Originally published on December 19, 2017
2. Section 1: KM Thought Leaders who are DEC Alumni
3. Section 2: Articles about DEC KM and Why DEC Failed
4. Section 3: Resources
This article begins a new series called Profiles in Knowledge: Insights from KM Thought Leaders. The first four articles cover knowledge management (KM) thought leadership from companies where I worked: Digital Equipment Corporation, Compaq Computer Corporation, Hewlett-Packard Company, and Deloitte Touche Tohmatsu Limited.
This article is about Digital, which at one time was the second-largest computer company in the world behind IBM. At its peak in 1987, it had 135,000 employees. Several people who became KM thought leaders worked at DEC. This article provides links to their content, and also includes articles about KM at DEC and why Digital no longer exists.
I joined DEC in 1983. VAX Notes Conferences were already in use for threaded discussions in both communities of practice and communities of interest. Details on VAX Notes are provided in Sections 1 and 2 below.
The Technology Transfer Society organized and sponsored a series of Roundtable discussions on critical issues. The first of the series was hosted by Purdue University, Indiana, on April 28 and 29, 1987. It was made possible by a grant from Digital Equipment Corporation. The Roundtable co-chairmen were Debra Amidon and Dan Dimancescu. The focus of the first Roundtable was, “Management of Knowledge Assets into the 21st Century”.
In 1990, the IMKA (Initiative for Managing Knowledge Assets) project defined for the first time the concept of Knowledge Assets: “Knowledge assets are (defined as) those assets that are primary in the minds of company’s employees. They include design experience, engineering skills, financial analysis skills, and competitive knowledge.” (IMKA Technology Technical Summary, July 30, 1990.) The IMKA project was formed by Carnegie Group, Inc., Digital Equipment Corporation, Ford Motor Company, Texas Instruments Inc., and US West Advanced Technologies Inc.
Before we had formal knowledge management, I managed a team of consultants who needed to know whom to contact among Digital’s employees for different issues. There was no personnel directory other than a physical phone book — nothing that showed organization structure, roles, responsibilities, reporting hierarchies, or titles. So I created a document to record what information I could find out about the various groups. This became known as the Key Contacts List, and it was the single most popular piece of knowledge I ever managed. It contained the structure, names, and roles of everyone at Digital who had a key area of responsibility, and the monthly updates were subscribed to by over 30,000 people using an opt-in service called Reader’s Choice. I updated this document every month, and it had the most subscribers of any periodical in the company.
In 1996, I was asked by Kannankote Srikanth, Senior Vice President of Systems Integration, to start a knowledge management program, after we visited Ernst & Young’s Center for Business Knowledge in Cleveland, Ohio. When he heard that Ernst & Young had a Chief Knowledge Officer, he turned to me and said, “I want you to be our CKO.” I had been doing knowledge management for many years in addition to my official duties in professional services management, but we didn’t call it that. It was referred to as something like “resource management” or “capability development” or simply, “information.” So I started the first KM program at DEC in 1996. Details are provided in Section 2.
Digital was acquired by Compaq in 1998, which in turn was acquired by Hewlett-Packard in 2002. I worked at DEC from 1983 to 1998, at Compaq from 1998 to 2001, and at HP from 2001 to 2008. Details on KM at Compaq and HP will be provided in the next two articles in this series. For information on the Digital culture, see the DEC Culture Manual.
Section 1: KM Thought Leaders who are DEC Alumni
1. Debra Amidon
Debra worked at DEC from 1981 to 1993. I didn’t know her when she was at DEC, but I later interacted with her during AOK Star Series Dialogues. Sadly, Debra passed away on August 13, 2016.
- Entovation International
- The Digital Management Legacy: A Culture of Knowledge, Innovation and Collaborative Advantage
- Roundtable on critical issues: Management of Knowledge Assets into the 21st Century
- The Innovation SuperHighway: Harnessing Intellectual Capital for Collaborative Advantage
- Innovation Strategy for the Knowledge Economy: The Ken Awakening
- Handbook of Knowledge Management Vol. 1 — Chapter 28: The 7 Cs of Knowledge Leadership — with Doug Macnamara
- Handbook of Knowledge Management Vol. 2 — Chapter 47: An Atlas for Knowledge Innovation: Migration from Business Planning — with Darius Mahdjoubi
- Next Generation Knowledge Management — Chapter 5: Architecting Success in the Knowledge Economy; Chapter 6: Characteristics of Laggards and Leaders
Presentations in SlideShare
- AOK: Preparing for Conversations with Debra M. Amidon
- Conversations with Debra M. Amidon: Architecting Success
- AOK: Preparing for Conversations with Bryan Davis and Debra Amidon
- Summary: Conversations with Bryan Davis and Debra Amidon
- Archive: Conversations with Bryan Davis and Debra Amidon (PDF)
2. Patti Anklam
Patti worked at DEC from 1976 to 1998 and at Compaq until 2000. She worked with me as a key member of the KM team from 1996–1998. We have been friends ever since.
