Medium 9781576753057

DEC Is Dead, Long Live DEC

Views: 2853
Ratings: (0)

Edgar Schein is one of the founders of the organization development field, a widely respected scholar and a bestselling author

• Shows how the unique culture of DEC was responsible both for its early rise and for its ultimate downfall-a real-life classical tragedy

• Schein was a high-level consultant to DEC throughout its history, with unparalleled access to the company's story as it unfolded over the course of four decades

DEC Is Dead, Long Live DEC tells the 40-year story of the creation, demise, and enduring legacy of one of the pioneering companies of the computer age. Digital Equipment Corporation created the minicomputer, networking, the concept of distributed computing, speech recognition, and other major innovations. It was the number two computer maker behind IBM. Yet it ultimately failed as a business and was sold to Compaq Corporation. What happened?

Edgar Schein consulted to DEC throughout its history and so had unparalleled access to all the major players, and an inside view of all the major events. He shows how the unique organizational culture established by DEC's founder, Ken Olsen, gave the company important competitive advantages in its early years, but later became a hindrance and ultimately led to the company's downfall. Schein, Kampas, DeLisi, and Sonduck explain in detail how a particular culture can become so embedded that an organization is unable to adapt to changing circumstances even though it sees the need very clearly.

The essential elements of DEC's culture are still visible in many other organizations today, and most former employees are so positive about their days at DEC that they attempt to reproduce its culture in their current work situations. In the era of post-dot.com meltdown, raging debate about companies "built to last" vs. "built to sell," and more entrepreneurial startups than ever, the rise and fall of DEC is the ultimate case study.

List price: $22.50

Your Price: $16.88

You Save: 25%

Remix
Remove
 

21 Chapters

Format Buy Remix

Contents

ePub

 

1. Purpose and Overview

ePub

The story of Digital Equipment Corporation (DEC) is fundamentally a forty-year saga encompassing the creation of a new technology, the building of a company that became the number two computer company in the United States with $14 billion in sales at its peak, the decline and ultimate sale of that company to the Compaq Corporation in 1998, and the preservation in its many alumni of the values that were the essence of the culture of that company. (The company’s official name was Digital Equipment Corporation, and its logo was “D.I.G.I.T.A.L.” or “Digital,” but common usage around the company was typically “DEC,” so we will adopt that usage throughout this book.) That culture was an almost pure model of what we can think of as a “culture of innovation.” It created the minicomputer revolution and laid the groundwork for the interactive computing that today is taken for granted. The managerial values and processes that were at the heart of that culture produced an almost uniformly positive response in DEC employees throughout its history.

 

2. Three Developmental Streams

ePub

A MODEL FOR DECIPHERING THE LESSONS OF THE DEC STORY

As we have seen, DEC was a coat of many colors, and there are many ways the DEC story could be told. In order to bring out the cultural dynamics that are the central part of the story, I will discuss DEC’s founding and early history, its rise and peak years, and its decline and death. However, I will not present the story the way a historian would, with many dates and details. Two other books have provided such a historical perspective (Pearson 1992; Rifkin and Harrar 1988). Rather, the emphasis will be on the cultural eras and critical periods that highlight major trends and that enable us to begin to see why those trends were developing.

Organizations can be analyzed from three developmental perspectives. Although these perspectives are often treated as independent, they are, in fact, highly interdependent. The analysis of DEC will show how this interdependence works and what can be learned from it. The three developmental streams are

 

3. Ken Olsen, the Scientist-Engineer

ePub

My ambition is to be remembered as someone
who challenged them, who influenced them to
be creative and enjoy work and have fun for
a long time.
Ken Olsen,
MIT graduation address, 1987
referring to DEC employees

To fully understand Ken Olsen’s powerful impact on the evolution and management of DEC, it is essential to understand the 1950s technological, cultural, and sociopolitical context within which he operated. In this chapter we will also look at different facets of his personality, character, and talents. Ken Olsen is a complex man of many facets, and it is this complexity and his own evolution as a person that determined DEC’s fate to a considerable degree.

