“growing at around 30 percent per year …”: From 1986 to 1994, Intel grew at a 31.3 percent CAGR. Intel Annual Report, 1994.
“headlines …”: New York Times, November 24, 1994; p. D1; Wall Street Journal, December 14, 1994; p. B1.
“long-standing bugs …”: “Attempting to address the complaints of Macintosh users, Microsoft Corp. last week shipped a maintenance release of its best-selling word processing software. The company says the release improves speed and resolves conflicts with a handful of system extensions.” “Microsoft Fixes Word for Mac,” Computer World, March 27, 1995, p. 40. “Apple Computer Inc. joined rival Microsoft: Corp. last week by delaying the release of the next major revision of its operating system. Apple’s Copland is now expected to ship in mid-1996, not in the middle of 1995 as previously announced.” “Microsoft Not Alone: Apple Delays Copland OS Release,” PC Week, December 26, 1994/January 2, 1995, p. 106. “‘We regret that customers have had incompatibility problems and we are 100% committed to customer satisfaction,’ says Steve McBeth, president of Disney Interactive, the company’s software arm. ‘We won’t be satisfied until all compatibility problems are removed.’ … As company officials now concede, the program was marketed with known errors, wrongly believed to affect only a minute percentage of computers.” “A Jungle Out There: The Movie Was a Hit, the CD-ROM a Dud,” Wall Street Journal, January 23, 1995, p. A1. “Hoping to avert a major revolt, Intuit Inc. last week made available on-line free revised versions of tax preparation software, designed to fix three bugs.… Intuit will pay IRS penalties and interest for any errors caused by the bugs, which the company claims affect fewer than 1 percent of MacIn Tax and Turbo Tax users.” “Intuit Issues Patches for Turbo Tax and MacIn Tax,” PC Week, March 6, 1995, p. 3.
“competitive strategy analysis …”: Michael Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors (New York: The Free Press, 1980), pp. 3–4.
“the force of complementors …”: Adam M. Brandenburger and Barry J. Nalebuff, “The Right Game: Use Game Theory to Shape Strategy,” Harvard Business Review, July/August 1995, p. 60.
“a cost-effectiveness that was easily ten times greater …”: “In a little over five years, the cost adjusted by performance decreased by 90%. This unprecedented rate of decline in cost to the consumer came about, basically, as a result of standardization. In the future, the price/ performance characteristics will continue to drop further and further at this hair-raising rate.” Andrew S. Grove, “The Future of the Computer Industry,” California Management Review, Vol. 33, No. 1, Fall 1990, p. 149.
“the way computing was done changed …”: “Right now the computer business is in a painful transition between two worlds: from the old world of slow-moving, highly integrated systems to the new world of quickly developed, extremely cost-efficient, but not-very-well-integrated technology.… The very structure of the industry is being dramatically reshaped by the standardization of the PC.” “PCs Trudge Out of the Valley of Death,” Wall Street Journal, January 18, 1993, p. A10.
“big-time computing increasingly started to be done this way …”: “Within a few years, every computer in the NCR line from PCs on up will be based on one or more Intel microchips. Gone will be NCR’s mainframe proprietary designs and any other machine that cannot run standard software.…” “Rethinking the Computer: With Superchips, the Network Is the Computer,” Business Week, November 26, 1990, p. 117.
“IBM … a $100 billion company …”: “When Opel retired as CEO in 1985, the corporation’s outlook called for revenue of $100 billion in 1990 and $185 billion by 1994.” “The Transformation of IBM,” Harvard Business School Case, 9-391-073, rev. September 9, 1991, p. 6.
Compaq: “Compaq made corporate history by becoming the first company to surpass the billion dollar milestone in sales after only five years of operations.” Compaq 1988 Annual Report, p. 3.
“those that win inevitably get stronger …”: W. Brian Arthur paraphrases Alfred Marshall’s 1890 observation, “If firms’ production costs fall as their market shares increase, a firm that simply by good fortune gained a high proportion of the market early on would be able to best its rivals.…” The more contemporary version of this theory is summed up by Professor Arthur: “Technologies typically improve as more people adopt them and firms gain experience that guides further development. This link is a positive-feedback loop; the more people adopt a technology, the more it improves and the more attractive it is for further adoption.” W. Brian Arthur, Increasing Returns and Path Dependence in the Economy (Ann Arbor: University of Michigan Press, 1994), pp. 2, 10.
