Computer World has the article Decline of Digital Equipment offers lessons for Microsoft. As an alumnus of DEC, I thought this would be an interesting story to follow.
“There’s something endemic in technology companies that they are not built to last,” said Peter DeLisi, founder and president of Organizational Synergies, a Fremont, Calif. strategy consulting firm. “The larger and larger they become, the more they spin out of control. In a highly empowered culture like Microsoft or DEC, the pieces are loosely held together. And in a crisis, down they go.”
When I first heard of Microsoft buying Nokia, I thought this was an example of a company, Microsoft, that had failed to catch the next wave in its industry buying another company, Nokia, that failed to catch the next wave in its industry. What could the two companies teach each other? Then I heard that the CEO of Nokia was a former employee of Microsoft and a candidate to become CEO of Microsoft after the merger. So he can come to Microsoft and fail to do for them what he failed to do for Nokia.
I had not thought of Bob Palmer at DEC, until reading the article mentioned above. While Palmer had not been a former employee of DEC before being hired to head the group that I was in, he had lead another semiconductor company into bankruptcy. I got out of DEC in 1988, when i could see the handwriting on the wall. Bob Palmer became President of DEC a little while after I left. At that point, I knew I had made the right decision to leave.
Of all the people in DEC who wouldn’t have a clue as to what DEC needed to rescue itself, I put Bob Palmer at the head of the list.
Reader RayS suggests the book The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business as a better read than the analyses of Peter DeLisi.
In the conversation about this blog post that is on my Facebook page, Ray said:
This book is must-reading for anyone who wants to understand what happened to DEC and what’s happening to Microsoft.
Long story short, it is almost impossible for an industry leader to “catch the next wave. There is no point in their business life where it makes sense to switch.”
As I think about it, I realize that Microsoft’s insistence that everything it does must be compatible with Windows is similar to DEC’s thinking that all its new products had to be VAX compatible. The VAX was an industry leading computer at the time DEC started its descent.
In other conversations, this problem has been called the drag of having an installed base. In an effort to keep your installed base of customers happy and able to buy your new products, you fail to see how you can make a new product that is a clean break from all of your old products. You may even recognize that you need to do it, but you just cannot figure out how. There are probably just as many companies who did see the need, tried to do it, and were right that they could not figure out how.