Ken Olsen was born in Bridgeport, Connecticut, in 1926. His father, Oswald Olsen, was the son of Norwegian immigrants and a self-taught engineer, machine tool designer, and inventor who believed strongly in Puritan ethics applied both at work and at home. Ken and his two younger brothers, Stanley and David, all became engineers. After high school Ken joined the Navy, where he learned to be an electronics technician, a good preparation for his later MIT education in electrical engineering. He received both a bachelor’s and a master’s degree at MIT and took a job in 1950 working for MIT’s Lincoln Labs in the newly formed Digital Computer Laboratory. There he was exposed to Jay Forrester, Robert Everett, and Norman Taylor, who were working on the Whirlwind computer, a machine that was being used in support of the Semi-Automatic Ground Environment (SAGE) air defense system.

 

4. Ken Olsen, the Leader and Manager

ePub

There is a story that Ken Olsen tells on himself, that he learned the basics of management as a young adult in his pre-DEC days when his church put him in charge of the Sunday school. He says that he went to the library and read all the management books that he could find and developed from that a concept of how to manage. Whether or not he found Alfred P. Sloan and Douglas McGregor at that time I do not know, but in subsequent interviews he often attributed his own managerial theory to those two people. From Sloan he says he learned how powerful it is to “divisionalize” and give autonomous units profit and loss responsibility; from McGregor he says he learned how important it is to believe in and trust people.

He had observed, of course, the style of his mentors in the MIT Lincoln Labs, especially Jay Forrester, and was especially impressed by the freedom they gave everyone in the lab. Giving freedom to subordinates became the most basic aspect of Olsen’s philosophy, but, as we will see, he made some implicit assumptions about how people would use freedom that often proved wrong. The central managerial issue of how to empower people and give them freedom while retaining some kind of managerial discipline and control becomes the basic dilemma around which DEC’s culture evolved.

 

5. Ken Olsen, the Salesman-Marketer

ePub

Ken Olsen’s approach to product development, marketing, and sales merits a separate chapter because, on the one hand, it was paradoxical and self-contradictory yet, on the other hand, it was innovative and exciting. DEC’s approach to sales was one of its contributions to the field of management, as we will see. Olsen’s beliefs about sales and marketing were derived from his engineering background and his general managerial philosophy, as described in the previous chapters. His sales philosophy was based on three interlocking beliefs:

1. Customers’ needs were the primary basis for how one designs, markets, and sells products, and customers had to be dealt with honestly at all times.

2. Customers did not always know what they wanted, and it was the job of sales to educate them by working with them to solve their problems.

3. It was the job of engineering visionaries to educate salespeople on what they should be advocating and selling to solve the customer’s problems. Even though the market is the ultimate decision maker in terms of what products will succeed, one should not ask marketers what products to develop but should trust one’s own technical vision.

 

6. DEC’s Cultural Paradigm

ePub

To fully understand a culture one must look at the pattern of interrelationships among the shared tacit assumptions that drive day-to-day behavior. These assumptions are often consistent with an organization’s espoused beliefs and values, but not necessarily so. Many organizations espouse teamwork yet have completely individualized management systems, or they espouse an open-door policy but employees learn that their ideas are not really welcome. So we must examine in DEC’s case the relationship of the espoused beliefs and values as reviewed in the last several chapters to the deeper tacit assumptions that evolved and increasingly governed DEC’s daily behavior.

These deeper assumptions derived originally from (1) the broader culture in which Ken Olsen and his founding group grew up and (2) the environment that was created by that broader culture, namely, U.S. technical entrepreneurial capitalism (Roberts 1991). However, it must be reiterated that Olsen’s personal beliefs and values came to be shared tacit assumptions only because the behavior based on them produced success, both in the external and internal environments. A culture evolves as a result of continuing success, and what were originally just the beliefs and values of the founders gradually come to be a shared set of beliefs and values, and with continued success these dropped out of awareness and become shared tacit assumptions.

