Lessons from Ken Olsen and Digital Equipment Corp. (2024)

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Since Digital Equipment Corp. founder (and MIT alumnus)Ken Olsen diedearlier this monthat 84, much has been written about him and the computer company he cofounded.

The story of Digital Equipment Corp. (DEC)was one of adramatic rise and fall: DEC was an entrepreneurialcomputer company that grew to$14 billion in sales and employedan estimated 130,000people worldwide at one point.ButDigitalfailed toadapt successfully after the personal computer eroded its minicomputer market.

Ken Olsen

Eventually, Compaq Computer bought DEC in 1998, and then Hewlett-Packard later acquired Compaq.

Whathave welearned fromDigital Equipment Corp.’s experience? Here are threemanagementlessons from DEC’s rise and fall:

1. Watch out for disruptive innovations. DEC’s troubleshelped inspire Harvard Business School professor Clayton Christensento develop his now well-known ideas about disruptive innovation.According toanarticle in Strategy+Business, watching the problemsof Digital and other minicomputer companies inthe late 1980sgot Christensen thinking about disruptive technology.

Today, Christensen’s ideas are well-known –and managers in established companies as a result have a much better awareness of the potential for disruptive innovation to affect their businesses. Here’s how Christensenput itin a 2009 interviewin MIT Sloan Management Review:

“Every disruption has three components to it: a technological enabler, a business model innovation and a new commercial ecosystem. In computing, the technological enabler of disruption in computing was the microprocessor. It so simplified the design of a computer that Steve Wozniak and Steve Jobs could just slap one together in a garage. It transformed the industry’s fundamental technological problem—the design of a computer—from a problem that took hundreds of people several years to solve into one that was much simpler.

Then that simplifying technology had to be married with a business model that could take the technology into the market in a cost-effective and convenient way. Digital Equipment Corp. had microprocessor technology, but its business model could not profitably sell a computer for less than $50,000. The technology trapped in a high-cost business model had no impact on the world, and in fact, the world ultimately killed Digital. But IBM Corp., with the very same processors at its disposal, set up a different business model in Florida that could make money at a $2,000 price point and 20% gross margins—and changed the world.

Topics

  • Innovation
  • Leadership
  • Strategy
  • Disruption
  • Innovation Strategy
  • Culture
  • Organizational Behavior

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Corporate Culture Disruptive Innovation Entrepreneurship High-Tech Entrepreneurs Organizational Culture

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Comments (6)
On Software Project Management, Part 2 | Frances Advincula
[...] 4. Dec is Dead, Long Live DEC: The Lasting Legacy of the Digital Equipment Corporation For now, a review and insights [...]
On Software Project Management, Part 2 « Frances Marie
[...] 4. Dec is Dead, Long Live DEC: The Lasting Legacy of the Digital Equipment Corporation For now, a review and insights [...]
Avoiding the Mistakes of Fallen Executives » Denise Brouillette
[...] What could be going on with the leaders at RIM? Before I answer that, I’ll revisit what happened to CEO Ken Olsen and the once dominant Digital Equipment Corporation (DEC) of Maynard, MA. [...]
Tim Cook and Apple’s Tricky Next Steps | EOS Worldwide
[...] shows it isn’t easy. Wang [4]did not survive the departure of An Wang; Digital Equipment never flew high again after Ken Olsen.[5] Untold numbers of firms that hadn’t attained such heights when they lost their founders [...]
HP and the Challenge of Change | Mike's Place in Cyberspace
[...] file format. Digital Equipment Corporation, at one time the second largest computer manufacturer, failed to adapt to the changing market and was purchased by Compaq in the [...]
Dewita Soeharjono
Great reading. I bet not too many Fortune 500 cos. employees remember their bosses. Let alone their CEOs, unless CEO's name is the name of the product, like Dell, etc. It's so true that disruptive innovations will change who'll be the next market leader - if the current leaders don't pay attention to trends. Consumer trends. Social commerce trends. Population growth. Etc. It will be interesting to watch how these things going to unravel throughout 2011 and on..
Lessons from Ken Olsen and Digital Equipment Corp. (2024)

FAQs

Why did Digital Equipment Corporation fail? ›

Digital Equipment Corp. had microprocessor technology, but its business model could not profitably sell a computer for less than $50,000. The technology trapped in a high-cost business model had no impact on the world, and in fact, the world ultimately killed Digital.

