Steve Jobs, one of the computer industry’s foremost entrepreneurs, gives a wide-ranging talk to a group of MIT Sloan School of Management students in the spring of 1992. Jobs shares his professional vision and personal anecdotes, from his role at the time as president and CEO of NeXT Computer Corporation, to the thrilling challenges of co-creating Apple Computer, and subsequent disappointments at his ousting.
Following is the full transcript of Jobs’ lecture at MIT Sloan School of Management (1992).
Steve Jobs – President & CEO, NeXT Computer Corp.
Hi. I guess we get to spend an hour or so together today. And most of the time, I wanted to spend just talking about what you want to talk and answering some questions.
But I thought if you wanted, I’d take about 10 minutes or 15 minutes upfront and tell you what we’re doing at NeXT and why the world might need another computer company. Is that something you guys think about these things? OK.
I thought I’d tell you about some of our mistakes. Maybe that would be more useful. We have a lot of scar tissue.
There is a really interesting book that was written by a guy named Paul Strassmann. And Paul has one of the more interesting jobs in the planet. He’s the Chief Information Officer — CIO of a very large organization called the Pentagon. And they really understand software there. I had a conversation with him not too long ago, and he said the lesson from the Gulf War was that the best software will win the war. And so they’re trying to do a lot of work in the software area.
He wrote a book, though, before he got this job called The Business Value of Computers. It’s rather thick, and it’s not good bedtime reading. But you can plow through it, and there’s some incredible stuff in it.
And he asked two questions in particular. One was, he surveyed a bunch of companies from not very successful all the way up through really successful. And there’s somebody taking notes here. He asked how much they spent on information technology as a percentage of revenues. And he got a very counter-intuitive answer, right?
You’d think that either the really successful companies would either spend more or less than the not-successful companies, depending on your theory. But it was exactly the same. They all spent about 2% of revenues on information technology.
And he found this curious, and so he asked another question. How did they spend their money? And he found out that the really successful ones — actually, let’s start with the not-so-successful ones. As success increases and dollars increase, he found out that the not-so-successful ones spent the majority of their money on management productivity, and the more successful ones spent the majority of their money on operational productivity applications.
Now, this was not very pleasant for me to read, because I spent the first 10 years of my life on management productivity, which was PCs. PCs and Macs never attacked operational productivity. They just attacked management productivity. Why is that? Because you can’t go down to your local computer store and buy an app that will help you do stock trading, or will help you run a hospital, or will help you in whatever operational part of your business you want to automate.
Unless you’re a very, very small business, then you can run some accounting packages. But other than that, if you were a medium-sized or large business, these things never attacked operational productivity.
So we zoom out and we say, how have people attacked operational productivity with information technology? Well, in the ’60s, they bought a mainframe, and they got some terminals and a bunch of COBOL programmers, and they wrote a few apps. And most of them were kind of back-room apps. And it sort of worked for the very few that could afford to do this.
In the ’70s, they got a mainframe and some terminals, and they did the same thing. And a few of them got a few mini computers and terminals and tried to do it a little cheaper.
In the ’80s, nothing changed. Mainframe and terminals, minis and terminals. Until maybe about two or three years ago.
What happened two or three years ago was that the front office started to realize that they needed operational apps so bad that they couldn’t depend on the MIS folks anymore. They started taking life into their own hands and sometimes working with the MIS folks to start downsizing and getting some servers and running some industry-standard databases like Sybase or Oracle in the servers, and making a little local area network, and getting maybe some Sun Workstations, and spending about two years writing some mission-critical operational applications. Like trading apps for Wall Street, perfect example.
And it kind of worked. And the reason that they needed to do this was because more and more, they were discovering that things like new products required a custom operational application. An example, if you’re in financial services and you come up with a new product, it’s only three things. It’s an idea, it’s a sales force, and it’s a custom app to bang on databases to make the product real, to do the mortgage swaps or whatever it is you want to do.
Without the app, you don’t have a product.
And so there has been an increasing buildup of demand from the front parts of corporations to create more and more and more of these operational applications. And I think it’s going to get to the point where this becomes fairly clear that this is the next big revolution in desktop computing, is to attack the operational productivity.
And as we start to re-engineer the way we do things, to automate a lot of this in custom applications. Sounds a little strange now, to most people. Sounds like desktop publishing in 1985. Nobody knew what it was, everybody thought it was kind of a strange vertical thing over there.
But my guess is it’s pretty horizontal. And we’re attacking vertical markets now that know they want this. And it’s going extremely well. Sun is the only company that’s really had any success at this, and we’re knocking them out of the box.
Because we came up with the software called NeXTSTEP which lets you build apps five to 10 times faster than anything anyone’s ever seen. And after you build them, they’re deployable and usable by mere mortals, because it’s really easy to use, this computer. And you can interoperate your custom apps seamlessly with a bunch of off-the-shelf productivity apps.
So we go to these companies that use Suns and take two years to write their apps — or are thinking about using Suns, and they can write their apps in about 90 days on a NeXT.
Now, if you’re on Wall Street and you can create a new product in 90 days versus your competitor in two years, that’s eight new products you can field for their every one. And you can start to see the competitive advantage that can be created this way.
Now, we had no idea that we were any good at this when we started NeXT. A lot of times you don’t know what your competitive advantage is when you launch a new product. Let me give you historical example.
When we created — how many of you guys use Macs? Anybody? Good.
How many of you have seen a NeXT? Oh, how many of you use a NeXT? Oh, that’s not so bad. We’d like to change that ratio a little bit. We’re on the right track.
When we did the Macintosh, we never anticipated desktop publishing when we created the Mac. Sounds funny, because that turned out to be the Mac’s compelling advantage, right? The thing that it did not one and a half or two times better than everything else, but four or five times better than anything else, where you had to have one.