In The Innovator’s Dilemma, Clayton Christensen gives many examples of how industry-leading companies lost their lead, often so badly they went out of business. As I’ve said before, this is something I’ve studied in rats writ large. In a great talk about the beginnings of the PC industry, Mitch Kapor describes meeting Ken Olsen, the CEO of Digital Equipment Corporation (DEC), a $15-billion-sales-per-year company destroyed by the PC.
“Meeting the needs of people who had never previously used computers was the foundation of this entire [PC] industry,” says Kapor. “Even after we [Lotus] had started to become successful, this was still not clear to some people.” This is what Christensen says, too: Disruptive innovations begin downmarket, among users not previously thought worthy of notice. For example, hydraulic-powered shovels started in sizes appropriate for digging ditches. The pattern Christensen saw was that the industry-leading companies ignored this market until it was too late. DEC was no exception. Olsen wanted to meet Kapor, who was flown by DEC helicopter to DEC headquarters. When they met, Olsen complained for 15 minutes about the flimsiness of the PC case.
“The stuff that made him smart was the stuff that was now making him incredibly dumb,” says Kapor. “They didn’t understand that they needed to stop doing all the things that had made them successful in order to have a chance to succeed.” I would put it differently. Our experiments with rats made one thing clear: The more successful you are — and DEC was very successful — the harder it is to try new ways of doing things.
Comment on another Kapor talk.
The bit about the helicopter made me laugh. I worked in marketing for DEC for a few months in the late 80s. The pièce de résistance of all our sales strategies was always just that: fly ‘em to DEC headquarters in the company helicopter, they’ll be putty in our hands!