“IBM’s growth slowed down …”: “But [IBM’s] PC revenues haven’t compensated for a slowdown in mainframes and minis—a slowdown caused in large part by the success of the PC. As a result, IBM’s revenue growth has averaged 6.5% since 1984.” “Is the Computer Business Maturing? New Technology May Not Halt an Erosion in Growth and Margins,” Business Week, March 6, 1989, p. 69.
“OS/2 worked only on PS/2 computers …”: “[The new software] will use the IBM Personal System/2 PC as the window into information.… [It] requires a new IBM proprietary version of OS/2, the PC operating system, or basic software, introduced two years ago.…” “A Bold Move in Mainframes: IBM Plans to Make Them Key to Networking—And So Restore Its Growth: The Software That Ties It All Together,” Business Week, May 29, 1989, pp. 74–75.
“marketing their operating systems to … their competitors …”: “IBM stresses that it will ‘open up’ OS/2 version 2.0 to companies that don’t sell IBM-manufactured PCs.… By selling beyond its own confines, IBM—which is responsible for OS/2 version 2.0 development and sales—will help spur interest in the operating system.” “IBM Announces OS/2—Again,” Systems Integration, June 1991, p. 38.
“eventually they even passed IBM …”: In 1994, Compaq shipped 4.8 million units worldwide, compared to IBM’s 4.0 million. “Personal Computers Worldwide,” Dataquest, June 26, 1995, p. 90.
“Michael Dell started supplying his friends …”: “Dell’s roots can be traced to a small dorm room at the University of Texas. In 1984, during his freshman year, Michael Dell began buying excess computers from a local retailer, enhancing their features and selling the PCs directly to end users at a discount. In less than a year, Michael was grossing $50,000 a month with his direct relationship marketing approach. He left the University to devote his full attention to his rapidly expanding company, PCs Limited.…” “The Story of Dell’s Success” from Dell’s Home Page on the World Wide Web, June 9, 1995.
“Dell … is doing about $5 billion worth of business a year …”: Expected FY96 sales are $4.8 billion. Bear Stearns Analyst Report, May 26, 1995.
“In adapting, Unisys …”: “The economic model and the business model of the business we had been in totally changed. So we had to step back and say, well, that means, first of all, we shouldn’t be doing things that aren’t really of added value to the client.… So it’s a very different strategy and our success will come from building successful partnerships with our clients, to assist them with information management to get that competitive advantage.… If you look at it from revenue streams, [five years from now] you’re going to see well over half of the revenue coming from software services and much less coming from hardware.” From an interview with Unisys chairman and CEO James Unruh, “Smooth Sailing on an Ink-Black Sea: Unisys Eyes Information Services,” Computer Reseller News, June 13, 1994, p. 226.
“Ray Noorda often tells the story …”: “Note on the PC Network Software Industry 1990,” Harvard Business School Case N9-792-022, rev. September 5, 1991, p. 5.
failure of “a better PC”: For an example, see the story of Digital’s Rainbow in Glenn Rifkin and George Harrar, The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment Corporation (Chicago: Contemporary Books, 1983), pp. 203–42.
“Wal-Mart … is competition …”: “Electronic scanning of the Uniform Product Code (UPC) at the point of sale began in Wal-Mart stores in 1983.… Electronic scanning and the need for improved communication between stores, distribution centers, and the head office in Bentonville, Arkansas, led to the investment in a satellite system.… Wal-Mart’s two-step hub-and-spoke distribution network started with a Wal-Mart truck-tractor bringing the merchandise into a distribution center, where it was sorted for delivery to a Wal-Mart store—usually within 48 hours of the original request.” “Wal-Mart Stores, Inc.,” Harvard Business School Case N9-794-024, rev. April 26, 1994, pp. 6–7.
“once Wal-Mart moves to town …”: “Few local merchants can compete against sprawling 50,000-square-foot stores whose notions counters alone dwarf many rural mom and pop concerns. Nor can many match Wal-Mart’s direct-from-factory prices, which are often cheaper than the wholesale prices local shopkeepers pay for their merchandise. As a result, down-town business districts begin to empty, leaving fewer sponsors for Little League teams and a smaller pool of advertisers for the high-school yearbook. ‘When Wal-Mart comes in, something has to go out,’ observes Rex Campbell, professor of rural sociology at the University of Missouri.” “How Wal-Mart Hits Main St.: Shopkeepers Find the Nation’s No. 3 Retailer Tough to Beat,” U.S. News and World Report, March 13, 1989, p. 53.
