Steve Jobs on what happens to companies when sales people take over product people

Here's a great quote from Steve Jobs (from this interview) about what happens when technology companies, and especially ones with a monopoly, pivot from being product-driven to sales-driven. The italics are mine.

“The technology crashed and burned at Xerox. Why? I learned more about this with John Sculley later on. What happens is, John came from Pepsico. And they—at most—would change their product once every 10 years. To them, a new product was a new sized bottle. So if you were a ‘product person’, you couldn’t change the course of that company very much. So, who influences the success at Pepsico? The sales and marketing people. Therefore they were the ones that got promoted, and they were the ones that ran the company. 
 

Well, for Pepsico that might have been okay, but it turns out the same thing can happen at technology companies that get monopolies. Like IBM and Xerox. If you were a ‘product person’ at IBM or Xerox: so you make a better copier or better computer. So what? When you have a monopoly market-share, the company’s not any more successful. So the people who make the company more successful are the sales and marketing people, and they end up running the companies. And the ‘product people’ get run out of the decision-making forums. 
 

The companies forget how to make great products. The product sensibility and product genius that brought them to this monopolistic position gets rotted out by people running these companies who have no conception of a good product vs. a bad product. They have no conception of the craftsmanship that’s required to take a good idea and turn it into a good product. And they really have no feeling in their hearts about wanting to help the costumers.”


I have noted a similar quote by Jobs regarding the decline of Microsoft before, but this quote really fleshes out the problem in detail. What Jobs is saying about technology companies applies equally or even more to science-driven companies like pharmaceuticals and biotechnology. Nobody is saying that sales and marketing are not important, but when your company's basic foundation is fundamentally based on new products like drugs, then sales people can only get you so far, and beyond a point they can even destroy your raison d'etre. Interestingly, Microsoft itself is a good recent example of how a product-driven strategy can actually shore up a company's fortunes: a lot of the recent uptick in Microsoft's recent stock price and performance has come from the development of a new product - their cloud computing platform Azure. 


OpenEye CEO Anthony Nicholls has noted how the decline of Big Pharma's fortunes from the 90s onwards tracks well with the replacement of product people at the helm with sales people and lawyers. That seems to be too much of a coincidence. CEOs and CSOs definitely set the tone for what's important, and it's hard to see how a lawyer from a company that has nothing to do with making drugs can truly appreciate how to improve a drug-making company's core competency. Nor does being product-driven entail sucking up other firms in mergers and acquisitions. The problem is that while your company's fortunes may get a brief shot in the arm because of new products developed by other companies, at some point those companies' products may themselves run out. More importantly, if your primary goal is to simply acquire other companies, then you are no longer a pharmaceutical R&D organization, you are more like a holding house for other companies' products which you simply acquire and sell. At the very least you should then call yourself a holding house.

Of course, all this is more comprehensible (although still not excusable) when you consider how skewed the incentive systems are. When a new CEO is given a mandate to make a hefty profit in five years by impatient investors, their goals are totally limited to satisfying that narrowly defined demand, and since drug discovery (new product creation, that is) almost always looks at ten year horizons, the likelihood of that particular activity meeting their requirements is slim. Instead, acquiring the small neighborhood biotech and keeping investors happy for five years is the primary goal; after that you and your ten million dollar bonus are out anyway, so who cares?


In some sense Jobs' wisdom can be summed up very simply: if your company is based on a product, you should make better and more product. Selling it is important, but that comes next. If you invert the order or make sales your exclusive focus, then the very thing you are selling will one day cease to exist.

Why healthcare might not have benefited from a Steve Jobs-style disruptor

Steve Jobs holding a non-emergent object

The website Stat has an article titled "Why healthcare needs a Steve Jobs-style disruptor". The article which is by a physician named Damon Ramsey focuses on Jobs' ability to rethink design and to reinvent many of the ways in which we interact with the digital world. Ramsey thinks that Jobs would have had much to offer our current healthcare system with its convoluted regulatory mechanisms and information systems; it draws inspiration from an account by Jobs's sister in which she recounts him sketching out new designs for hospital systems even on his deathbed.

It's a pleasing vision, and Jobs was certainly a visionary who will go down as one of the most important people in the history of modern civilization, but I actually don't think that someone like him will be a disruptor in healthcare. The main reason is that healthcare is very different from electronics and computer science in terms of the complexity and predictability of its essential elements. Jobs might certainly have been useful in designing some of the electronic interfaces in hospitals, but that's a very limited part of the system. A major part of healthcare lies in the process of drug discovery, and in this vast arena I think Jobs would have been far less effective. In fact his working philosophy might have even been a hinderance.

