History is littered with massive tech companies that ultimately fell by the wayside, and Steve Jobs had a very interesting theory on why this happened.
Apple co-founder Steve Jobs had once offered a stark warning about how large, monopolistic tech companies lose their innovative edge. His analogy, drawing parallels between PepsiCo and tech giants like IBM, provides a compelling framework for understanding the pitfalls of success. Jobs’s insights, though delivered years ago, remain strikingly relevant in today’s landscape, where debates around Big Tech’s dominance and stifled innovation continue to rage.
“Former Apple CEO John (Scully) came from PepsiCo,” Jobs began, “and they, at most, would change their product, you know, once every 10 years. I mean, to them, a new product was a new size bottle, right? So if you were a product person, you couldn’t change the course of that company very much. So, who influenced the success of PepsiCo? The sales and marketing people. Therefore, they were the ones that got promoted, and therefore they were the ones that ran the company,” he said.
He continued, “Well, for PepsiCo that might have been okay, but it turns out the same thing can happen in technology companies that get monopolies, like, oh, IBM and Xerox. If you are a product person at IBM or Xerox, so you make a better copier or a better computer, so what? When you have a monopoly market share, the company is not any more successful. So the people that can make the company more successful are sales and marketing people, and they end up running the companies.”
“And the product people get driven out of the decision-making forums, and the companies forget what it means to make great products. It’s sort of the product sensibility and the product genius that brought them to that monopolistic position [that] gets rotted out by people running these companies who have no conception of a good product versus 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 usually about wanting to really help the customers.”
Jobs’s argument boils down to a shift in power dynamics. In a competitive market, product innovation is paramount. However, as companies achieve market dominance, the focus shifts from creating groundbreaking products to maximizing existing market share. This empowers the sales and marketing teams, who are seen as key drivers of short-term profits, while sidelining the product visionaries.
This phenomenon, as Jobs describes, creates a vicious cycle. The very “product sensibility” that propelled the company to success is eroded, replaced by a focus on marketing and maintaining the status quo. This ultimately leaves these once-innovative companies vulnerable to disruption from smaller, more agile competitors who prioritize product excellence. Looking at the tech landscape today, we can see echoes of Jobs’s observations — the AI revolution, at least for the moment, has caught Apple napping, and Google has scrambled in recent months to catch up to OpenAI. Companies that prioritize engagement metrics and advertising revenue over genuine product innovation risk falling into the same trap he described. The challenge for Big Tech is to resist this temptation and maintain a culture that values the “craftsmanship” and customer-centric approach that Jobs championed.