Patti says that Charles Savage was one of her inspirations. He worked at DEC from 1989 to 1994. Charles introduced a number of powerful knowledge-sharing techniques and wrote Fifth Generation Management: Dynamic Teaming, Virtual Enterprising and Knowledge Networking. He also contributed Chapter 11: Turning Ideas into Products and Services and Chapter 12: Removing the Stigma of ‘Not Knowing’ to Next Generation Knowledge Management.
- Web Site
- Old blog archives
- The AppGap blog archives
- The Camelot of Collaboration — the case of VAX Notes (and a PDF version)
- Net Work: A Practical Guide to Creating and Sustaining Networks at Work and in the World
- Next Generation Knowledge Management, Volume 2 — Chapter 4 KM mavens: The way ideas rise, emerge and mingle
- SIKM Leaders Community, December 2006: Networks and Sensemaking: Themes from Net Work
- 2014 W17: Social Network Analysis Methods and Tools
- 2011 W8: Organizational Network Analysis & Tools
- 2010 W13: Organizational Network Analysis & Tools
- 2010 B101: Building Knowledge Networks
- 2008 C203: From Networking to Net Work
- 2008 Net Work: Creating & Sustaining Networks
- 2007 Net Work: Creating & Sustaining Networks
- 2006 W19: Organizational Network Analysis (ONA)
- 2006 B101: Tools for Social & Organizational Network Analysis (ONA)
- 2006 B106: Piloting Collaboration Software
- AOK: Preparing for Conversations with Patti Anklam
- Archive: Conversations with Patti Anklam (PDF)
- SIKM Leaders Community Posts
Jean-Claude worked at DEC from 1985 to 1994. I did not know him then, and he was not involved in KM at that time. He joined Microsoft in 2010, became Global KM Lead for Microsoft Services in 2012, and was named Chief Knowledge Officer in 2016. I first met him at KMWorld 2013, and we have been friends ever since.
Jean-Claude recently retired from Microsoft. He is now a digital transformation coach and advisor for The Monney Group and a faculty member for Columbia University’s Master of Science in Information and Knowledge Strategy (IKNS) program.
- Transforming Data for Decisions
- The CKO of Microsoft Services Has a Surprising Perspective on Knowledge Management by Nancy Dixon
- Proven Practices for Promoting a KM Program by Stan Garfield
- Chapter 15: Reuse Proven Practices — Microsoft Services
- Lucidea Webinar: Selling KM: Reuse Proven Practices — Part 1
- Microsoft is BIG in Big Data
- JC’s Head in the Cloud
- Social Media for Enterprises
- TOO DAMN FAST — How to match the blistering evolution of social media with effective internal & external social technology strategies
- KM Strategy, Execution, and Culture: Sharing Microsoft Services’ KM Initiative (2014)
- KM Strategy, Execution, and Culture: Sharing Microsoft Services’ KM Initiative (2015)
- Fostering a Knowledge Culture at Microsoft Services
- Microsoft’s Knowledge Collaboration Culture Drives Productivity and Innovation
- Implementing KM at Microsoft: A Real-world Reflection: Webinar Q&A Summary
- 2017 C205: Industry Leaders Conversation: Change, Culture, & Learning
- 2016 KEYNOTE PANEL: Hacking KM
- 2015 C102: All of Us Are Smarter Than Some of Us
- 2014 A201: KM Enterprise Adoption: How to Make It Stick!
- 2014 A302: Delivering Global Business Value
- 2013 A104: Strategy, Execution, & KM Culture
4. David Skyrme
David worked at DEC from 1971 to 1993. I didn’t know him then, but I used the resources he shared on his site. He is now semi-retired.
- Knowledge Networking: Creating the Collaborative Enterprise
- Capitalizing on knowledge: From e-business to k-business
- Creating the Knowledge-Based Business: Key Lessons from an International Study of Best Practice
- Measuring the Value of Knowledge: Metrics for the Knowledge-Based Business
- Handbook of Knowledge Management Vol. 2 — Chapter 63: Commercialization: The Next Phase of Knowledge Management
- Knowledge Management: Classic and Contemporary Works — Chapter 3: Developing a Knowledge Strategy: From Management to Leadership
- Next Generation Knowledge Management — Chapter 9: Struggling with New Management Strategies
- Knowledge Horizons, The Present and the Promise of Knowledge Management — Chapter 15: The New Metrics
5. Wendi Pohs
Wendi worked at DEC from 1984 to 1994. She developed a competitive intelligence retrieval system, successfully used for years by the Digital sales force.
