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IMT 581: Case Study Analysis: Sculley and Jobs – A Difference in Apple Leadership

by on November 18, 2010

Steve Jobs, a driven young college dropout, co-founded Apple in 1976 at the age of 21.

He was part of the company’s remarkable road to success for seven years until his famous exit due to power and control clashes with John Sculley. Two years earlier Sculley, a successful CEO at Pepsi Cola Co., was brought in by Jobs as CEO at Apple for his marketing skills to make the consumer products more profitable and manage Jobs. However, it became difficult to keep Jobs under control. He was a perfectionist that would drive others to work in unethical circumstances and no mercy on work that was under par for him. Not some one you might readily want to work for.

The board had to decide to sideline him. After a dramatic confrontation between Jobs and Sculley, Jobs left for a couple days of and said he’d be back. Only to find that the Apple board had changed the organization chart with no space for Jobs left in it.

When Sculley came in, he brought in the motto of competing with IBM and reaching to customers at home and schools apart from professionals. He reorganized the company that was divided based on products. He made the division based on functional units. Having product-based units had caused competition among these teams and their market audience turned out to be same due to lack of communication among the divisions. By having functional based divisions, Sculley brought in stability and harmony among teams. In his tenure, he was able to increase Apple’s revenue from $800 million to $8 billion. He had an analytical and traditional approach to being a CEO.

However, projects started failing. There were too many projects running simultaneously and a lot of capital went in them even if they did not give in good returns. That’s when Apple’s downfall started. In 1993, Sculley resigned. Shortly after the company had another two CEOs and after Gil Amelio, the 3rd CEO of Apple, the company had the lowest stock price in 12 years. Maybe they should not have fired jobs after all?

This is where Jobs stepped in as interim CEO and changed the company around. It is said that had Steve Jobs not taken the reigns in his hand in 1997, Apple would have vanished. He came in and first halted the failing projects and those which had no market value. Jobs was a minimalist in his approach and gave a lot of importance to aesthetics. He wanted everything perfect. He came with a vision to “change the world” with Apple. This time he was more experienced than what he was a decade ago, but no less focused and intolerant of anything that came in the way of that focus.

After leaving Apple, Jobs went traveling, searched his options and ultimately started NeXT. They produced personal computer with high-end industrial design. Only the software was successful though.

Sculley took over Apple and led the company to newer heights. Jobs took over when other CEOs before him had failed to get the company back on its feet. Sculley came in at the right time and later when Jobs came back he had gotten more management and executive experience. He stayed true to his own style and original vision that resulted in the products we see today. What is required of a CEO is the vision of change. Jobs breathed the motto to “change the world” into Apple from the start and made that part of it’s DNA. He is a co-founder of Apple, but the company might have just remained “Camp Runamok” (as it was called) had Sculley not come along. It is all about the right style of management at the right time. We believe they both served well and played an important part in taking the company to where it is today.

By: Gauravee Gandhi, Surry J. Mowery & Jeroen van den Eijkhof

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11 Comments
  1. All — an interesting case. What insights did you gain into how Sculley and Jobs developed their power? I recall Kevin describing the differences between Jobs and Gates — internal versus external power. Do you see this difference played out between the two CEOs?

  2. Colin Anderson permalink

    It sounds like it was some combination of intentional maneuvering and luck that got the company the right CEOs at the right times. I wonder what comes next? Jobs has had health issues, and my impression is that he won’t be CEO for much longer. What sort of leader will replace him? Will that leader follow in his footsteps, or set out in a new direction? Which would be best for Apple?

  3. Though it can be stated that Jobs came back after he got some more management and executive experience,Whats to be noted is he was well aware of what is strengths were and he focused on that .As stated before he was a perfectionist who had no mercy on stuff which was not upto his standards and despite him having a decade of experience,he was still ruthless .

    So I guess the point to be taken away is that leaders should be aware of their strengths and utilize them to their maximum possible potential .However the question that begs to be asked is whether sometimes a leadership style is not what a company is ready for as in the case of Apple during Sculleys timeline

  4. Tien Nguyen permalink

    This case is very interesting to read. However, I agree with Ross’s idea that you have not discussed in detail the difference between the two CEOs?

