August Turak

Author Consultant Speaker

5 Ways that Steve Jobs, Steve Denning, and Peggy Noonan are Dead Wrong

I’m a fan of Steve Denning and this column has repeatedly praised Steve Jobs. I religiously read Peggy Noonan in the Wall Street Journal. But as another hero of mine, Popeye, would say, I’ve had all I can stands ‘cause I can’t stands no more. It’s time to right some wrongheaded thinking about why great companies die.


In 1985 I became VP of Sales for a start-up called Applied Control Systems (ACS) that made PC based inventory and accounting software for restaurants. I soon discovered there that were 25 competitors selling a similar product. Worse, at the time very few mom and pop restaurants had a PC or plans to buy one. This meant a “two step sale.” We had to sell a third party PC just to sell our software. As a result, ACS had very few sales and was rapidly burning through cash.

The solution was NCR Corporation. NCR not only sold PCs, but through its cash register division had a huge sales force and installed base in the food service industry. If NCR’s register division would resell our product,FoodManager, our problems would be solved. Of course, all our competitors realized this as well. We all made the trip to NCR’s headquarters in Dayton, Ohio. We all presented wonderful products only to be told that NCR had no interest in reselling any of our offerings.

An NCR rep summed it up best, “When I sell a PC to a restaurant, I get a fifty dollar commission and a million dollar headache. They load it up with software, they won’t pay for training, things go wrong, and fingers start pointing at me. The agony to revenue ratio just doesn’t make sense.”

But I kept asking questions and eventually discovered that NCR’s computer division was launching a mini-computer called the NCR Tower with a price point of $200,000. Software on the Tower went for $150,000, and FoodManagerwas the only product on the market that could be ported to run on the Tower’s proprietary operating system. Besides, the Tower would only be bought by large restaurant chains. This meant leaving the morass of mom and pop restaurants behind. Maybe the commission on $350,000 sales plus the yearly 20% maintenance fee might bring the agony to revenue ratio back in line for NCR.

But there was a problem. NCR’s computer division had no plans to offer the Tower to the food service industry, and the cash register division folks had never even heard of the Tower and didn’t have permission to sell it even if they had.

It took dozens of phone calls, but I finally got the president of NCR’s computer division on the line. He agreed to a ten minute meeting on a park bench outside NCR’s cafeteria at 6:30 AM. No, I couldn’t buy breakfast. A plane flight toDayton for ten minutes on a bench was the best I could do.

I only had ten minutes but I luckily only had one question: Why was he launching the Tower into vertical markets where the NCR brand meant nothing when NCR already owned the restaurant industry through its cash register business? An hour later I had the phone number of his key lieutenant and a mandate to “look into it.”

Two weeks later I introduced a team of executives from NCR’s computer division to their heretofore unknown colleagues from the cash register division. I showed them the immense size and growth rate of the restaurant industry. Then a slide on how fast the industry was computerizing and another on NCR’s dominate cash register share. I made the case that stand-alone cash registers would eventually be replaced by terminals hanging off a computer: a computer that should be NCR’s Tower.

Then I argued that if NCR didn’t use the Tower to control back office functions like accounting and inventory management, competitors would use the back of the house as a point of entry into NCR’s accounts for their own computers. From here they would eventually win the front of the house register business by replacing NCR’s registers with terminals. On the other hand, NCR could use the same back of the house strategy and the Tower to gradually pick off the registers from competitive installations.

Next, I presented an eye-popping revenue projection of what a joint venture between the two divisions would achieve by leveraging the retail division’s sales force, the computer division’s know-how, and NCR’s dominant brand in the restaurant industry. I then suggested the revenue split between the divisions and provided an org chart for how the retail and computer division’s field forces would work together on Tower opportunities. Then I unveiled a training program and contest funded by our company to kick off the joint venture. My last slide was our company logo. To which I verbally added, “By the way, this plan will need some software. We provide that.” In a two hour presentation this single sentence was the only time I mentioned our product.

Two months later we signed our first deal with many more to come. Software that we couldn’t give away at $2500 was flying off the shelves at $150,000. And everyone, especially our mutual customers, were absolutely delighted…

*    *    *

In two recent articles here at Forbes, Maximizing Shareholder Value: The Dumbest Idea in the World, and Peggy Noonan on Steve Jobs and Why Big Companies Die, Steve Denning refers to an article by Noonan and her quote aboutSteve Jobs.

He [Steve Jobs] has a theory about “why decline happens” at great companies: “The company does a great job, innovates and becomes a monopoly or close to it in some field, and then the quality of the product becomes less important. The company starts valuing the great salesman, because they’re the ones who can move the needle on revenues.” So salesmen are put in charge, and product engineers and designers feel demoted: Their efforts are no longer at the white-hot center of the company’s daily life. They “turn off.” IBM and Xerox, Jobs said, faltered in precisely this way. The salesmen who led the companies were smart and eloquent, but “they didn’t know anything about the product.” In the end this can doom a great company, because what consumers want is good products.

After nodding approvingly to this sideswipe at sales in his first article, Denning felt morally obligated to pour on the opprobrium in his second:

Instead of the company being dominated by salesmen who can pump up the numbers and the accountants who can come up with cuts needed to make the quarterly targets, those who add genuine value to the customer (my italics) have to re-occupy their rightful place.