- Practical Knowledge Management: The Lotus Discovery System
- Upgrading to Lotus Notes and Domino 7
- Enterprise Taxonomies: A Business Professional’s Guide to Taxonomies for Content Retrieval
- 2008 W7: Auto-Categorization
- 2008 W16: Measuring Taxonomy Success
- 2006 Integrating Taxonomy & Search: Practices & Trends
- 2005 Workshop 4: Taxonomy Development & Usage
6. Other KM Contributors
- Mary Lee Kennedy is profiled in a separate article
- Jessica Lipnack is profiled in a separate article
- Max Bromley, Earle Craigie, John Tohline, Etienne Bossard, and Ron Kempf are profiled in the Compaq article
- Andrew Gent and Nancy Settle-Murphy are profiled in the HP article
Section 2: Articles about DEC KM and Why DEC Failed
1. Digital Increases Profits Through Knowledge Sharing
by Britton Manasco and Kimberly Merline in Knowledge Inc., The Executive Report on Knowledge, Technology & Performance, May, 1998, Vol. 3, №5
With 20 knowledge managers, a corporate level KM team and a Webmaster, Digital Equipment Corporation’s Network & Systems Integration Services (NSIS) business unit has a wide umbrella of knowledge stewards throughout its 6,000 employee international organization. This grassroots approach to KM — as well as top level support — is helping to create a culture in which KM is becoming more widespread and easier every day.
“Knowledge management is the centerpiece in our ability to provide higher margin repeatable solutions,” says Kannankote Srikanth, Digital’s vice president of NSIS. “In short, knowledge management enables us to unleash our creativity, build an internal culture of sharing and collaboration, and escalate our ability to quickly increase revenues and profits.”
The impact of such efforts could become even more significant if Digital’s pending merger with Compaq Computer Corp. is ultimately successful. Preliminary discussions have been held between representatives of Digital’s and Compaq’s services organizations concerning knowledge management and how to integrate the efforts of both companies. Knowledge sharing should help accelerate the integration of the companies, allowing employees to quickly learn about service offerings, resources, methods, tools, software, and systems.
Digital’s NSIS business unit’s KM initiative, put in place at the end of 1996, envisions a system in which:
- Everyone uses the knowledge library every day as a regular part of his or her job;
- Everyone contributes their experiences, contacts, lessons learned, documents, and other nuggets of knowledge whenever they can;
- Everyone regularly thinks about how a piece of knowledge or a deliverable can be reused, who could use it, how to make it more useful, and where it should be located for easy access;
- Knowledge capture is embedded in everyone’s job, and is not a separate process;
- No one thinks of starting an engagement without looking for prior examples, proposals, lessons, etc.;
- All engagements are entered into the knowledge library at key milestones;
- New pieces of knowledge content are regularly suggested and added to the knowledge library;
- Everyone knows how to find the information they need, and it is readily available to them;
- The knowledge library is easily accessed and updated;
- The knowledge library is linked to other functions, systems, databases, etc. to make it easy to get information from anywhere;
- There are knowledge managers in each organization who constantly add to and improve the knowledge library and help others to use it more effectively;
- Measurable benefits result from the use of the knowledge library, and all goals are achieved;
Key KM Architecture Designed to Easily Capture Work in Progress
One of the key knowledge management tools Digital uses is what it calls DPM/T, or Digital Program Methodology/SHL Transform, named for a combination of a methodology and tool. The tool is SHL Transform, which Digital purchased from MCI Systemhouse. This is a set of methods MCI Systemhouse used for their systems integration delivery in a database structure. Digital did a survey of existing tools and determined that this one was best for their needs. This tool — which includes templates, experiences, rules of thumb, examples and forms — was then merged with the Digital Program Methodology.
DPM/T includes an effort to collect stored information as quickly and easily as possible. At first, the company tried to collect project documents after the projects were completed and found that employees “never had time to do that,” says Stan Garfield, Digital’s NSIS knowledge manager. “We realized that we had to try to make data capture a part of the job in some automated fashion.”
DPM/T — which is accessible from the main home page of the NSIS intranet — houses all of the documents employees generate in the bidding process. During the bidding process, employees must get approval for what they are proposing, including the pricing, by submitting documents to an approval board. So now, when the documents are submitted to the approval board, they are immediately passed onto the knowledge manager who reviews them and posts them on the intranet. At the project close out, still more documents are generated which are submitted to the knowledge manager in the same fashion.
Digital NSIS set up shared directories and folders so that the knowledge managers can post things quickly and easily. Eventually the whole process will be automated. “We would like to get to the point where the information is simply sent somewhere and then automatically posted, eliminating the human intervention step,” says Garfield.
Digital is currently looking at variations of the Microsoft Site Server and one other tool to do the job. Rollout of this new procedure should be ready in the next three months, says Garfield. This system would include carefully constructed templates to ensure quality control. “As long as you set the template carefully enough and employees stick to the template,” the company should be able to ensure quality, says Garfield. However, the company will still retain some human review to make sure the templates are filled out correctly, he says.
A future goal is to make the whole system “more useful,” says Garfield. Employees now search the system for projects similar to their own to glean useful tips and lessons learned. Searches can be done by keyword, but are more often done through the hierarchical structure in which the projects are organized, so that users can find projects in their own practice similar to the one they are working on.
But there is no indication of which of the projects represents best practices, Garfield says. “We need to go beyond [warehousing project documents] to distilling trends, observations and nuggets,” he says. “We would like to highlight some [projects] as best examples.”
