Internal NeXT Video 1991

A confidential employees-only NeXT internal video where Steve Jobs explains NeXT's competitive landscape and go-to-market strategy in front of a white board.

Video Transcript

Note: for some videos, timestamps on the transcripts might be off by a few minutes due to theĀ original videos having been edited for YouTube (typically, sections with music playing may have been removed).

Steve Jobs: Hi, for those of you that don't know me, my name is Steve Jobs, and this is the first of one of many chalk talks we're going to have this year together. The subject of this one is really important, which is who is our target customer? Why are they selecting our products over our competitions? And what distribution channels are we going to use to reach these customers?

A lot of light bulbs have come on over the last 90 days. I've had the good fortune to be with a lot of you out in the field, meeting customers, getting firsthand information as to what they're doing with our products. You have fed a lot of information to the management of this company. We've done a lot of thinking and looked at the data and all of a sudden out of this data, some very, very important things have come to light. I want to share them with you today.

We've had historically a very hard time figuring out exactly who our customer was, and I'd like to show you why.

When we first look at the workstation marketplace, looks something like this. And the biggest player, as you know, in the workstation marketplace is Sun. Second biggest player is HP Apollo. Third biggest player is DEC. And IBM with the RS/6000 is now in the game as well. And then, outside the workstation marketplace, a very large market for PCs and Macintoshes, the traditional personal computer market.

Now, we looked at the workstation marketplace and we said, wow, we have multitasking, we have great networking just like the workstations, we use Unix, we have a pretty good development environment. So we're a lot like these folks. But then again, these folks don't really care about user interface or at least they haven't been able to execute on it if they do. They don't really have great third-party application software. And these are not machines for mere mortals. So we're not like them at all.

And then we'd look at the PCs and we do strive to get a suite of application software that allows us to be just like these folks. We do strive to attain, ease of use, and actually are easier to use than even a Macintosh today. So we're a lot like these folks. But then again, we have multitasking and networking that is an order of magnitude beyond what you can do with a PC today.

So over the last year, we've oscillated back and forth between thinking that the PCs and the Macs were our competitors, and this is where we want it to be, or the workstations were our competitors, and this is where we wanted to be. In essence, are we an easier to use workstation or are we a more powerful PC.

And had it not been for a revelation if you will, five or six months ago, we probably would still be oscillating today. And what that revelation was, was that somebody turned up the power of our microscope a little bit, and we saw something very important. And what we saw was that the workstation marketplace is really not just one workstation marketplace, but two.

There's the traditional half, which is what we've come to know and love, science and engineering. Which does indeed look just like this. But there's a new half emerging, which we're calling the professional half. That is professionals that are not scientists and engineers who want the power of workstations. And inside this marketplace, there are several sub-markets. Publishing, the high end of the publishing market, tech pups. Medical. A lot of database-driven applications. Higher education. Et cetera, et cetera, et cetera. Legal markets in here; many, many markets are in here. And what's very interesting is Sun is the only company that seems to have eked out a beach head over here. And our data says that in 1990, Sun sold around 40,000 computers into this market and had about an 80% market share. So the entire professional workstation market in 1990 was about 50,000 units. And Sun had the majority share.

That's why we didn't see it before. It was such a small blip compared to the workstation marketplace, or of course the PC marketplace, that it did not show up on our radar screen. But we've seen it now. And it's good that we have, because this is a marketplace that we can dominate and it's a marketplace that's going to be very large. The market research data that we have, and also our gut feelings from many, many years in the industry, say that this marketplace in '91 is going to grow to about a hundred thousand units in size. It's going to double this year. And next year in '92, it's going to triple to about 300,000 units. That is a substantial marketplace. What is also exciting about this marketplace is that a hundred percent of our volume goes in here. In other words, if we could ship 50,000 computers into all these markets this year, we would have a 50% market share of one of the fastest growing segments of the entire computer industry.

Now, let's examine why this thing is going to grow. What is going to cause this thing to grow from 50 to a 100,000 to 300,000 units. Clearly it is not these people deciding to not - to stop being engineers and go to business school, and re-emerge over here. That's not how it's going to grow. It's going to grow from two factors.