“category killer” strategy: “A significant type of specialty chain that evolved during the 1980s was the ‘category killer.’ Modeled after Toys “я” Us, category killers were single-line stores with in-depth inventories in such areas as sporting goods, office supplies, and electronics.” Sandra S. Vance and Roy V. Scott, Wal-Mart: A History of Sam Walton’s Retail Phenomenon (New York: Twayne Publishers, 1994), p. 86.
Staples: “To get to know its customers, Staples has been compiling lots of information about buying habits and storing it in a massive database.… Staples uses this knowledge to locate new stores where they will be convenient for their customers—such as in neighborhoods with lots of law offices.… Staples wants to do everything it can to get its best customers coming back to its stores. Since the database knows who those folks are, Staples can try to win their loyalty by offering them special discounts.” “How One Red-Hot Retailer Wins Customers Loyalty,” Fortune, July 10, 1995, p. 74.
“provide an environment …”: “B&N [Barnes & Noble] has opened six outlets in the area, including a 35,000-square-foot store stocked with 125,000 titles that opened last fall less than two miles from the Tattered Cover.… [T]o fight back, [the Tattered Cover] has extended hours, added a coffee bar, and opened a 7,500-square-foot satellite store in downtown Denver. Next month, [they’ll] open a restaurant atop the flagship store, which is adjacent to Denver’s elegant Cherry Creek Shopping Center. So far, however, [they] refuse to discount.” “Chain-store Massacre in Bookland?” Business Week, February 27, 1995, p. 20D.
“Next was in financial difficulties …”: “The company that only two years earlier had gotten an infusion of $100MM from Canon was once again out of money.” Randall E. Stross, Steve Jobs and the Next Big Thing (New York: Atheneum, 1993), p. 301.
“Next, the software company …”: “Obsessed for years with hardware, Jobs, 37, now recognizes that Next’s ‘crown jewel’ is not its sleek computer but its operating system—[the] software it comes with.… So now Jobs is making a bold and desperate move to save Next by transforming it into a publisher of software that runs on other companies’ computers.” “Steve Jobs’ Next Big Gamble,” Fortune, February 8, 1993, pp. 99–100.
Charlie Chaplin’s reaction to sound: “Early in 1931 he had made several statements to the press: ‘I give the talkies six months more. At the most a year. Then they’re done.’ Three months later, in May 1931, he had modified his opinion slightly: ‘Dialogue may or may not have a place in comedy.… What I merely said was that dialogue does not have a place in the sort of comedies I make.… For myself I know that I cannot use dialogue.’” David Robinson, Chaplin: His Life and Art (New York: McGraw Hill, 1985), p. 465.
“Anna Christie … was both a critical and commercial success …”: Barry Paris, Garbo: A Biography (New York: Alfred A. Knopf, 1995), p. 194.
“a ‘10X’ change in the productivity of shipping …”: “[T]he conventional system eventually came to be associated with relentless increases in cargo handling costs.… When expressed in 1870 prices there was a sixteen-fold increase in [loading] costs [between 1870 and 1975].” The Shipping Revolution: The Modern Merchant Ship, Conway’s History of the Ship (London: Conway Maritime Press, 1992), pp. 42–43.
“a worldwide reordering of shipping ports …”: “[In 1959, the Port of Seattle] was the subject of countless hand-wringing editorials that proclaimed the obvious—it was dying. The Port altered course and became one of the most dynamic ports in the country; the unquestioned leading port north of Oakland, and the sixth busiest container port in the world.” Padraic Burke and Dick Paetzke, Pioneers and Partnerships: A History of the Port of Seattle (Port of Seattle, 1995), p. 85. “Singapore, for the past five years the world’s busiest port, has now surpassed Hong Kong as the world’s busiest container port.” “New Hub in Southeast Asia: Singapore Manages to Supplant Hong Kong as the World’s Number One Container Port,” American Shipper, June 1991, p. 93. “The marine terminals of New York have been eclipsed since the 1960s by those on the New Jersey side of the harbor, which are better equipped for modern shipping because they have more land and easier access to railways and highways. Government-owned terminals in Manhattan, Brooklyn and Staten Island have been unable to keep up, losing about $40 million annually in the last two years, with little prospect of breaking even in the near future.” “Questioning the Viability of New York in Shipping,” New York Times, August 30, 1995, p. A16.