NSIS will probably segregate this information out and display it as a separate Web page, Garfield says. This way DPM/T will become known as a place for “just our methodology,” and another site will be for “capturing project experience.” Right now, “it is a little confusing for people. The DPM/T seems to have a little of this and a little of that,” he says.
The company offers a DPM/T Guided Tour training course to ensure that employees know how to use the system. The KM department had received feedback that “the system was too hard to navigate,” says Garfield, so it created an online training session to overcome resistance to the system. The training is done in groups over a conference call. Employees “learn from the convenience of their own office but they are all doing it together,” says Garfield. “This has proven very effective and it only takes a couple of hours.” Classes are scheduled both at regular intervals and on demand.
The Digital Library Offers One-Stop Shop
The company-wide intranet is organized from a home page that displays available information in three columns. The first column is for various communities of practice and leads the user to home pages with more options for each of these. In the middle column is “What’s New,” an online newspaper edited by the KM department. The display is updated daily and includes the latest industry news as well as announcements and new services. Past day’s news is archived for easy retrieval.
In the third column are pictorial graphics for a host of resources, including something called “911 Requests,” which is a company-wide help wanted page that brings together individuals with the appropriate skills for different projects. There is also a link to “Knowledge Sharing Requests,” on which employees post work related questions or problems about which others can give advice. Another heavily used site here is company contacts, which includes whom to contact throughout the company for what information. Mostly a company yellow pages, it lists the managers and their departments for each territory and practice. This list requires a great deal of manual updating, says Garfield.
Other links include an events calendar; a page called Methods and Tools, where people can go to learn about the latest tools the company recommends for different parts of its service offering; a catalogue of software the company offers customers; Policies and Standards; a project management page; the archive of daily news; selling and marketing information, including news releases and presentations; a human resources site which includes information on training and recognition; an operational page that has information such as how to do requisitions. Basically the system has “everything that someone needs to do the job organized in a logical way,” says Garfield. The system also includes a couple of different search engines.
Acknowledging that good things can always be made better, the company actively solicits feedback on the system. “We try to make it as easy as possible, but we are always looking for people to tell us how to make it better,” says Garfield. And it is very easy to give feedback. On the home page, there is a feedback button that users can use to type in their advice. In addition, specific page owners often receive direct feedback on their sites.
Knowledge Managers Positioned Throughout Company
Key people throughout the organization have been assigned the role of knowledge manager and are tasked with spearheading KM efforts in their department. NSIS is organized into territories and practices with 16 territories throughout the world and 5 practices.
The practices represent the different services that Digital delivers, such as enterprise networks, manufacturing solutions and communications solutions. A few of the knowledge managers oversee more than one territory, so there are 14 knowledge managers in the territories. Each practice has its own knowledge manager. There is a core team including the knowledge managers, the Webmaster, and representatives of sales and marketing, architecture, and project management. This core team meets by phone every other week and face to face once a year to review KM progress.
The knowledge managers in the territories and practices are the front line advocates for KM. Their original role was simply to make people aware of the KM effort and get employees contributing to the system and using it regularly. They also work to ensure the quality of information presented on the intranet.
Currently, these knowledge managers have other operational roles in NSIS, but in the future, Digital hopes to name full-time knowledge managers, Garfield told us. Current knowledge manager duties include:
- Reviewing and approving standards for architecture, documents, templates, and web page layouts;
- Reviewing all content for quality and sanitizing all content for confidentiality;
- Creating second-order value from base content, e.g., qualification checklists;
- Managing implementation of KM processes and functionality;
- Aligning resources with needed tasks for KM implementation;
- Communicating within the organization and to the Corporate KM Program;
- Recognizing contributions, use development, and innovation within the organization;
- Ensuring that each function within the organization is using KM appropriately;
- Constantly thinking about what content is reusable and adding it to the Knowledge Library;
- Reviewing raw data and distilling trends, findings, examples, and best practices;
- Providing a content help desk for the organization to assist users in finding the information they need;
- Soliciting contributions to the Knowledge Library on a regular basis;
- Helping members of the organization use the Knowledge Library and DPM/T;
- Promoting what is available in the Knowledge Library contributions and use;
- Helping managers with Knowledge Management measurements;
- Managing the internal and external web pages for the organization;
- Maintaining a current list of contacts for the organization;
- Continuously improving content, user interfaces, functionality, and contribution process.
Performance Metrics Shape KM Culture
As of last calendar year, Digital NSIS began including KM as part of its company-wide review process. Goal sheets are distributed to everyone in the organization each year as part of the review process. These are then reviewed at the end of the year to see how closely these goals were met. Performance evaluations, which are closely tied to compensation, are made accordingly.
KM was targeted in two ways. Employees are now measured on their efforts at contributing knowledge to the company. Each employee is expected as part of his or her job to contribute something reusable to the system each quarter. In addition, employees are being evaluated on how much they are using the KM system as part of their job. If Digital “keeps stressing this as being an important part of employees’ goals, they will get the message that KM is an important part of the company’s overall priorities,” says Garfield.
by Mary Lee Kennedy in Information Outlook, Vol. 1, No. 6, June 1997, pages 39–42
In 1996, the Digital Equipment Corporation’s Corporate Library Group (CLG) piloted a web-based information solution on Digital’s Intranet: The WebLibrary. The value proposition? Provide consistent, reliable, authoritative external content, and content expertise for effective decision making and timely transference and application of knowledge — anytime, anywhere.
