.01" thinner, and weighs 2ozs less.
Hmmm... not _terribly_ good value for money, is it?
@Malcolm - the HP Spectre XT has a 1366x768 netbook display resolution and 5 hour battery. The MacBook Air has 1440x900 (16:10, a good bit more useful than 16:9), 7 hours battery. Still doesn't seem a lot extra for $200, but then it's amazing what PC vendors like to charge for a small bump in resolution.
Since I'm from the longhaired smelly side of the computering world I wouldn't be seen dead with a Mac, but must agree with the OP that like-for-like PC alternatives seem to end up in the same price bracket.
Then add in support.
For an extra $300 Dell will add next day support where they will send a 3rd party technician out to replace some random part of your laptop (often even the correct part). If anything else doesn't work they will just blame MSFT.
Included in the price of the Mac is walk into a Mac store anywhere in the world and people who, even if they aren't actually geniuses, do at least know about Macs - will fix it or swap it.
They must have adjusted their prices in the last few years. Last time I tried to spec a Dell laptop vs a... Macbook? Powerbook?, getting each part as close as possible in capabilities as the respective site allowed, a slightly more powerful Dell was cheaper by about 50%. This was back before SSDs took off massively, mind.
You don't have to be a cow to discus about the quality of milk...-;) In recent years Apple has been more lucky then others in IT industry and quite inventive, however NOTHING last for ever, even Apple. I like my iMac but it's performance, build and specification doesn't justify the price comparing it with MS Windows.
If Apple really did want to get into the lower end of the market, there is no reason why they couldn't do so under another brand name, maybe another fruit, sub-licensing the iPhone trademark and selling the cheap phone without damaging their premium brand.
Companies do it all the time.
Obviously there is a lot of growth potential for Apple to sell iPads to africa, Brazil, Vietnam, etc, but that misses the point of how Apple has defined emerging markets since they introduced the iPod. Apple doesn't see emerging markets as Laos, Tajikistan, Bolivia, etc, Apple defines emerging markets by the type of device. MP3 players were an emerging market, smartphones were an emerging market, tablets were an emerging market. Why sell cheap low margin goods to poor countries, when you can wait for them to develop to be rich enough to buy your high margin goods? The risk with this strategy, though, is that very few companies can consistently create and/or dominate emerging markets.
...if his comments are anything to go by:
- Developed world approaching saturation. No shit!
- Emerging markets are where it's at. No shit!
- Emerging markets can't afford Developed World prices. No shit!
- To sell in the emerging markets, you need to sell at prices they can afford. No shit!
Just stunning. And he got paid how much?
"The big shift as we go from $500 smartphones to even as low – for some companies – as $100 for a smartphone, you've got to dramatically rethink the supply chain and how you can build these products and do it profitably," Sculley said"
How can you get any cheaper than using the slave labor at Foxconn? According to MSN Money, the Iphone 5 costs Apple between $207 and $238 to make. They sell the Iphone 5 with 16GB for $649 making a cool $442 profit off of each unit. Or, in other words, they make about 200 percent profit. I can give them a suggestion if they want to sell their Iproducts cheaper, but something tells me they won't listen
ref:
http://money.msn.com/technology-investment/post.aspx?post=c2739b74-68c7-4480-aa9d-7d66322e7e5a
http://www.sfgate.com/technology/article/Apple-pioneers-installment-plans-in-China-4200804.php
Apple will NOT likely lower prices, since to them that would devalue the upscaleness or premium branding. factors they see around their existence. More likely, Apple will make even MORE money, from earning interest income. And, since it will be offshore, probably it will pay lower taxes if it can find a way to Statesside "administer" the financing and administrative overrhead" while keeping the money in some offshore account. My assumptions in this para, though.
Anyway, from the article...
"Apple pioneers installment plans in China"
""Apple has introduced installment payment plans for buyers of iPhones and MacBook laptops in China as it struggles to compete with low-cost devices in the world's largest computer and mobile-phone market.
Payments on purchases costing from $48 to $4,800 made via the company's Chinese website can be spread over as long as two years, according to the site. The plan, which requires a China Merchants Bank Co. credit card, has fees ranging from zero to 8.5 percent.
Apple is trying to make its products more affordable in China after being surpassed by local suppliers such as ZTE Corp. and Lenovo Group Ltd. in the smartphone market. The iPhone 5, released in China last month, is priced at $850 on Apple's local site, equal to about six weeks' pay for the average urban worker.
"There is an enormous mid-range consumer market that they are not tapping into," said Mark Natkin, managing director of Marbridge Consulting, a Beijing market research firm. "They're trying to figure out how to make products more accessible to that market segment. This is a good step in that direction."
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