Five Key Lessons for Today from the Rise and Fall of Yesterday’s IT Leaders

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To achieve sustainable strategic advantage, a new technology wave should represent a radical shift in both underlying technology and business model. The PC sector filled the bill and created substantial wealth for a few hardware leaders and dozens of software suppliers starting with Microsoft. The minicomputer sector did not, and its demise over ten years would be accompanied by major losses for the software firms that hitched their futures to quickly fading stars like Data General, Datapoint, Digital Equipment, Prime Computer, Wang Labs, and two dozen more.

What made the difference? Minicomputers were simply low-end versions of the mainframe, with cheaper circuit technology but proprietary circuit designs, operating systems, and distribution models. Conversely, personal computers were built on a “layered” approach, in which each manufacturer shared processors (typically Intel), operating systems (typically Microsoft), and even basic applications like databases, spreadsheets or word processing. Common components made two huge differences: lower costs and a much higher volume of users with essentially the same systems. The rising volume of users attracted even more software applications, which attracted even more users; and so it went. Minicomputers simply couldn’t compete, and every one of them failed along with then-major software firms like Cullinet (once the industry’s largest). The two notable exceptions were IBM and Hewlett Packard, both large enough for their minicomputers to attract a viable collection of independent software applications and, not coincidentally, both with sizable investments in personal computers.

The IT sector is at another turning point as mobile devices dampen the demand for PCs – just as PCs formerly dampened and then buried the demand for minicomputers. Simultaneously, the purchase of new on-premise servers and licensed software is being displaced by public cloud infrastructure and software services. Add cybersecurity as another question mark for the next decade. In sum, this transformation points to an era of “creative destruction,” in the phrase coined by the Austrian economist on entrepreneurship Joseph Schumpeter. As agile and often new firms will produce creative new solutions, slow-footed companies will be destroyed.

These two prospects will require special assessment: the new companies rising to these opportunities and the old companies threatened by impending change. What lessons can be learned from the histories of corporate rises and falls during equally ferocious transformations of the past?

Ernest von Simson, a senior partner of Ostriker von Simson, a consultancy that assists the largest worldwide enterprises in the selection and deployment of advanced technologies, and author of The Limits of Strategy: Lessons in Leadership from the Computer Industry, has identified five key lessons.      

 

Related Topics : A Big Market for Big Data Jobs, Midmarket CIO, IT Management Automation, SharePoint, Technology Markets

 
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