3. Requiem for a pioneer: Digital Equipment Corporation failed to learn from its own rise, and this led to its downfall
From Next Generation Knowledge Management, Volume 3 edited by Jerry Ash, section written by Stan Garfield, with contributions from Debra Amidon, et al. — Chapter 1, pages 13–33
I joined Digital Equipment Corporation (DEC) in 1983, right as it was entering its greatest growth spurt. Digital reached its peak in 1987, when it was the second-largest computer company in the world (behind only IBM) and had 135,000 employees. By the mid-90s, DEC was well on its way to the bottom. Many of us tried to suggest ways to help the company return to its successful days, but our advice was not heeded.
Digital also failed to heed the advice of Al Ries and Jack Trout that a company should attack itself to avoid complacency. Digital was able to rise to become the number two computer company by exploiting an IBM blind spot. IBM dominated the mainframe market and didn’t think that the minicomputer invented by Digital could pose a threat. Digital repeated this mistake by dominating the minicomputer market and not considering the possibility that the PC would do to them what the minicomputer had done to IBM. Had Ken Olsen embraced the PC and used it to reinvent Digital as a PC company, Digital might have been the PC market leader. This is tough to do because you have to stop clinging to the very product that made you successful, the minicomputer.
Digital was in the best position to have exploited the PC when it first appeared. The three-headed monster of the Rainbow, Pro, and DECmate did not work, and thus began Digital’s demise.
Lesson 1: Attack your own existing products by developing new ones before the competition does this for you. I first learned about Ries and Trout in my first year at Digital, when I attended a class based on their book, Positioning: The Battle for Your Mind. It always frustrated me that Digital didn’t pay more attention to what Ries and Trout had to say in this and subsequent marketing books.
Another missed opportunity was the standard operating system for the PC. CP/M was the original market leader, but Digital Research missed its opportunity to stay ahead and Bill Gates was able to get IBM to use Microsoft DOS on its first PC. DOS was based on RT-11, a primitive operating system developed by Digital for the PDP-11 minicomputers. At the time, VAX/VMS was a far superior operating system. If Digital had shown the foresight to license VMS to Microsoft or to IBM as the new standard, Digital could have thrived on the resultant revenue stream. The lesson? Be willing to change your business models as new markets evolve.
As Patti Anklam wrote in The Camelot of collaboration: The case of VAXnotes, Digital’s VAXnotes was ahead of its time. It provided the ideal combination of a good technology platform with all needed functionality for threaded discussions, the ability to create both work and non-work related conferences to ensure widespread adoption, cross-company participation in the conferences, and a culture that embraced VAXnotes as the standard place to search for the answer to a question on any topic, and post a new question if it had not been previously answered. Digital had a wonderful collaboration environment. But it failed to recognize the power of this tool and associated culture, and Lotus Notes was able to have great commercial success in an area that Digital might have grabbed first. In addition to failing to exploit the commercial potential of VAXnotes, Digital also failed to migrate the technology at the same time that it migrated its internal office automation platform from Digital’s own ALL-IN-1 product to Microsoft Exchange. Digital employees grumbled about having to migrate to Exchange, but they did so and got over it.
No similar migration for VAXnotes was planned, and as a result, it became tainted in the minds of employees because it still ran on the VAX and not on a PC. Despite the fact that VAXnotes (renamed DECnotes) continued to run for many years, and is in fact still running both within HP (OpenVMS Notes Conferences) and externally, the general perception was that it was obsolete. Thus, it fell into disuse, and a resulting Tower of Babel of tools competed to succeed VAXnotes. If Digital would have renamed VAXnotes, refreshed the brand, migrated the notes conferences and their content, and actively promoted it, it likely would have lived on in active use. The loss of this rich knowledge-sharing platform and culture certainly didn’t help Digital during its decline.
Lesson 2: Pay attention to the tools that matter to the employees, and continue to invest in them.
Advice on avoiding the line expansion trap was offered in several books by Ries and Trout, and was the subject of a book by Ries, Focus: The Future of Your Company Depends on It. By continuing to expand into more product and service areas (e.g., mainframes), Digital lost its focus on being the leading minicomputer company. Digital could have tried to become the leader in PCs (reusing its knowledge and experience in minicomputers), in services (which was one of the recommendations from the outside consultants), PC software (by licensing VMS and its associated tools and applications), or Internet search (by focusing on AltaVista). Any one of these might have allowed Digital to survive, but Digital’s leaders could not see how they could abandon the minicomputers which had led to their success in favor of PCs, services, software, or search.
After Ken Olsen was replaced as CEO, the end was in sight. Many different consulting firms were engaged to help with strategy, some of which gave good advice to Digital, but it went largely unheeded. The emphasis of the company changed from innovation, collaboration, and engineering excellence to playing the Wall Street earnings game with analysts. Once layoffs began, the company never recovered. Too much energy was expended on reorganizing, planning layoffs, and trying to avoid being laid off. The sale to Compaq in 1998 marked the end of a once-great company.
