Chapter 21 - The Limits of Strategy

The extreme turbulence of the computer sector in the 1980s provides an intellectual wind tunnel for testing radical survival strategies and effective leadership. What can be learned from the leading computer companies and the men who led them? Are there limits to strategy, however brilliant? Or were these CEOs diminished and even fired simply because of their own managerial inadequacies?

Yes, they were buffeted by disruptive technologies, but wouldn’t more savvy CEOs have identified the threat soon enough to navigate through the turbulence? Yes, company survival depended on radically different business models, but wouldn’t farther-sighted leaders have identified the turning points soon enough to lead the restructurings? And yes, such painfully massive restructurings were impeded by stiff internal resistance, but wouldn’t stronger leaders have forced compliance on middle management?

Perhaps it’s not so easy. The potential impact of disruptive technologies like the microprocessor can be difficult to discern even by those closest to the action—witness contemporaneous interviews with the CEOs of Intel, National Semiconductor, and Motorola. Conversely, the real distinction between disruptive and essentially transient technologies like the minicomputer is often befogged in Creative Ideology.

Besides, a technological advantage alone is not enough, as evidenced by Amdahl’s futile twenty-five-year assault against IBM. Much more important is the accompanying business model. First movers trying to harness a disruptive technology to an outdated business model will fail, as did Commodore, Tandy Radio Shack, and, to some degree, Apple.

Even when the disruptive technology and its equally disruptive business model are clearly visible, the survival strategy can be nearly impossible to implement. Incumbents can be hobbled by organizational and physical assets that quickly become boat anchors. Faced with hard choices, executives can be distracted by traditional competitors doing even worse than they are. Response may be further delayed while management is still savoring a recent apogee—witness Tandem, DEC, Cullinet, Lotus, and many others. That’s fatal given the mind- numbing levels of attention over a remarkably long term required to change minds and incentives in the field organizations at both DEC and IBM. Too often, the only prescription is massive downsizing, but that’s something sitting CEOs find very difficult, especially if they’re a founder or lifelong employee.

Ups and Downs

By definition, apogees mark the beginning of decline. When you’ve reached the highest point and can go no further, you may fight to hold your position, but, in terms of movement, there’s no place to go but down. Thus, the same Ken Olsen who persevered with VAX/VMS was later implicated in his company’s failure to move more aggressively to Unix, RISC, and the new business model. An Wang was responsible for heroic business leaps but failed to acknowledge the irresistible appeal of the Intel/Microsoft platform and the layered business model. Vic Poore, though never Datapoint’s CEO, was its brilliant guiding light in distributed processing and local area networks; Poore even helped invent the microprocessor. But he didn’t see that standardization in microprocessors and networking would make even his sturdiest innovations obsolete. And the list goes on.

All this is evident in Innovation, the Attacker’s Advantage, where Richard Foster places the challenge posed by disruptive technology in a desperate perspective: “Prior success handicaps change.” The recent apogee adds further disadvantage: “I don’t know any comprehensive statistics that would stand up to academic scrutiny, but my feeling is leadership changes hands in seven out of ten cases when discontinuities strike. A change in technology may not be the No. 1 corporate killer, but it’s certainly among the leading causes of corporate ill health.”