Number one, these folks moving in. PCs and Mac owners deciding that they need more sophisticated networking, more sophisticated development environments, et cetera, deciding they need to step up to workstations. And one other class of users, there's a lot of people now using 3270 terminals, or terminal emulators, hooked up to a mainframe, for database driven applications. More and more they are deciding to move their applications onto a powerful desktop workstation, connected via networking to the mainframe. So that they can get the application out of the mainframe and onto the desktop for more rapid development, for better user interface, and for better economics. So these two factors are what's going to cause this market to increase almost an order of magnitude in size over the next 24 months. And we can get half of it.

Now. One of the things that is very interesting is that Sun is today the major participant in this marketplace with an 80% market share. And I personally don't see too many other people being able to move into this marketplace over the next few years. I believe Sun will remain our major competitor. The funny thing is, while we're convincing these people using PCs and Macs, and these people using 3270 terminals or equivalents, to move in to the professional workstation segment, Sun is if you will, our friend. Because they're going to spend their marketing money to convince people to move into the segment. But the minute they've made their choice to move into the segment, whether we've convinced them or Sun has convinced them, Sun and NeXT are mortal enemies. And the good news, which we'll talk about in a minute, is that we've had a chance to suit up against Sun with our new products, about 15 times in the last 90 days. And we've won 15 out of 15.

Now, we want to address what is compelling these people to move into this new category of professional workstations. And secondly, once they've decided to make the move into the category, why are we going to beat Sun? Let's take a look. There's three primary reasons.

The first one is that every single customer we've talked to here has the need to write one custom application. They've got one mission critical app that they've got to write. And so the development environment becomes critical. In addition to that, these applications are very network intensive, so they need very sophisticated networking capabilities, which they cannot find in PCs and Macs. And third, these applications primarily are database driven, which means that they want to write the application on the desktop machine, but this application on the desktop machine through the sophisticated networking is going to communicate with SQL databases running in either an IBM mainframe, or running Oracle or Sybase on a Sequent machine, something like that. So they need the sophistication of the networking and the ability to seamlessly talk to databases running on large servers. And the development environment and the networking and the database sophistication together, are things they cannot begin to get from this class of products.

So the first thing we're seeing is the custom app is the key thing that's driving these people to upgrade from PCs and workstations.

And even down here, we see the same thing. People that have mission critical apps they need to do deciding they don't want to write the application itself on the mainframe, and use it via a terminal. But rather they want to write the application in a much better development environment, where they can create the app much faster, with a much better user interface, much more cost-effectively, and talk to the database on the mainframe through sophisticated networking. So custom applications is our number one reason, driving people into this category.

Now, the second reason is one that may come up initially, or it may come up in a secondary way for the first sale of products to the customer, or it may even come up in a secondary sale, three to six months down the road, and that is the desire to use great productivity apps. That's number two, great productivity apps.

As an example, when it comes up in the first sale, many times people will want their employees to be using the custom app 90% of the time, but still need productivity apps, 10% of the time. But more likely they will start to understand that they want to put our workstations on the desks of a wider audience than just need to use the custom app. They'll want to include more administrative personnel, more marketing personnel, have them all on the same network so that they can share the interpersonal computing that our system provides. And productivity apps will come into play to the extent that we have even better productivity apps that are available on PCs. And to the extent that those productivity apps use the network so they can tie people together, we're going to win. Perfect example is of course, Lotus Improv. Another example is full Wiziwig WordPerfect. A third example will be of course, our advanced version of Adobe Illustrator that ships in the next 60 days. So having better productivity apps will be important to the primary sale. I believe what we're starting to see - First Boston is a good example in the financial services market that I forgot to draw - of a company where we sold 40 or 50 computers to primarily for the custom app in one group. Three, four months later, a second group comes back and wants to buy over a thousand computers for another group that is more concerned now with great productivity apps, as the computer starts to spread more widely in the organization.