Lessons 3, 4, 5: Avoid the line expansion trap, focus on what you do best, and heed the advice of those who have objective perspectives.
This story includes at least three knowledge management failures.
- From having attacked IBM on the low end of the computer market, Digital should have known that the same thing could happen to them. Digital knew this, but failed to act. Thus, it repeated the same mistakes IBM had made.
- Had Digital openly licensed its leading-edge products such as the MicroVAX chip, the VAX/VMS operating system, AltaVista, and VAXnotes, rather than clinging to the hopes of proprietary profits, it might have not only survived, but led the industry. Digital knew how to develop outstanding products, but it didn’t learn how to adapt to changing market conditions.
- Had Digital listened to Ries and Trout (who offered specific advice in some of their books), the outside consultants they engaged, or some of its own people, it might have survived. But all such advice was ignored.
by Martha Mangelsdorf in MIT Sloan Management Review, February 17, 2011
The story of Digital Equipment Corp. (DEC) was one of a dramatic rise and fall: DEC was an entrepreneurial computer company that grew to $14 billion in sales and employed an estimated 130,000 people worldwide at one point. But Digital failed to adapt successfully after the personal computer eroded its minicomputer market.
Eventually, Compaq Computer bought DEC in 1998, and then Hewlett-Packard later acquired Compaq.
What have we learned from Digital Equipment Corp.’s experience? Here are three management lessons from DEC’s rise and fall:
1. Watch out for disruptive innovations. DEC’s troubles helped inspire Harvard Business School professor Clayton Christensen to develop his now well-known ideas about disruptive innovation. According to an article in Strategy+Business, watching the problems of Digital and other minicomputer companies in the late 1980s got 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 Christensen put it in a 2009 interview in 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. It’s a combination of the technology and business model that makes formerly complicated, expensive, inaccessible things affordable and accessible.”
2. Even a “culture of innovation” can become dysfunctional as markets change. Edgar Schein, a professor emeritus at the MIT Sloan School of Management and an expert on organizational culture, analyzed DEC’s rise and fall through the lens of corporate culture in a book he coauthored in 2003 called “DEC is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corp.” As I wrote in a book review of “DEC is Dead, Long Live DEC” that was published in The Boston Globe in 2003:
“Schein credits Olsen with creating a ‘culture of innovation’ that empowered employees and was characterized by expressly stated values such as ‘Do the right thing,’ an oft-cited maxim. But, Schein argues, as DEC grew bigger, the values and culture that helped it thrive as a younger, smaller organization led to an environment that ‘felt more and more chaotic and out of control.’
What’s more, DEC’s culture, which had flourished during the heyday of minicomputers, had a hard time accommodating the computer industry’s paradigm shift to the personal computer….
Schein argues that a corporation’s founding values, if they lead to success, tend to ossify as a set of tacit assumptions about successful strategy. When the business environment shifts, the organization may not be able to adapt, rejecting plans or ideas that don’t fit its preconceived notions. ‘The illusion that organizations can control their own fate stems from the failure to understand how technology and culture limit what is possible,’ he writes.”
Also, Paul Kampas, who was one of the coauthors of “DEC is Dead, Long Live DEC,” wrote a 2003 MIT Sloan Management Review article, based on his research about DEC and the computer industry, that argued that technology-driven companies need to shift from a product-innovation culture to a process-innovation culture as their markets mature.
3. In an age when companies come and go, one of an executive’s most lasting legacies may be how he treats people.
Despite Digital’s decline, many former employees remember Olsen fondly. As one former DEC employee told the Worcester Telegram & Gazette in a recent article on Olsen’s influence: “I feel indebted because it was the golden era of corporate culture done right, and this was all Ken Olsen’s values.”
And as Curt Nickisch noted at WBUR.org:
“Ken Olsen…was certainly a titan in the computer industry. But he was also a personal titan to most of the employees at the company he co-founded in Maynard, Digital Equipment Corp. They knew Olsen for his humility and the culture of fun and excitement he created.”
It kind of makes you wonder: How many current Fortune 500 executives will be remembered fondly by their former employees?
an interview with Ed Schein by M. Rajshekhar in Businessworld, September 15, 2003
MIT’s Edgar Schein has very strong views on organizational culture. He believes business theory has got it all wrong — it is impossible to transform an innovative company into a business-driven one.
In early 1966, Edgar Schein received a phone call from Digital Equipment Corporation (DEC), asking if he would like to do some consulting for the company. Schein, a professor at Massachusetts Institute of Technology’s Sloan School of Management, specializing in social psychology and group dynamics at that time, agreed.
Over the next 26 years, Schein, the Sloan Fellows Professor of Management Emeritus today, had a ringside view of the rise and fall of DEC. He was watching as under founder Ken Olsen, DEC’s hardcore engineering culture took root. Schein was around as the market changed, but DEC refused to change the way it worked. And he was present at the finale when Olsen abruptly quit, products were axed, and employees were fired in a final desperate attempt to survive.