Why did DEC Alpha fail? ›

Alpha systems have always suffered a price-for-performance penalty when compared with Intel systems running NT. This penalty was a major factor in Alpha's poor sales. The other major factor in poor Alpha sales was that a scarcity of software exploited the power of the Alpha.

What happened to Ken Olsen? ›

Olsen left in 1992 and DEC was acquired by Compaq in 1998. Olsen received many awards, including the US National Medal of Technology (1993). With Gwen and Gordon Bell, Ken Olsen was a founder of The Computer Museum. He passed away in 2011.

Who bought Digital Equipment Corporation? ›

It was bought by Compaq Computer Corporation in 1998.

What ever happened to DEC? ›

DEC was the second largest computer company in the world by the 1980s, behind IBM. However, in the 1990s the company struggled to maintain its place in a rapidly changing marketplace. After several attempts to stay afloat by selling off assets to other competitors, DEC was acquired by Compaq for $9.8 billion in 1998.

Why was DEC Alpha so fast? ›

At the time that Alpha came out, the x86 was struggling to get more clock speed, and the groupthink was that RISC was the way forward. RISC chips would run at 4-8x the clock speed of an x86 and even when you adjusted for needing 2-3x more instructions, RISC was 50-200% faster.

Are VAX computers still in use? ›

In August 2000, Compaq announced that the remaining VAX models would be discontinued by the end of the year, but old systems remain in widespread use.

Are PowerPC processors still made? ›

IBM continues to develop PowerPC microprocessor cores for use in their application-specific integrated circuit (ASIC) offerings. Many high volume applications embed PowerPC cores. The PowerPC specification is now handled by Power.org where IBM, Freescale, and AMCC are members.

What did Ken Olsen invent? ›

In the 1960s, Olsen received patents for a saturable switch, a diode transformer gate circuit, an improved version of magnetic-core memory, and the line printer buffer. (The MIT professor Jay W. Forrester is generally credited with inventing the first practical magnetic-core memory).

Where did Ken Olsen live? ›

He had recently lived with a daughter in Indiana and had been a longtime resident of Lincoln, Mass. Mr. Olsen, who was proclaimed “America's most successful entrepreneur” by Fortune magazine in 1986, built Digital on $70,000 in seed money, founding it with a partner in 1957 in the small Boston suburb of Maynard, Mass.

What happened to the Olsen sister? ›

Mary-Kate and Ashley Olsen rose to fame as Michelle Tanner, a role they shared on "Full House." The Olsen twins no longer act, and they are now successful fashion designers. Ashley Olsen recently welcomed her first child with her husband, Louis Eisner.

What are 5 digital devices? ›

INTRODUCTION
  • desktop computers.
  • laptop computers.
  • mobile phones.
  • tablet computers.
  • e-readers.
  • storage devices, such as flash drives.
  • input devices, such as keyboards, mice, and scanners.
  • output devices such as printers and speakers.

Is long gone DEC still powering? ›

Long gone, DEC is still powering the world of computing | Ars Technica.

What is DEC? ›

Dec- comes from the Greek déka, meaning “ten.” The word December is related to this root via the Latin equivalent, decem. In fact, what is now the twelfth month of the year was once the tenth month of the early Roman calendar.

What happened to DEC VAX? ›

DEC struggled to change with the times, and the company ultimately failed. In 1998, DEC was acquired by Compaq, and in 2001, Compaq was acquired by Hewlett-Packard. The DEC line, including the VAX/VMS system, was discontinued and faded from the market.

Why do digital businesses fail? ›

Digital transformation projects fail when there is no change management strategy. A change management strategy is a structured process that helps people understand and embrace business changes. When organizations follow a change management strategy, they are 6x more likely to meet their digital transformation goals.

What happened to the Compaq computer? ›

In 2002, Compaq was acquired by Hewlett-Packard for $24.2 billion. Compaq products were rebranded as part of a new range of lower-end HP computers and the Compaq brand was discontinued in 2013.

What is the purpose of the Digital Equipment Corporation? ›

They began by building small circuit modules for laboratory use and, in 1961, released their first computer, the PDP-1. During the 1960s, they produced a variety of machines, mainly aimed at the laboratory market, culminating in 1964 with the introduction of the PDP-8, often regarded as the first true minicomputer.

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