IBM researchers predicted PC disruption

IBM researchers predicted PC disruption

Summary: It is the 25 year anniversary of the PC and I have long wondered if the industry standard technologies that resulted from the PC revolution were accidental because the computer industry always favored proprietary technologies.It was good to discuss this subject when I recently met with IBM's top strategist, Irving Wladawsky-Berger.

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TOPICS: PCs
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It is the 25 year anniversary of the PC and I have long wondered if the industry standard technologies that resulted from the PC revolution were accidental because the computer industry always favored proprietary technologies.

It was good to discuss this subject when I recently met with IBM's top strategist, Irving Wladawsky-Berger. We talked about the disruptive effect of the PC technology. It disrupted the business models of huge sectors in the computing industry, nearly all the minicomputer and mainframe companies were put out of business or disappeared through acquisitions. Even IBM barely survived--it had to reinvent itself as an IT services company.

There are many definitions of a disruptive technology, but to me, a disruptive technology is something which disrupts the business models of large numbers of companies. You can see the train wreck happening in front of you, but you cannot get out the way.

The East Coast minicomputer companies could see what was happening, but they couldn't change course, or downsize fast enough. Mr Wladawsky-Berger said that it was IBM's research labs, the largest in the world, that helped save the company.

"In labs, we were able to see a few years ahead and we could predict the disruptive effect of the PC but our management wasn't able to react fast enough." He said that making the necessary changes at IBM, the cuts in staff and projects was very difficult to do.

"People talk about having to 'eat your children' but those people clearly have no children of their own," he said. I agree, as a father of two fantastic kids my instincts are to protect them as much as I can, and I can see how that kind of emotional involvement in business ventures, the people you work with, the communities created, makes it so tough to make the hard decisions.

I remember chatting with Ed Zander, the first interview since he left as president of Sun Microsystems. He said the worst thing about his job was laying off people at Sun, following the dotcom dotbust. Sun had never been in that position before, its culture was one of fast paced growth and loyalty to staff.  Mr Zander went on to join Motorola as CEO and make the tough restructuring decisions as an outsider.

And that's why Lou Gerstner, an outsider, was brought in to run IBM. I read Mr Gerstner's account of those times in his excellent book, "Who says elephants can't dance?" He had to be incredibly rigorous and disciplined in his ten-year-long transformation of IBM, in response to the incredible disruption wrought by PC technologies.

I asked Mr Wladawsky-Berger why IBM chose off-the-shelf components and software for its IBM PC, and thus enabled an open industry platform that spawned a massive industry. Up until then, proprietary computer systems were the way the computer industry made money, and lots of it.

Mr Wladawsky-Berger said that IBM used off-the-shelf technologies to create the PC platform precisely because it did not take the threat from the PC seriously. "We dealt with big, complex computer systems, our management did not look to the PC as something that could seriously challenge our business."

But some researchers in IBM's labs did see the writing on the wall and eventually that message was recognized. IBM was lucky in that it had a large enough business base that gave it time to make the changes needed for survival. Others didn't have the same solid customer base and took too long to make changes and are now gone.

Are the platform industry standards of the PC industry an anomaly? I think they were because we haven't been able to see much of the same in other industries.

The network comms business, and the cell phone business sectors remain resolutely based on many competing technologies. Intel and Microsoft were not able to convince those industries to standardize on components and software in the same way as happened within the PC industry.

And the reason for that, IMHO, is that Intel and Microsoft sucked all the margins out of the PC business leaving tiny slivers for the manufacturers. Why would other companies allow the same to happen in their sectors?

- - - 

 Irving blog: A collection of observations, news and resources on the changing nature of innovation and the future of information technology. Business as a Complex, Continuously Evolving System

Reflections on blogging - one year later 

 Book: Who Says Elephants Can't Dance? Inside IBM's Historic Turnaround

Topic: PCs

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9 comments
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  • No "IMHO" about it

    [i]And the reason for that, IMHO, is that Intel and Microsoft sucked all the margins out of the PC business leaving tiny slivers for the manufacturers. Why would other companies allow the same to happen in their sectors?[/i]

    Check out [url=http://www.mipi.org]MIPI[/url] and you'll see that there's no speculation required. The mobile industry is quite consciously working on standards that will allow them to put their suppliers in the position of being commodities rather than having the OEMs be commodity distributors for a pair of monopoly suppliers.

    Interestingly, the PC business overall has margins that are about par for many industries. It's unusual primarily in that two companies have managed to secure the lions' share of those margins for themselves leaving only scraps for the rest.
    Yagotta B. Kidding
    • Step one?

      The mobile companies are working with commodity products, okay. But what happens when they produce commodity products?

      Nokia has already pointed the way toward this next step with the contribution to Mozilla's minimo project, the one that gave money toward FireFox when it was needed. The one intended to substitute free labor for the paid labor at Nokia and Opera.