According to Schein, DEC isn’t just another story of management hubris and inability to respond to change. It offers a more fundamental lesson. DEC’s nemesis was the same force which had made it the second-largest computer company in the world — its culture. In his book, DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation, borrowing from his years of experience at the company, Schein narrates a cautionary tale about how hard it is to change an organization’s culture. To understand more, BW spoke to Schein. Excerpts.
Q: Why did you write a book on DEC?
A: The reason for writing the book is that I had a lot of information about DEC based on my experiences. I had a story to tell that I felt was not known. Most of the explanations about why DEC didn’t succeed are very superficial — it missed the PC market, it held on to proprietary products for too long. While everybody seemed to know what happened, nobody knew why it happened.
The answer lies in how culture evolves. The very culture that enabled DEC to be innovative for three decades, and become the №2 computer company in the world, failed to evolve as the company grew and faced new market demands. DEC was created by a group of engineers with an idea for the future of computing. That idea was so good that they became a success for over 30 years. They built a set of values which were geared to innovation and engineering. There was lots of freedom, lots of encouragement for creativity. But the company never had what I call a serious money gene. They were never in business for business reasons, they were always in it for innovation and creativity.
As the market changed, and computers became commodities, DEC was not only unable to make the change, it didn’t even want to. Because that meant becoming a different kind of organization, and giving up many of the values it had come to cherish over 30 years.
Q: Such as…
A: For innovation, products should compete with each other internally. DEC funded almost every good idea which any engineering group had. When the market changed, they could not decide which products to gamble on. They kept doing everything. And so, everything was late, and nothing was really competitive. For example, three different groups inside the company were developing the personal computer. They said, well, internal competition is good, let the market decide. But, in the process, they all failed.
The best example is that DEC was simultaneously building a large, water-cooled computer which was a brand new technology at that time, and very expensive. At the same time it was building the Alpha chip, which was an equally great drain on its resources. Most people agree that they couldn’t do both simultaneously. But they tried to do both because, internally, both engineering groups were convinced that they were the answer to the future.
Innovation benefits from lots of debates and arguments. These were highly valued in the decision-making process at DEC. But, as the company grew, the debate between groups was biased by group leaders trying to protect their own turf. Each of the groups believed they had the right answer and neither Ken Olsen nor the board at that point could make a determining decision. There was no mechanism for deciding between competing groups.
Q: Why was it so hard to change this culture?
A: Partly because people loved it. It was an environment where everyone was taken seriously, where people could make real innovations. Also, remember that the company was successful for over 30 years. It is very easy to convince yourself that this is the way to run a company, because it continues to be successful.
Also, DEC was an engineering-driven company, founded by electrical engineers and academic types. Whenever business types joined, they would not find support to a point where some of them would leave. You could almost think of it as an immune system that the culture created. Other values, particularly commercial ones, didn’t get priority over innovation and creativity.
But we have to understand that it is possible to create a very financially successful business even without the business gene. If the ideas are good enough, a company will succeed even though it is very inefficient, misuses its resources and does other things that, from a marketing or business point of view, would be very bad ideas.
Q: Didn’t they see that as the market commoditized, some of the old values would have to be jettisoned?
A: They did see the change coming but the business gene wasn’t there. So, they convinced themselves that they could continue to grow by innovation. That attitude lasted till the end. Every time the business managers said, ‘We have to get more efficient’ or ‘We have to put cost controls in’, the engineering types said, ‘Why? We can grow our way out of this. Just look at our next two products’.
What they should have noticed is some very good business-oriented managers began leaving in the 1970s and 1980s. Other consultants and I did bring this to the notice of the company. But the management was always confident that problems like inefficiency would take care of themselves as they kept growing.
That is the paradox — it is not the lack of knowledge, it is the lack of desire. They would have had to curb some of the freedoms, they would have had to kill projects, they would have had to, as some people say, eat their own children. That is very painful. They didn’t feel they had to do that.
Also, the founder was a part of the problem. He believed in innovation and individual responsibility. So, any steps would have to be taken by the board of directors. And it didn’t have any powerful people who really understood the computing industry. Even if they did, they would have had to bring in a new leadership. And if they had done that, the best engineers would have left the company, saying that this is no longer where I want to work. So, the company might have survived economically. But as a different kind of company.
Q: Can’t a leader distance himself from the culture to know when it is becoming a handicap?
A: There are not too many examples of true technical entrepreneurs who have made this transition. Even the recent experiences at Silicon Valley suggest that leaders who are founders rarely make this transition. Their boards usually have to kick them out. Even a leader who sees change coming will have a hard time remaking the company without firing a large number of people living by the old values. Ken Olsen would have had to fire several of his top engineers whom he cared about and had faith in. It would have been a very difficult thing for him to do. That is why I say the board is maybe the only place where this can happen. And it would probably have to fire the founder in the first place.
Q: So, how do companies avoid getting into such a culture trap?