“ports that didn’t adopt …”: “San Francisco does barely 10% of the shipping trade of Seattle, Oakland or Los Angeles.… What happened here (in San Francisco) started nearly 30 years ago, with the advent of containerized cargo.… [W]hen goods were sealed in large metal containers, uniform in size, easily loaded onto trucks or rail cars, the finger piers were obsolete, and San Francisco became a shipping cemetery.… During the 1960s, the shipping repair business employed 20,000 people in San Francisco. Today, barely 500 work on dry-dock operations here.” “Past and Future Collide on San Francisco’s Waterfront,” New York Times, February 10, 1995, p. A8.
“modified their strategies to take advantage …”: “[NCR’s] System 3000 line, based on Intel Corp.’s 80×86 microprocessors, reaches from portable and pen-based computers; to desktop PCs and workstations; to servers and mainframe-class, parallel-processor computers.” “NCR/AT&T: One Era Ends … Another Begins,” Electronic Business, May 1993, p. 37. “H-P, once a nonfactor in the PC business, is now streamlined, nimble, and growing faster than market leader Compaq.” “Hewlett-Packard: The Next PC Power,” Fortune, May 1, 1995, p. 20.
DEC and PCs: See Rifkin and Harrar, The Ultimate Entrepreneur, p. 242.
“Digital broke into the world of computers …”: “In late 1962, DEC won its breakthrough order. International Telephone and Telegraph bought fifteen PDP-1s to control its message switching systems. This order gave Digital the confidence and financial ability to become a general systems supplier.” Ibid., p. 44.
“IBM … blamed weakness in the worldwide economy …”: “IBM executives blame their financial performance on other factors, which are beyond their control. Foremost among them: U.S. capital spending patterns, which Akers and his lieutenants say have been disrupted by tax reform.” “Computers: When Will the Slump End?” Business Week, April 21, 1986, p. 63. “We have this sparkling product line.… And we do have an economic environment that has resulted in customers’ delaying and deferring decisions. That can’t go on forever.” Interview with John Akers, Fortune, July 15, 1991, p. 43.
“Chen described his switch …”: “Steve Chen, the reclusive supercomputer designer whose last company folded two years ago, has resurfaced with a new firm that embraces a technology approach he once shunned.” “Supercomputing’s Steve Chen Resurfaces in New Firm,” Reuters, June 27, 1995.
“an analysis of the history of business failures …”: “Bad things happen to good companies for three reasons: Firms leave their markets, markets escape from firms or both happen simultaneously.” Comments by Richard S. Tedlow in a seminar at Intel, October 7, 1993.
Young people’s comfort with computers: “63 percent of children ages 11–17 would rather use a computer than read a book; 59 percent would rather use it than watch TV.” San Jose Mercury News, April 10, 1995, p. 1A.
Ford: “In an industry in which market share has always been a key to profitability, every other automobile sold in the United States in 1921 was a Model T.” Richard S. Tedlow, New and Improved: The Story of Mass Marketing in America (New York: Basic Books, 1990), p. 150.
“Alfred Sloan … saw a market …”: “‘The changes in the new model should be so novel and attractive as to create demand for the new value and, so to speak, create a certain amount of dissatisfaction with past models as compared with the new one.’” Alfred Sloan, quoted, ibid, p. 168.
“General Motors had taken the lead …”: “General Motors surpassed Ford in terms of both profit and market share in the 1920s and outperformed Ford in profit every year from 1925 until 1986.” Ibid, p. 171.
“Cray … unable to maintain operations …”: “In a bitter final chapter signifying the decline of the supercomputer industry and the fortunes of its founding father, computer pioneer Seymour Cray said Friday that his company, Cray Computer Corp. was seeking Chapter 11 bankruptcy protection after failing to raise an additional $20 million to continue operations.” San Jose Mercury News, March 25, 1995, p. 2D.