 

7. DEC’s “Other” Legacy

ePub

THE DEVELOPMENT OF LEADERS

Tracy C. Gibbons

Digital Equipment Corporation’s technical legacy is well known and widely respected. Its innovation in minicomputers and networking was the basis for the evolution of new ways of computing and the democratization of technology. But DEC also made other significant contributions, technical and otherwise, to the larger community. Among the contributions was an approach to employee and leadership development that produced leaders at all levels of the organization. During their time at DEC, the talents and abilities of many employees were discovered, nurtured, developed, and honed, and these employees helped Digital become the technical and organizational powerhouse and much-sought-after employer-of-choice that it was until the early 1990s. Many employees were profoundly influenced by their experiences at DEC in ways that have had lasting impact. As these people left the company, first through normal turnover and attrition and later by less voluntary means and in greater numbers, they went on to other companies and enterprises where many held positions of considerable influence, and they continued to make significant contributions. This is DEC’s “other” legacy.

 

8. DEC’s Impact on the Evolution of Organization Development

ePub

Some of the unique aspects of DEC’s culture surfaced in my own efforts to be a helpful consultant to Ken Olsen, to the Operations Committee, and eventually to many other individuals and groups throughout the organization. I have already described how some of my early efforts to improve communication in the Operations Committee forced me to learn that “expert consulting” would not be helpful but that if I got into the flow of the group and figured out what they were trying to do, I could help them to do it better. This was the essential lesson that led to the whole philosophy of process consultation (Schein 1967,1999b).

In my further work with various parts of the organization I learned many more lessons, both about the DEC culture and about the role of organization development (OD) in such a culture. In that process I learned some important principles that apply to the practice of OD in all organizations. In addition to sitting in on Operations Committee meetings, I became involved with the whole human resource function, management development and training, and employee surveying. Working within and across groups made it very clear how difficult it is to distinguish contact clients who recruit you, primary clients who ultimately want help and pay for the services, and ultimate clients who will be impacted by all the interventions you make. In all of the work I did at DEC over a twenty-five year period, one overarching lesson had to be learned over and over again, a lesson that Kurt Lewin taught us sixty years ago but that we still don’t get: when you are dealing with a complex human system, if you want to influence people you have to involve them and you have to be willing to be influenced yourself.

 

9. The Impact of Changing Technology

ePub

Paul Kampas

During DEC’s forty-year history the technology of information processing and computing changed dramatically. Some of these changes were the direct result of DEC’s own innovative products, some of them were the result of competition that DEC stimulated, and some of them were simply a product of the times. As a result, DEC in its midlife was operating not only in a different technological environment and market but at the same time the organization was growing and the products themselves were becoming more complex.

The computer revolution is the technology wave that transformed processing power from scarcity to abundance. Because processing is the “engine” of an information system, it was a very important advancement and one to which DEC made a great contribution.

Perhaps the first notable automated information processing device was Herman Hollerith’s tabulating machine, invented in 1890 expressly for the purpose of processing the information gathered in the U.S. census of that year. Though this electromechanical machine did no computing, it stored and sorted records using eighty-column perforated cards. Based on this technology, Hollerith formed the Tabulating Machine Company in 1896. Thomas Watson, who had been a salesman for the National Cash Register Company, became president of this company in 1914 and changed its name to International Business Machines in 1924.

 

10. The Impact of Success, Growth, and Age

ePub

DEC’s growth, innovative capacity, and ultimately its economic difficulties all resulted from the interaction of the technology, the organization, and the culture. In chapter 9 Paul Kampas analyzed how the evolution of the technology stream created particular transition difficulties for the company. In this chapter I want to highlight how those difficulties were compounded, even created to some degree, by DEC’s incredible success and subsequent rapid growth. Growth is generally regarded as a desirable condition. But as we will see in this chapter, an organization that lacks the money gene, an organization that is growing on the strength of its technical vision, in this case the minicomputer, develops particular difficulties as it grows and ages. Continued technical success and positive feedback from some segments of the customer population strengthen certain core elements of the culture, as we will see in chapter 11, but growth and age inevitably erode other core elements of the culture. I say inevitably because the phenomena that will be discussed in this chapter characterize all organizations. How DEC dealt with them is a unique product of its own culture, but the issues DEC had to face are general results of growth and age.