    Furthermore, you claimed that CEO Sculley was able to increase Apple’s revenue from $800 million to $8 billon. Yet after that, projects started to fail. Was something wrong with the way Sculley managed the team? If yes, then why Sculley managed to increase the Apple’s revenue then? Had Jobs managed the team at that time, would it have been successful ?

    • Good questions, Tien.
      Sculley reorganized the structure of the entire organization which helped Apple become more productive. He raised the price of Macintosh from $1995 to $2495 using the additional money for higher profit margins and expensive advertising campaigns. This helped to increase the revenue.
      However, he did not have proper hold on the projects. As the company grew, mid- and low-level managers within the company found it fairly easy to gain funding for practically any project. Apple became filled with these projects, many of which had little commercial potential. When money tightened in the early 1990s, this resulted in a sweeping round of empire building, in which mid-level managers attempted to take over as many projects as possible in order to make their projects more difficult to discontinue.

  5. Ahsan Ali permalink

    Saying that Sculley “was able to increase Apple’s revenue from $800 million to $8 billion” seems a misleading (or at least incomplete) piece of information, particularly in light of Apple’s subsequent downfall. While that is an impressive number at face value, revenue does not equal income. It would appear that Sculley was so focused on growth that costs ran amok.

  6. This case sounds very interesting. Jobs and Sculley are both great leaders for Apple and I am wondering how their distinct management styles affect Apple to thrive? And I am also curious to know which management style will be more effective in which kind of companies?

    Anyway, these two Apple leaders is a good example for finding the comparison cases.

  7. Thomas Zhenhua Wang permalink

    Management styles do have great influence on the future of a company, especially for one like Apple. However it is unfair or inconclusive to say one management style is more superior than the other. If Sculley continued to lead Apple, the company might have a totally different image of Apple today and this image may not necessarily be worse than the current one in terms of the value for the shareholders. Even so, Apple might be less popular than it is today.

    It is about the strategic direction the company is heading and the CEO has great power over that direction. CEO’s like Sculley are more conservative according to his background in Pepsi (according to the corporate culture and etc.). This background would make him more analytics-oriented, which I guess would more likely to lead Apple goes after for more corporate customers instead of only focusing on individual consumers. Again, this may not necessarily mean Apple would end up worse than it currently does.

    Another example would be IBM gives up its PC section to Lenovo. IBM made that decision at that time according to its strategic direction, which lead it to be the way it is today. However if IBM was lead by another successful CEO, the image of IBM today could be totally different too and maybe even better.

    Those discussions are all based on the perspective of the shareholder’s value. Of course we cannot deny the social value Apple has created today, but one thing is business is business.

  8. As Sculley and Jobs, both had a different way of managing the company – both helped Apple to grow and emerge as a leading company. A CEO’s work pattern and view of industry makes a lot of difference to the company’s future. Moreover, often there are factors in the external environment as well as internally, that bring about a tendency to manipulate the culture of the company. For example, the changing market during Sculley’s tenure might have been different from the market during Jobs tenure leading to changes in their decision making. Also, Steven Jobs has been famous for stressing on aesthetic design, minimalism and perfectionism leading to a complete change of Apple’s existence. On the other hand, Sculley’s background of leading Pepsi might have affected his decision-making for Apple. But, in spite of having different perspective, they managed to understand the competitive behavior of the market, Apple’s current direction and helped Apple to grow exponentially.

  9. Interesting case study. I see another emerging point, which is Steve Job’s ability to bring a company up from ashes. In both cases, Steve was in the company when it was not in its peak. And, in both cases, he was able to improve the organization. May be, as Ross mentions, Job’s external power enabled this feat.

    Thanks,
    Ajay, Nishant & Paul

  10. swarnikam permalink

    What I draw from this case, is that leadership style has a powerful impact on the success of any company. Jobs could bring up even when Apple was failing and now has turned it into one of the most admired companies. Sculley had his own distinct style that was to the advantage during his tenure. Thus, right strategy and right vision is what decides a company’s fate.

    Scott, Jitsuko and Swarnika.

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