“airlines … place a cap on commissions …”: “Delta, staggered by its bloated costs, said it made the move as part of its plans to eliminate $400 million in marketing expenses, and $2 billion overall, by 1997. ‘It took a lot of nerve to do this,’ said Vincent F. Caminiti, Delta’s vice president of sales.” “Delta Caps Its Commission on Ticket Sales: End of Fixed 10% Fee Aims to Cut Costs but Risks Angering Travel Agents,” Wall Street Journal, February 10, 1995, p. A2.
“agencies instituted a policy of charging customers …”: “American Express Travel, the country’s largest agency, said last week it will charge $20 a ticket on domestic flights costing less than $300 and credit the fee toward cruises or tour packages. Carlson Wagonlit, the No. 2 agency, will charge a $15 fee to first-time customers who travel alone and book no other services.” “Coffee, Tea and Fees,” Time, February 27, 1995, p. 47.
“40 percent of all agencies might go out of business …”: “The American Society of Travel Agents said in a preliminary estimate that as many as 10,000 of its 25,000 members could be put out of business.” Ibid., p. 47.
For the impact of the 1906 Food and Drugs Act on patent medicines and the pharmaceutical industry, see James Harvey Young, Pure Food: Securing the Federal Food and Drugs Act of 1906 (Princeton, NJ: Princeton University Press, 1989).
“the phone company could not require the use of its own equipment …”: “In 1968, in a landmark decision known as Carter-fone, the Federal Communications Commission … had ruled that the ‘terminal equipment’ market should be opened up for the first time to companies other than AT&T.… [The FCC] decided that independent companies making new communications devices like answering machines and mobile radio phones should be allowed to interconnect with AT&T’s switched phone network, a privilege that had been previously denied to them. Suddenly, phone users could buy non-AT&T equipment and plug it into the telephone lines at their homes or business.” Steve Coll, The Deal of the Century: The Breakup of AT&T (New York: Atheneum, 1986), pp. 10–11.
“the U.S. Government … brought suit …”: “On March 6, 1974, MCI filed a sweeping antitrust suit against AT&T seeking hundreds of millions of dollars in damages.… On Wednesday, November 20, 1974 … on the fifth floor of the main Justice building at 10th and Pennsylvania, the attorney general met with several antitrust division lawyers to discuss the AT&T case.… Shortly before eleven … the AT&T lawyers arrived.… [The lead lawyer] retained by AT&T stood up to begin AT&T’s presentation.… [He] began puffing on a pipe [and addressed the attorney general], ‘Before we start our presentation, I’d like to know exactly what your state of mind is on this case.’ … [The attorney general replied] ‘I intend to bring action against you.’” Ibid., pp. 52, 65, 67–68.
the breakup of the Bell System: “Once again, in 1974, the Justice Department sued AT&T.… After dragging on for nearly eight years, the suit was settled by consent decree in January, 1982. AT&T agreed to divest itself of its 22 operating companies, while retaining Western Electric, Bell Labs, and long-distance communications.… Judge Greene [later] issued his Modified Final Judgment (MFJ).… Under the MFJ, the 22 Bell operating companies were reorganized into seven Regional Holding Companies.…” “AT&T and the Regional Bell Holding Companies,” Harvard Business School Case N2-388-078, rev. March, 1989, pp. 3–4.
“long-distance market …”:
| AT&T | 60% |
| MCI | 20% |
| Sprint | 10% |
| LDDS | 3% |
| Wilted | 1% |
| Other | 6% |
Arsen Darney and Marlita Reddy, Share Reporter: An Annual Compilation of Reported Market Share Data on Companies, Products and Services. Table 1216, p. 318.
“a cable network …”: In 1993, 57 million homes (61.4 percent) had cable. Statistical Abstract of the United States 1994, U.S. Department of Commerce, issued September 1994, Washington, D.C. Table 882, p. 567.
Deutsche Telekom: “Mr. Sommer is expected to bring to Telekom a global business outlook and a feel for the hotly competitive world of consumer electronics.” “Deutsche Telekom Picks Ron Sommer as Its Chairman,” Wall Street Journal, March 30, 1995, p. B4.
AT&T and the Bell companies’ combined valuation. In December 1993, following the breakup, AT&T and its successor companies had an approximate market valuation of $60 billion. Capital International Perspective (Capital International S.A., Geneva, Switzerland), January 1984, pp. 330–32. In 1995, their market value was approximately $240 billion. The Red Herring, September 1995, pp. 110, 112.