 

11. Learning Efforts Reveal Cultural Strengths and Rigidities

ePub

The problems that surface with growth are invisible in the sense that they are unintentional, inevitable, and easy to overlook. Ken Olsen and DEC’s senior management saw some of what was happening with success and growth, but they did not fully appreciate how difficult it would be to develop fixes that would work. In a sense, what was invisible to them was the strength of the culture they had created and the difficulties that arose when they attempted to make changes in a still growing and highly successful organization. But learning and experimentation were highly valued, and Ken Olsen’s engineering background led to a tinkering mentality that suffused his thinking not only about products but about organization and management as well. He was willing to try all kinds of processes and mechanisms to address the various problems that arose as the technology and the organization evolved.

Experimentation seemed normal in the DEC culture throughout the 1980s, but it reflected more the engineering mentality of trying one thing after another than the scientific mentality of carefully reflecting on why certain experiments did not produce the expected results. Careful reflection was missing except at the Woods Meetings and in the context of various educational interventions that will be described in this chapter. Impulsive and intuitive tinkering was more the norm, especially in an environment where there were always multiple proposals for what to do coming from the various subcultures.

 

12. The Turbulent 1980s

ePub

In the previous chapters we have seen how the technology stream and the organizational stream diverged and how the culture served both as a continuing source of growth and as a conservative force to prevent effective learning and adaptation. In the 1980s both of these processes became sharper. Most alumni feel that DEC reached its peak in 1987, but this very growth accentuated the forces described in the previous chapter and made it harder and harder for DEC to develop a coherent strategy that would permit it to deal with the changes in the technology and the market. On the surface DEC was peaking, but underneath, the company was weakening.

Detailed accounts of the main historical events in terms of technology, personalities, and external events that impacted DEC can be found in Pearson (1992) and Rifkin and Harrar (1988). In going over these details and my own consulting notes, it became clear to me that what DEC did in the 1980s that brought it both to its peak in 1987 and to its demise in 1998 is best understood in cultural terms. What DEC did is fairly obvious. Why DEC did what it did is far from obvious, because some of the alleged mistakes that DEC made are incomprehensible except in cultural terms. For these reasons I will review the events themselves fairly superficially and put more emphasis on analyzing and trying to explain the reasons behind those events.

 

13. The Beginning of the End

ePub

KEN OLSEN’S FINAL EFFORTS TO SAVE DEC

DEC’s end did not come with either a bang or a whimper. Rather, it was a long drawn-out process consisting of several years of success mixed with occasional crises, recognition in the late 1980s that a new way of managing had to be found, intense efforts to market new products, networking and systems integration through large fairs, finally the acceptance of open standards and commodities, recognition of the need to downsize, two painful years of nonprofitability (1991 and 1992), and Ken Olsen’s resignation in late 1992.

The board promoted Bob Palmer, vice president of semiconductors, who then spent six years trying to bring DEC back to profitability by selling off some units, imposing a more disciplined way of managing, and changing elements of the culture by bringing in outsiders in senior management roles. The formal DEC era ended in 1998 with the sale of the company to the Compaq Corporation. My direct involvement ended in 1992, so I can only provide limited secondhand data about the later years, but I interviewed many ex-DEC managers while they were working at Compaq.

 

14. Obvious Lessons and Subtle Lessons

ePub

The analysis of the DEC story teaches us two things about how the world works. First, the lessons of history can be viewed on various levels—there are obvious lessons to be learned that are fairly clear based on events, but, more important, there are subtle lessons to be learned by trying to explain why the obvious events occurred. Second, the events of history are highly interactive. The search for root causes is flawed because it implies that there is a root cause, when, in fact, the events may have occurred for a multiplicity of reasons. For example, it is obvious that one of the reasons DEC failed is that it did not respond to the shifting market away from minicomputers to personal computers. But why did DEC not make this shift? Many senior DEC managers and engineers saw the shift in the market, saw the need to respond to it, and came out with a variety of products to compete with the PC but never could make the trade-offs that would have had to be made to be competitive because such changes were not supported by the cultural DNA.