The third reason that people are moving in, which is one that I think will not become paramount in 1991, but within 24 months will be the largest reason people are buying our computers, is interpersonal computing. Improving group productivity and collaboration through the use of sophisticated desktop computers. And right now, when we first meet a customer, we tell them about interpersonal computing. I'm sure most of them would rather hear about the custom app solutions and the great productivity apps that we have. But as these customers become educated in the sales cycle, I'm sure all of you have seen the value of interpersonal computing rise in their eyes. And as we are successful, customer by customer, over the next year to 18 months, interpersonal computing will be something that rises on the customer's agenda of what's important, even as we walk in the door.

As Regis McKenna once said, the best marketing is education. And as we accomplish that education, more and more customers are going to be asking us about interpersonal computing, versus us having to educate them.

Now, interpersonal computing is something that, again, relies on a very powerful desktop computer and very sophisticated networking, neither of which are available in these classes of machines. So to the extent that an organization wants to use interpersonal computing, again, they are compelled into the professional workstation category.

Now, one of the things we pretty much know is that everyone who is considering a purchase of NeXT computers at one point or another in the sales cycle, calls up Sun. They'd be foolish not to. Unfortunately, the reciprocal is not yet true. Our goal is to make it so that everyone who is considering a purchase of a Sun calls us up. And you'll see more and more of our marketing targeted to try to make this happen as the year rolls on. So let's say Sun or NeXT spend their hard-earned marketing dollars and sales energy, and convince a customer to move into this category. And the customer being a smart one calls up the other company. So that Sun and NeXT are always competing for every order. What are our key competitive strengths against Sun.

It turns out that they are exactly the three things that are driving people into the category in the first place. We couldn't ask for a much better situation. Let's examine them.

Custom applications. It turns out that our development environment is vastly superior to Sun's. And this is being decided not by us, but by our customers' best technical people when they return from our software camp. Our best competitive weapon to illustrate this point is to get our customers' best two or three developers to spend a week and to come to Redwood City or Pittsburgh and go through our developer camp. They will go back raving about NeXTSTEP and telling their own management that NeXTSTEP will allow them to build their custom app three times faster than Sun. We've had a lot of experience in this so far and I think one of the things we need to do is to use our software camp more. We're not seeing enough corporate developers through the software camp. We're not getting potential customers to send their best technical people through our software camp, either soon enough in the sales cycle or at all. And it's an area where we could really get more benefit.

Secondly, once they're in this category, comparing us with Sun, the comparison of productivity apps really tilts in our favor. The productivity app suite that we now have, and are in the process of getting, dwarfs that of Sun. Not only do we have more apps that are easier to use for this customer, but we have the breakthrough ones. We have the Lotus Improv, we have the Wiziwig WordPerfect, et cetera, et cetera. So once they're in this category, the productivity app comparison is no longer against these guys. It's against Sun and we're winning hands down.

The third, interpersonal computing. A demo will communicate very rapidly how superior NeXT is in interpersonal computing. And we will be supplying you a videotape of a demo that we've been using a lot. I would suggest you use it to show your customers. And I would suggest that you get the software that's on this videotape and learn how to demo it yourself. Very rapidly, we have been able to convince customers that because of our multimedia features and our ease of use features, these people can use interpersonal computing on our system to achieve a far superior result than they can with Sun's.

So these are the three competitive weapons that we have against Sun. And as we use them to move people into the category, they are already very well positioned to see us in a favorable light once they're inside the category.

So I hope this gives you a feel for what we've learned in the last 90 to 120 days. I have no doubt that we will continue to learn more and more together at an ever accelerating rate. As we get more and more customers. We've been listening a lot to them and we intend to listen even more to them, to continue refining this professional workstation market definition, and what is important to these customers and our competitive position against our number one competitor, Sun.

I hope this has proved useful. I'm really excited to hear some of your comments and thoughts about what you think of all this, and of course, more and more information about how we continue to refine it in the future. Thanks a lot. Give me some feedback, if this is a successful way of communicating and I'm sure I'll see most of you soon and I'll see you all at the retreat.