Jobs' main achievement was to make computers and other electronics easy to use: even more than Bill Gates he brought computer technology to the masses. He was probably the best interface designer of his time, and he also had a genuine capacity to see the interconnections between various aspects of software and hardware.

And yet Jobs was designing his iPhones and Macs based on extremely well understood principles of software and hardware engineering. He certainly needed to think creatively in order to understand how to make these principles play well with each other, but he did not have to worry about the truth of the principles themselves. In addition the systems he was looking at were very modular, so most creative ways to package them together would work since they would not suffer from unexpected interactions. Put simply, there was very little chance that Jobs's devices would blow up.

In contrast, biological systems are startlingly non-modular and non-linear. Getting them to work is not a matter of designing interfaces. Not only do we not yet understand how to discover new drugs well, but we don't know how to do that because we lack an understanding of the human body to begin with. The "software" in case of drug discovery would be the genome which dictates the actual workings of the cell. The "hardware" is the universe of proteins that serve as workhorses for regulating every single important process in our body, from reproduction to the immune response. Unlike a microprocessor in which the welding together of software and hardware is a matter of engineering, welding together the software and hardware of the human body is currently impossible, simply because we are ignorant both about the nature of these components and their interactions.

I think Steve Jobs would have been completely befuddled if he had been confronted with the task of reinventing drug discovery. In fact one wonders if he would have fundamentally misunderstood the problem; it's worth noting that some people think that he died an early death because he wasted critical time in refusing standard chemotherapy for his cancer, opting to pursue untested "alternative" cures instead (although he does seem to have regretted his decision later). Knowing what we do about his philosophy, I get the feeling that he preferred the simple to the complex, the intuitive to the un-intuitive and the predictable to the chaotic. iPads and Macs are all of the former, biological systems are all of the latter. Notwithstanding his drive and intelligence, a Steve Jobs in drug discovery might have likely have taken his team down some very dark and interminable alleys.

The challenges that Jobs met were very impressive, but they were primarily engineering challenges which could be solved by putting together a bunch of smart people in a room and giving them enough money. The systems he was looking at were largely homogeneous, did not involve too much unexpected feedback and were non-emergent. The challenges that healthcare faces - and this includes the regulatory, economic and informational challenges which the article mentions - deal with highly emergent systems composed of very unexpected feedback and non-linear phenomena arising from extremely heterogeneous and diverse players. Solving those systems is not a matter of designing a better mousetrap, it's one of understanding what a mouse is in the first place. Steve Jobs would not exactly have been the right candidate for unraveling that particular pickle.

A Christmas message from Steve Jobs for our friends in pharma: 2015 version

I had posted this at the end of 2011, and it's both fascinating and highly disconcerting at the same time that Steve Jobs's lament about product designers' focus on sales instead of product design leading to the decline of specific industries rings even more true for pharma in 2015 than it did in 2011. If anything, the string of mergers and layoffs in Big Pharma during the last four years have underscored even more what happens when an industry starts to worry more about perception and short-term shareholder value than its core reason for existence. Most would agree that that's not how you innovate and that's not how you solve the really hard problems. Let's hope Steve will have a different message for us in 2019.

I am at the end of Walter Isaacson's excellent biography of Steve Jobs and it's worth a read even if you think you know a lot about the man. Love him or hate him, it's hard to deny that Jobs was one of those who disturbed our universe in the last few decades. You can accuse him of a lot of things, but not of being a lackluster innovator or product designer.

The last chapter titled "Legacy" has a distillation of Jobs's words about innovation, creativity and the key to productive, sustainable companies. In that chapter I found this:

"I have my own theory about why decline happens at companies like IBM or Microsoft. The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of product becomes less important. The company starts valuing the great salesmen, because they're the ones who can move the needle on revenues, not the product engineers and designers. So the salespeople end up running the company. John Akers at IBM was a smart, eloquent, fantastic salesperson but he didn't know anything about product. The same thing happened at Xerox. When the sales guys run the company, the product guys don't matter so much, and a lot of them just turn off."

Jobs could be speaking about the modern pharmaceutical industry. There the "product designers" are the scientists of course. Although many factors have been responsible for the decline of innovation in modern pharma, one of the variables that strongly correlates is the replacement of product designers at the helm by salespeople and lawyers beginning roughly in the early 90s.

There's a profound lesson in there somewhere. Not that wishes come true, but it's Christmas, and while we don't have the freedom to innovate, hold a stable job and work on what really matters, we do have the freedom to wish. So with this generous dose of wishful thinking, I wish you all a Merry Christmas.