“the 10% rule …”: Andrew S. Grove, “The Future of the Computer Industry,” California Management Review, Vol. 33, No. 1, Fall 1990, p. 153.
“get ‘2X’ the price of Japanese memories”: “‘The DRAM manager would say: With this approach we’ll be able to get a price of ‘2X’ that of a standard DRAM, but unfortunately, we just didn’t like the ‘X.’” “Implementing the DRAM Decision,” Graduate School of Business, Stanford University, PS-BP-256B, 1991, p. 1.
Intel’s “public statements …”: Note the evolution of the phrasing: “Intel is a manufacturer of electronic ‘building blocks’ used by Original Equipment Manufacturers (OEMs) to construct their systems.” 1985 Intel Annual Report, p. 4. “Intel designs and manufactures semiconductor components and related single-board computers, microcomputer systems and software for original equipment manufacturers.” 1986 Intel Annual Report, p. 4. “The company originally flourished as a supplier of semiconductor memory for mainframe computers and minicomputers. Over time, though, the face of computing, and Intel, have changed. Microcomputers are now the largest, fastest-growing segment of computing, and Intel is a leading supplier of microcomputers.” 1987 Intel Annual Report, p. 4.
“an auxiliary one that would work with the 486 …”: “First of all, we positioned it as a coprocessor to the 80486 and made sure that it could be justified on that basis. We designed it as a standalone processor, but made it very useful as an accessory to the 486.” Comments of Intel designer Les Kohn in “Intel Corporation: Strategy for the 1990s,” Graduate School of Business, Stanford University, PS-BP-256C, 1991, p. 9.
“the advantages of RISC technology over CISC …”: “For many business applications, CISC may be both faster and cheaper.” “The Reality of RISC,” Computer World, March 22, 1993, p. 72. “It is now clear that those early ads showing RISC on a sharp upward performance curve as CISC leveled off were wishful thinking at best.” From an open letter from Michael Slater to the heads of IBM, Motorola and Apple, OEM Magazine, July/August 1995, p. 24.
Peter F. Drucker: “‘The entrepreneur,’ said the French economist J. B. Say around 1800, ‘shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.’” Peter F. Drucker, Innovation and Entrepreneurship: Practice and Principles. (Bungay, Suffolk: William Heinemann Ltd., 1985), p. 19.
Apple’s Newton criticized: “Instead of accolades, Newton became a running joke on no less visible a platform than Gary Trudeau’s Doonesbury comic strip.” “What Apple Learned from the Newton,” Business Week, November 22, 1993, p. 110.
W. Edwards Deming, Out of the Crisis. (Cambridge: Massachusetts Institute of Technology Center for Advanced Engineering Study, 1988).
Intel’s corporate culture: “A business like ours has to employ a management process unlike that used in more conventional industries. If we had people at the top making all the decisions, then these decisions would be made by those unfamiliar with the technology of the day.… Since our business depends on what it knows to survive, we mix ‘knowledge-power people’ with ‘position-power people’ daily, so that together they make the decisions that will affect us for years to come. We at Intel frequently ask junior members of the organization to participate jointly in a decision-making meeting with senior managers. This only works if everybody at the meeting voices opinions and beliefs as equals, forgetting or ignoring status differentials. And it is much easier to achieve this if the organization doesn’t separate its senior and junior people with limousines, plush offices and private dining rooms.” Andrew S. Grove, quoted in “My Turn: Breaking the Chains of Command,” Newsweek, October 3, 1983, p. 23.
“the sequence of emotions associated with grief …”: Elisabeth Kubler-Ross, On Death and Dying (New York: Macmillan, 1969).
“replacement of corporate heads …”: “‘In many cases, the emotional ties of the career CEO are just too strong,’ says Ferdinand Nadherny, vice-chairman of Russell Reynolds Associates, the nation’s largest executive recruiting firm.… [W]ith the recession creaming Tenneco’s 1991 results after years of erratic earnings, the board decided it was time to push aside the proud chief [James L. Ketelsen]. ‘[Michael H.] Walsh came with a clean perspective,’ explains one director. ‘He wasn’t weighed down by the politics of the past.’” “Tough Times, Tough Bosses,” Business Week, November 25, 1991, pp. 174–75.
