DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation [Taschenbuch]

 

 

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Professor Schein has written a helpful case history of Digital Equipment Corporation as a computer industry innovator from the perspective of its organizational culture. He draws successfully on his own direct observations during decades of consulting work, and involves others for their experiences as well in describing the organizational culture. The most helpful parts are in the form of notes and comments that occurred during the rise and fall of DEC. His main weakness as an observer is that he lumps too much of what was missing from DEC under his continuing references to the "business gene." The case history, as a result, is too light on other aspects of DEC.

Anyone who is interested in Professor Clayton Christensen's work on sustaining innovation will find deeper insights into why cultures encourage innovation failure by emphasizing one way of working on issues.

If you just want to understand the lessons of why DEC was ultimately unsuccessful as an enterprise, you only need to read Gordon Bell's postscript in appendix e. Like every other computer company at the time, DEC and its leaders did not have an actionable understanding of the implications of the ongoing productivity advances in semiconductors and how nonengineers liked to interact with computers. Our firm did consulting for another computer maker in 1978 to look at how to outperform DEC, and the vulnerability to semiconductor trends was clear then . . . even before the personal computer became important.

The book fails to explain why DEC was so insulated from profit disciplines that drive so many other companies. During its heyday, DEC and its fellow computer makers enjoyed exceptionally high rates of repeat sales (well over 90%) to the same customers. The reason: Software written for one company's machine often wouldn't work on another company's machine. So customers were stuck. It cost too much and took too much time to rewrite all that code. So you would stay with a vendor who was no longer competent for quite a long time. The challenge in the closed systems world was to sell the first machine to a customer, and make it work. In the open systems environment, you have to compete for repeat sales. For DEC, that was like AT&T having to compete with other long-distance carriers after having had a monopoly for all of those years. Ultimate failure should not have been surprising.

Rather than learning more about DEC, I would suggest that you focus on studying current computing industry technology leaders who have been consistently able to adjust their business models such as Dell, Business Objects, Cisco, QLogic and EMC. They have processes in place that DEC never had, and it's hard to learn to succeed by looking at a company that lacked such a key process. Clearly, the lesson of DEC is that working on organizational development in a technology company without creating an ability to perform continuing business model innovation is a waste of time.

As I finished the book, I realized that those who are hoping that boards will use better governance to ensure that high technology companies prosper are being way too optimistic. Few boards can hope to know enough to even understand whether or not the company is working on the right questions.

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