We have no interest in competing with Apple: Sculley of Obi Worldphone

John Sculley is one of the most popular corporate leaders in the US. As a president of Pepsi from 1977 to 1983, he led the campaign that enabled Pepsi to become the largest-selling consumer packaged goods company in the US. Later, he was hired by Steve Jobs to become CEO of Apple. In his 10-year stint at Apple, the company's revenue grew over 1000 per cent from $800 million to $80 billion. Last year, Sculley co-founded Obi Mobiles with three other people - Neeraj Chauhan, Shane Maine and Gordon McMillan. After initial hiccups, the company has recently gone for a transformation that focuses on design-led innovations in the smartphone market. In a conversation with Business Today's Manu Kaushik, Sculley tells about his future plans for Obi. Edited excerpts:
 
Q- How did the idea to start Obi come about?

A- The original idea to enter this market came from our CEO at Inflexionpoint Neeraj Chauhan. He was distributing smartphones in many countries. The idea to get into smartphone business was just to be a distributor of the phones because the market was growing so fast. Neeraj went to Chinese factories, got phones we had nothing to do with, we tried to sell them in India, and it just didn't work. It was not successful, we had no differentiation. Then, Neeraj and I sat down. I asked him why he thought there's an opportunity for us to go into this industry. He said that we have skills of distribution and supply chains, we know how to negotiate with various vendors, and we can run on a different business model.

At the same time, we were looking at the opportunity of buying BlackBerry. We were approached by the Canadian government. We have big operations in Toronto with another one of our companies. They said that we would like to keep BlackBerry a Canadian company and would you consider acquiring it. We studied BlackBerry's business practices. We realised that they had 7,000 people in their handsets division at that time. That was incredible number of people. There's no way you can make money with that. Eventually, BlackBerry pulled the auction [down]. They brought a talented CEO to run the company John Chen. They should have brought him in three years earlier.

But it opened our eyes. I asked Neeraj how many people you would need to run BlackBerry's handset business. He said that he could do it with hundreds of people. I said that I am really not interested in getting into smartphones business unless we take advantage of what we know in Silicon Valley. The [smartphones] market is too crowded, complex, margins are too tight and the competition is getting more heated.

I went and asked my friend Robert Brunner. I asked him whether we can differentiate in this industry, and can we actually design phones that are differentiated at the budget-end of the market. We have no interest in competing with Apple or any other international brands at the top. We see companies haemorrhaging losses at the top. Only Apple is successful at the top. We see Chinese brands like Xiaomi coming in at the budget-end of the market. But we think that while they are brilliantly successful in China and they may well be in India, we have much more experience in many markets around the world, and they are all going through change - 2G to 3G to 4G. They have young population. These people love fashion, they love design. We understand how to do that in Silicon Valley.

We pulled together the original team that worked with me 20 years ago [at Apple]. Robert Brunner, Matt Rolandson, Satjiv Chahil, and there are many others. Robert and Matt have built Ammunition which is now recognised number one design firm in the US. We said we just don't want to hire them to be our designers. We want to do business together. They are equity partners in Obi. That gave us the chance to approach this market in a way that is different from anybody else. First of all, we are the only Silicon Valley startup that is building a design-driven leadership approach to this market at the budget level. Most US companies never go to the budget level, they go to the premium level.

Q- What do you plan to do next?

A- When I was a boy going up, my generation admired automobiles. We knew the brands, engines, materials and everything. Today, the automobile [market] is largely commoditised but there are soma few brands that stand out. BMW, Porsche and Tesla stand out. We said that we're not trying to build General Motors. We are trying to build BMW. In India, we said that we will measure success not by how big we are but what people say about us. When we were building Apple in the early days, that was exactly our criteria. We said that we want to build the best personal computers in the world. We want to make tools for creative people. Everyone else was making tools for engineers and business people. Ten years later, by the time I left, we actually ended up being the largest selling hardware PC in the world. At Obi Worldphone, we are not starting by saying that we are going to be the biggest. We are saying we are going to be the best at the budget level. We don't compete with Apple.

Q- What's the difference between Obi and Xiaomi, for instance?

A- Xiaomi might be very successful. It's not like there's a winner and a loser. I think there are different philosophies to phone business. Some companies say that we will have a very broad product line. Samsung and Micromax have broad product line. That's not our philosophy at all. I don't argue their success. These companies have large market share. But that's not the company that we are building. The company that we are building will have two design centres. We will build beautiful products every time we introduce. We will continue to innovate. We are not trying to reinvent the smartphones. We are trying to say that how do we take this technology that people admire the most at these high price points, and bring it down on budget price point without compromising on design.

Q- What markets are you looking at for these new smartphones?

A- We are already in the UAE, where we have 5.2 per cent market share. We will be in Saudi Arabia, Pakistan, Bangladesh, Turkey, Vietnam, the Philippines, Indonesia, Thailand, Nigeria, Kenya, Tanzania, Rwanda, Uganda and South Africa. These are largely emerging markets. We will be launching simultaneously in some of these markets. The Chinese strategy is to go into one big market and make a splash. That's not our strategy. We love the opportunity in India but we are going in a different way. We are going to take step at a time. We will in many markets at the same time. We will leverage the fact that we are building reputation in the Islamic countries. We will be in all of the Middle East.

Q- Any tentative time line for the India launch?

A- I wish we could make it before Diwali but it is not realistic. The market is big in India, you have to have large inventory, and there's no way we can get there that fast. India is a tough market to crack. Even companies that have been successful in China like Xiaomi, it is taking a while. There are so many people trying different strategy and competing. The market is big and is growing fast. We are all learning and watching each other. I don't pretend to be an expert yet on India.
The real question is which markets we can expect to be more successful than others. We don't know yet. If we have 5 per cent market share in the world, it would be an amazing company but I suspect in some countries, we may have 1-2 per cent and in some we may have 10 per cent. It's going to vary country to country.

Q- Are you looking at manufacturing in India?

A- Initially, our phones will be manufactured in China. More and more companies will be manufacturing in India when they get through a certain size, we have to consider that. We need people like Foxconn and others who are experienced making investments [in India].