“Strategic Dissonance”: For further discussion of this phenomenon, see Robert A. Burgelman and Andrew S. Grove, “Strategic Dissonance,” California Management Review, Vol. 38, No. 2, Winter 1996, pp. 1–20. I also make a parallel to the concept of cognitive dissonance: “New events may happen or new events may become known to a person, creating at least a momentary dissonance with existing knowledge, opinion, or cognition concerning behavior.… What, then, are the circumstances that make it difficult for the person to change his actions? 1. The change may be painful or involve loss.… 2. The present behavior may be otherwise satisfying.… 3. Making the change may simply not be possible.” Leon Festinger, A Theory of Cognitive Dissonance. (Evanston, IL: Row, Peterson and Company, 1957), pp. 4, 25–27.
“Compaq’s board of directors …”: “[A]fter weeks of high-level wrangling aimed at pulling the company out of a six-month decline in revenues, profits, and market share … [Compaq Chairman Benjamin M.] Rosen stepped in.” “Compaq’s New Boss Doesn’t Even Have Time to Wince,” Business Week, November 11, 1991, p. 41.
“importance of scale and scope …”: In his book, Scale and Scope (Cambridge, MA: Belknap Press, 1990), Harvard Business School Professor Alfred D. Chandler showed that many industries adapt to a model in which scale and scope end up being key. These historical examples helped us understand what we needed to do.
Lotus in 1985: “By leveraging Lotus’ position as a leading supplier of application software, we are continuing to develop a rich line of companion and complementary products.” Lotus 1985 Annual Report, p. 11.
Lotus in 1991: “It’s tempting to describe 1991 as a year of transition at Lotus.… But our customers’ world—and the world of individual users—now opens up onto a broader horizon. In this wider world, users are linked by networks and networked applications, and they share computing resources, information and work itself. [I]n Notes, we have the ground-breaking collaborative computing product that is changing the way companies do business.” Lotus 1991 Annual Report, pp. 2, 4, 5.
“Drucker suggests …”: Nineteenth-century French economist J. B. Say quoted in Peter Drucker’s Innovation and Entrepreneurship: Practice and Principles: “An entrepreneur is one who shifts resources from areas of low productivity and yield to areas of higher productivity and yield.” Op. cit.
early movers: see Gary Hamel and C. K. Prahalad, “Competing for the Future,” Harvard Business Review, July-August 1994, pp. 122–28.
“Put all of your eggs …”: “Behold, the fool saith, Put not all thine eggs in the one basket’—which is but a manner of saying, ‘Scatter your money and your attention’; but the wise man saith, ‘Put all your eggs in one basket and WATCH THAT BASKET.’” Mark Twain, Puddin’ head Wilson, (New York: Penguin Books, 1986), p. 163. First published in 1894.
“Hewlett-Packard decided …”: “Intel Corp. and Hewlett-Packard Co. shook the core of the computer industry last week when they announced a broad partnership to develop a new generation of microprocessor technology.” “Intel-HP Agreement Alters CPU Landscape,” PC Week, June 13, 1994, p. 1.
Dr. Wang’s vision: “An Wang was more than just a technical wizard. From the beginning, he thrived on keeping his hands in all aspects of the business, and the management system was perfectly designed to fit his voracious eclectic intellect. ‘The Doctor had a whim of iron. He was into everything. He would come into the engineering department, head to the blackboard of a first-level engineer and sketch out what he wanted,’ says a former engineer. ‘What Dr. Wang wanted then became the design.’” “The Fall of the House of Wang,” Business Month, February 1990, p. 24.
Wang in bankruptcy: “After peaking at $3 billion in revenue in 1988, Wang hit hard times as the PC industry advanced and started to cut into word processors.… ‘They completely misunderstood the PC industry and it cost them greatly,’ [said Stephen Smith, an analyst with Paine Webber, Inc.].” “Wang Files for Chapter 11, Plans to Let Go 5,000,” Computer Reseller News, August 24, 1992, p. 10
“a powerful, adaptive organization …”: For studies on this subject, see Robert A. Burgelman, “Intraorganizational Ecology of Strategy-making and Organizational Adaptation: Theory and Field Research,” Organization Science, Vol. 2, No. 3, August 1991. Also ibid., “Fading Memories: A Process Theory of Strategic Business Exit in Dynamic Environments, “Administrative Science Quarterly, No. 139, 1994.