A: I am not sure that companies can avoid getting into such a culture trap. Business books always have a solution for everything. I am trying to be a bit more pragmatic. Some problems don’t have an easy resolution. Companies do die. Wang could not make this transition. Neither could Polaroid. It is not something which you can necessarily fix unless the entrepreneur is able to see it and chooses to abandon some of his original values. But you cannot say he should see it — some do, some don’t. It is very easy for us to say what the entrepreneur should or shouldn’t do. But it is very difficult to predict if they, in fact, will do it.
Business books are written on the premise that the business gene is there is every company. And that it is just a question of figuring out how to become economically successful. But, I think, if you want innovation, you have to consider the possibility that you will create organizations that will die. They will innovate. They will influence technology but they will not make that transition. Why do we say DEC should have survived? Maybe it’s the kind of company which should have died.
Q: That is a dire prognosis for companies which take pride in their innovativeness. They should then find a business model which supports their culture.
A: A culture of innovation doesn’t scale up. As a company grows, it must either find a way to break away small units which continue to innovate, or abandon innovation as a strategic priority. Also, different organizations with different cultures are needed at different stages in the evolution of a market. Current business theories are too locked in making a mature corporation in a mature market not only economically effective, but innovative as well. That may be just as difficult as making an innovative company economically effective. In a developing market based on new technologies, you may need more organizations like Digital, many of which will not survive, but will create an industry. Thus, playing their role as innovators.
Q: If a company recognizes it has to change the way it operates, how do managers start the change process?
A: There are two kinds of anxiety associated with learning — learning anxiety and survival anxiety. Learning anxiety comes from being afraid to try something new for fear that it will be too difficult, or that we will look stupid in the attempt. Survival anxiety, on the other hand, is the realization that in order to make it, we will have to change.
Now, change will only happen if the survival anxiety is more than the learning anxiety. And most managers make the mistake of increasing the survival anxiety rather than decreasing the learning anxiety. It is a mistake because that just creates more tension and defensiveness if I am convinced I cannot learn the new things I have to learn. If the leadership has convinced me that the vision of the future is non-negotiable, I already know I have to change. If my leadership also tells me that they will help me change, that I will be involved in choosing the mechanisms by which I will learn, that they will give me the time and resources to facilitate learning, and that they will provide coaching, all of that will reduce the learning anxiety.
by Robert Strohmeyer in PCWorld, December 31, 2008
Foolish Tech Prediction 4: “There is no reason anyone would want a computer in their home.” — Ken Olsen, founder of Digital Equipment Corporation, 1977 — Digital Equipment Corporation was acquired by Compaq more than a decade ago, but in the 1970s the company was a major force in the world of computing. Apologists argue that DEC president Ken Olsen made this quip before the advent of the PC as we know it, but ready-made personal computers like the MITS Altair had hit the market a couple of years earlier. And within four years of Olsen’s remark, the release of the IBM PC had enshrined this prediction in the high-tech hall of shame.
Section 3: Resources
- How AltaVista lost its mojo and Google found its groove by Sundeep Khanna
- DEC’s Final Demise by Michael S. Malone
- What happened to Digital Equipment Corporation? by David L. Farquhar
- Why did Digital Equipment Corporation Fail? by Ian Waring
- DEC: The mistakes that led to its downfall by David T. Goodwin and Roger G. Johnson
- The Definitive Guide to DEC & Digital Equipment Corporation by Brenda Barron
- Failures of Large Computer Companies — Chapter 2: Digital Equipment Corporation (DEC) by Bruce Sherwin
- The Birth and Passing of Minicomputers: From A Digital Equipment Corp. (DEC) Perspective by Gordon Bell (presentation)
- Decline of Digital Equipment offers lessons for Microsoft by Gregg Keizer, interview with Peter DeLisi
- Rise and Fall of the Digital Equipment Corporation by Jochen Fromm
- In Memory of Digital Equipment Corporation by Will Herman
- The Demise of Digital Equipment Corporation: What Made the Difference at DEC? by Jack Falvey
- What the DEC?!? Records of Minicomputer Giant Digital Equipment Corporation Open for Research at CHM by Sara Lott
- The inspiration for Clayton M. Christensen’s seminal theory on disruptive technology came from watching the Digital Equipment Corporation’s fall in 1988 by Lawrence M. Fisher
- Ken Olsen, Who Built DEC Into a Power, Dies at 84 by Glenn Rifkin
- Seven Secrets for KM Success by W. Ladd Bodem
- Selling KM: Reuse Proven Practices — Part 5 — case study of the Digital KM program
- DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporationby Edgar H Schein with, Paul J Kampas, Peter S Delisi, and Michael M Sonduck
- Digital Equipment Corporation by Alan R Earls
- Digital at Work: Snapshots of the First 35 Years by Jamie Parker Pearson
- The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment Corporationby Glenn Rifkin and George Harr
- Proven Practices for Promoting a Knowledge Management Program by Stan Garfield — Chapter Fifteen: Reuse Proven Practices — Microsoft Services (Jean-Claude Monney); Digital Equipment Corporation (Stan Garfield)