To put it mildly, I found these anti-sales tirades (I’ll let accountants speak up for themselves) more than passing strange; coming as they do from three people who otherwise argue persuasively for the importance of delighting customers rather than merely hitting financial targets – a people centric, service based corporate value system that I wholeheartedly endorse.

Denning, Jobs, and Noonan quite obviously have very little understanding of the critical role that sales must play in any organization intent on delighting customers let alone how salesmen add value. As I hope my case study above illustrates, great salesmen and great selling cultures don’t shove bad products down the throats of unwitting and unwilling customers. Instead through careful questioning and listening great salesmen use the constant contact they have with customers to uncover what the customer wants and needs and carry this intelligence back to the product development team. It was sales, not ACS’ engineers that brought two of NCR’s divisions together in order to delight customers with a turnkey solution. As for sales adding value, turning the $2500 product originally envisioned by ACS’ product team into a $150,000 product is not a bad start.

Further, the solution that NCR bought, strictly speaking, had very little to do with what Jobs referred to as “knowing the product.” It relied on knowing what the customer wants.  Customers don’t want what Noonan calls “good products.” They want what good products do for them. This critical distinction is caught neatly by the old adage thatIBM doesn’t sell drill bits IBM sells holes.

The key to delighting NCR, and by extension NCR's end users, was not in knowing our product better than the programmers who wrote it. The key was in strategically knowing NCR’s business: knowing it better perhaps in this case than they knew it themselves. Rather than focus on product, I asked a question right from the Golden Rule: If I were NCR what would I want?  In the spirit of what I refer to as service and selflessness, I ignored my product, commissions, and quarterly revenue goals, and focused instead on NCR’s wants and needs. ACS’ product became just one of several products that together became the means to a much larger end. The revenue ACS eventually garnered was merely the by-product of the much bigger mission of helping NCR delight customers.

Most of ACS’ competitors had “good products.” They were great at what Jobs described as “knowing the product”- they’re demos were dazzling. But they were lousy at knowing what the market wanted: a seamless integration of computer, cash register, and software.  All the so-called products of both NCR and ACS were merely features (drill bits) that created a much larger solution (hole).

Early in my career I made the mistake of turning customer support reps into salesmen precisely because they “knew the product.” It was a disaster. They were so busy talking drill bits that they forgot about the customer’s holes.  They ended up so busy talking to themselves that they failed to notice that the customer had long since left the room.

The error that Denning, Jobs, and Noonan make is buying into the common misapprehension that salesmen are hucksters when huckster is merely a moniker for a horrific salesman. In fact the mission of any sales training worth mentioning is to transform the novice salesman from a peddler into a consultant: a consultant who, yes, Mr. Denning, “adds value,” by providing a “solution” that satisfies his customer’s “felt need.” Peddlers push product. Salesmen realize that products are the means. The end is delighting customers.

Louis R. Mobley, my mentor and the founder of the IBM Executive School in 1956, summed up the ongoing conflict between product guys and sales guys in this way. The product guy argues that since he knows technology and where it’s going the sales guy should just peddle what he’s given to sell. The sales guy argues in turn that since he knows what customers want the product guy should just build what he’s told to build.

Mobley’s answer to these competing viewpoints lay somewhere in the middle, but I find it ironic that the customer centric argument that Mobley ascribes to sales, is exactly the argument that Denning, Jobs, and Noonan ascribe to the product folks. I’ve worked in many tech companies and owned two. For every pump and dump sales rep I’ll show you an arrogant product type determined to force feed customers some over engineered, feature bloated kluge that only a techie can boot up, let alone love.

Of course Jobs is an exception, and it is because I admire the sixth sense he had for delighting customers so much that I find his comments about sales so disheartening. Was it sales that insisted that every PC had to be uniformly boxy, steel gray, and big enough to anchor a boat? Apple didn’t succeed at the expense of sales driven companies, but at the expense of nerdy engineers who ignored user experience and form in favor of features and function.

While Jobs was way too cool ever to admit it, Jobs was foremost a great salesman.  In the beginning Steve Wosniak was the inside “product guy.” Jobs was the outside “sales guy” staying attuned to the customer’s wants and needs: a role he heroically played right to the end. Not to mention the electrifying salesmanship he displayed on stage as Apple’s incomparable pitchman. In his trademark black turtle neck and jeans he didn’t seem like a stereotypical salesman, but this masterful play against type was just what made him such a great one.

As for IBM going south because sales took over, what Jobs failed to recall is thatIBM’s founder, Tom Watson Sr., was a salesman. According to Mobley, he and his son and successor, Tom Watson Jr., worked tirelessly to ensure that IBM’s culture remained a sales culture, and what they meant by the term "sales culture" was always putting the customer first. I would argue (as did Mobley who retired from IBM in 1970) that IBM began to falter in the 70s not because IBM became a sales culture but because it stopped being one.

Of course none of this is meant to imply that product people don’t “add value” even if Denning denies that distinction to sales people. The value they add is critical. Instead I would argue that what Denning, Jobs, and Noonan describe as a “great product” means that everyone, even those damn accountants, must share a value system that puts delighting customers first.

Steve Denning eloquently begins his wonderful overall article on the perils of maximizing shareholder value with an equally wonderful quote from Peter Drucker. “There is  only one valid definition of a business purpose: to create a customer.” Salesmen have two similar mantras that we like to bandy about over a beer. “There is no business until someone makes a sale,” and "The customer is always right."