      The more the unique aspects of the product can be standardized and outsourced, the higher the profits based on design and features selected from those available. And if those costs are amortized over many units, the cost to buyers can be kept very low.

      If this is true, then the companies in the best position to be suppliers are those with the resources to provide the basic software and easily make desired modifications. And selling enough to keep their own costs to customers down.

      So a company which could become predominant in mobile would have to be a huge software company with many years of experience. And with proprietary products so that their cheap prices cannot be undercut by people willing to work even more cheaply.

      Perhaps Opera's problem was that the company was not big enough. Only the very largest proprietary companies need apply in the coming standardization.
      Anton Philidor
  • "Disruptive Technology": What a crock

    First off, anyone (IMHO) that uses that term tells me they don't understand technology.
    (Think about it: What in this world isn't disrupted to something else?)
    The professor that coined that term had nothing new or imaginative to say, just wrote a buch of nonsense so as to coin a phrase.

    Second:
    "Intel and Microsoft were not able to convince those industries to standardize on components and software in the same way as happened within the PC industry"

    Where did it say they were trying to convince the industry in any way? It looks to me that those industries followed the lead of MS and Intel on their own, as they saw where they were going and didn't want to be left behind.
    John Zern
  • tom - hindsight is 20/20

    >"We talked about the disruptive effect of the PC technology. It disrupted the business models of huge sectors in the computing industry, nearly all the minicomputer and mainframe companies were put out of business or disappeared through acquisitions."<


    i read this as a testiment to something that happened 20 years ago.

    its IBM that blew-it with the "PC" but did coin the phrase (personal computer).
    not of this world
  • Add the disruption from Windows

    Just as PCs disrupted the mini and mainframe markets, eventually Windows did the same to the PC software market.

    Here too, most companies were too slow to react. Having seen early versions of Windows fail to gain traction (due to poor performance and excessive hardware requirements), most PC software companies initially ignored or downplayed the importance of Windows 3.0/3.1, leaving Microsoft an open field to establish applications dominance.

    Hence, Lotus, Word Perfect, Ashton Tate and all the other early leaders in the PC software arena became marginal players, either closing their doors or being acquired by others.

    Since then, Microsoft grew so large and became so powerful that when the Internet came along, its disruptive force was hampered and dampened, making it difficult for new companies to flourish and compete against the established "older technology" companies.

    Given the near monopoly of Microsoft, it may no longer be possible for any new computer technology to have the disruptive effects that the PC had to hardware and Windows had to software.
    sylerner
  • There is not such a thing as distruptive technology...

    There is not such a thing as distruptive technology... only people who see the obvious things comings and people who just don't get it even if the the thing already happened.

    If you know your field (technology, bussiness, biomedics, manufacturing, law, etc.) and you know what is going on in the bleeding edge (I don't mean the latest marketed products, services or hype, but the things you see written in your field's journals, directly from the labs), you can predict pretty well what is coming. And if you are very, very good (if you have a bit of imagination) , you can even predict what conditions have to met before those things happens... and then, magically, you have vision of the (not so) near future in your field.

    Disruptive is disruptive for those who just don't have that vision (or don't listen to those who have it [the "experts"]).

    Reaction time is also an issue, but I really think it is not the main one.


    Regards,

    MV
    MV_z
    • Skill and luck.

      Knowing what's being accomplished in the labs does not provide an insight into what will happen in a market.

      Using the situation discussed in the article, suppose you had been amazed at what IBM was accomplishing in its labs for the mainframe at the time cheaper pc's were becoming widely available.
      You would have to compare technical innovations to devices which were not very advanced.

      If you followed the inclination to back the newest and best, you would have been very incorrect. Cheap and user-friendly and outside the control of IT acolytes were far more important than capabilities and functionality.

      Customers make their choices based on their priorities.
      Anton Philidor
    • Guerrilla warfare

      I disagree, think of Vietnam or (maybe) Iraq. Small inferior things can blindside even the experts on the bleeding edge. Why, because the bleeding edge usually looks to superior technology. No one can predict the future, even bleeding edge experts, even you. It cannot be done. Thats the fun in being alive.

      That being said, you do have a point - people, especially experts are idiots.
      Calm_Down
  • Warning Signs of Disruption

    It is fascinating to watch the warning signs of an industry or company facing disruption:

    * Profit margins rise may on flat to down sales as you cater to best customers or as smaller producers are squeezed out;
    * Industry fragments;
    * New and sometimes strange entrants gain toeholds in the market, often with marginal customers;
    * Special expertise no longer required;
    * Commoditized pricing;
    * Management playbook fails;
    * Growth gap opens;
    * Management seeks a miracle. (This last stage is often when mergers are trotted out.)

    Details on these warning signs and what to do about it at:

    http://www.ondisruption.com/my_weblog/2006/08/death_at_the_mo.html
    Michael Urlocker