“These debates are vigorous …”: “The real benefit … is to team up people with hands-on knowledge with those in positions of power to create the best solutions in the interest of both.” Andrew S. Grove, “My Turn: Breaking the Chains of Command,” Newsweek, October 3, 1983, p. 23.
“supporting the decision …”: “An organization does not live by its members agreeing with one another at all times on everything. It lives instead by people committing to support the decisions and the moves of the business.” Andrew S. Grove, High Output Management (New York: Random House, 1983), p. 91.
Hewlett-Packard: Hewlett-Packard 1994 Annual Report, p. 44.
AT&T and regional Bell companies’ market valuation: In December 1983, following the breakup, AT&T and the RBOCs had an approximate market valuation of $60 billion. Capital International Perspective (Capital International S.A., Geneva, Switzerland), January 1984, pp. 330–32. In 1995, their market value was approximately $240 billion. The Red Herring, September 1995, pp. 110, 112.
“the stock skyrocketed …”: Netscape’s initial offering price on August 9, 1995, was $28 a share. It reached a high that day of $74 and subsequently peaked at $174 on December 6, 1995. Bloomburg Business News.
“creating a dramatized confrontation …”: “‘There are gales of creative destruction blowing through every corner of the information technology industry, and the source of that wind is the Internet,’ says Paul Saffo, a consultant and research fellow at the Institute for the Future in Menlo Park, California.” “Whose Internet Is It Anyway?” Fortune, December 11, 1995, p. 121.
For a more detailed history of the Internet, see Joshua Ed-dings, How the Internet Works (San Francisco: Ziff Davis Press, 1994).
“impact the telecommunications industry …”: “Personal communication over the Internet will overtake telecommunications in five to six years, and telephone operators have the biggest interest in getting into the online business.… The importance of the telephone in personal communications will diminish just like the fax has replaced the telex.” Reuters, February 1, 1996.
“impact on the software industry …”: “From tiny one-person shops to start-ups staffed by prominent Silicon Valley executives, the Net is teeming with new Web software companies. Most wouldn’t have a prayer in the conventional software market. But the Net represents a green field where no software maker dominates.” “The Software Revolution: The Internet Changes Everything,” Business Week, December 4, 1995, p. 82. And: “Currently, you have to pay money up front to distribute software through either conventional retail channels or through the large distributors that sell into corporations. On the Internet you don’t need these intermediate distribution mechanisms. So we see this potential for low-cost distribution of any kind of intellectual property—whether it be software, or pictures, or movies, or CDs, or anything that can be represented as bits—as one of the most revolutionary aspects of the Internet.” Interview with Jim Clark, The Red Herring, November, 1995, p. 70.
“won’t that siphon off business …”: “In the computer industry, there’s never been a company that’s led the way in two successive eras. So really, what Microsoft as a company, or Paul and I as individuals, are trying to do is defy history and actually take our leadership from the PC era into this new communications era. The odds are against us, and that’s what makes it so much fun and challenging.” Bill Gates quoted in “Bill Gates and Paul Allen Talk,” Fortune, October 2, 1995, p. 82.
“even advertisers are joining in …”: “Hachette Filipacchi said it has just signed a new media commitment with … General Motors.” “Hachette Entangles GM in Web for ‘96,” Wallstreet Journal, November 30, 1995, p. B6.
“worldwide spending on advertising …”: 1995 estimated global spending on advertising was $345.7 billion. Standard and Poor’s Industry Surveys, October 1995, Vol. 2, New York, p. M15.
“Internet appliances”: “The device promises to offer the most popular functions of a personal computer, such as sending electronic mail, surfing the Internet and word processing, at a fraction of the cost. There are limitations, however: It’s less powerful than a PC, and has no slots to play your own CD-ROMs or software.” “Ellison’s ‘Magic Box,’” San Francisco Chronicle, November 16, 1995, p. B1. Also, “The argument is that the day of the desktop application—and therefore the OS—ends when applications are stored and distributed over the Net.… Such technology provoked Upside magazine to gush that the Web is a ‘whole software standard that makes the current software industry obsolete’” “Dubious Extinction,” PC Week Inside, November 13, 1995, p. A14.