 

15. The Lasting Legacy of Digital Equipment Corporation

ePub

How does one capture the legacy of an organization that existed for forty years? In part of this chapter and in appendix A we will review the obvious legacy, the technical contribution that DEC made to the world of computing. Perhaps more significant, however, is DEC’s contribution to the careers and lives of its alumni. As I indicated in the first chapter, one of the reasons for writing this story is that so many ex-DEC people say that working in DEC was the high spot of their careers and that “Doing the right thing” was a key value that informed their entire approach to their jobs.

Michael Horner, who was employed primarily in Europe, included the following note in a recent e-mail:

I am writing this from the building which used to house “DEC Europe” HQ. In this building this evening there will be a cheese and wine party as part of a series of “ex Decies” events and typically between 100 and 200 people turn up! Remember there has been no DEC since 1998 and many left [in] 1993 or earlier, 10 years ago. I find this amazing.... I want to share the “Sunflower Story” applied to the termination of DEC as an enterprise. In the “strong” version of the story, the end of DEC was planned by Ken and he somehow put many of the free spirits he had attracted into the company (and helped them to develop themselves), under such unpleasant conditions that they chose to leave. In the same way that a sunflower spurts out its seeds at the end of Summer, these people seeds took the DEC culture with them and influence the whole of business today. In the “weak” Sunflower story Ken did not do it intentionally but unconsciously. It is evident that the end result is in fact true and the DEC culture continues to influence business worldwide. In systems thinking, DEC outgrew being an enterprise. It emerged to the next level to become an influence in the world business ecology. The legal entity of DEC had to give up being an enterprise to become an important part of business culture. This point is not made just to have a happy ending but is a serious point and indicates there may be other examples of enterprises that became so successful that they had to emerge to the next level. (Mike Horner, e-mail, personal communication, September 9,2002)

 

A. DEC’s Technical Legacy

ePub

For the reader who is more interested in technical detail, I asked several of DEC’s key engineers to write about what they considered DEC’s technical contributions to have been. The points below are an amalgamation of their various comments.

Interactive computing. Starting with the PDP-1, DEC computers were interactive, allowing immediate direct response to the user’s commands for computational results without waiting for a long (potentially overnight) batch job queue. Interaction also included connection to lab experiments and eventually manufacturing processes for real-time control. The capability to easily and tightly interconnect computers to both people and other processes led directly to the first minicomputer that in turn enabled the OEM market and the ability to use computers widely.

Graphical user interfaces. Although the graphical user interface could be viewed as a subset of the above, it should be separated out because of its far-reaching effect on how computing is done, even today. Again starting with the PDP-1, DEC computers offered graphical displays to further their interactive nature. Evidence of this is the first computer game, Spacewar, developed on the PDP-1 at MIT (Steve Russell, Alan Kotok et al.). From the simple point-by-point directed beam display of the PDP-1 to the more complex (but still directed beam) vector graphics pioneered on the PDP-11-based GT40 to the advanced raster graphics on VAX-based and Alpha-based workstations, DEC was out in front.

 

B. DEC Manufacturing

ePub

CONTRIBUTIONS MADE AND LESSONS LEARNED

Michael Sonduck

I joined DEC in the Maynard plant in 1976 to help the company grow as organization development manager. DEC employed twenty-five thousand people in 1976, about fifteen thousand of them in manufacturing. Employment had grown at an average compound rate of 34 percent a year for the prior ten years. There were already manufacturing plants in Maynard, Massachusetts (1957); San German, Puerto Rico (1968); Westminster, Massachusetts (1970); Mountain View, California (1970); Westfield, Massachusetts (1971); Taiwan, Republic of China (1972); Kanata, Canada (1972); Springfield, Massachusetts (1972); Aguadilla, Puerto Rico (1973); and Marlborough, Massachusetts (purchased from RCA in 1973). DEC was manufacturing computers and almost all the component parts, printers, video displays, and core memory, eventually becoming the largest manufacturer of core memory in the world. The company was still servicing every computer in use by its customers.

By the end of the next year, there were thirty thousand PDP-8s installed, fifty thousand LA36 printers, and the PDP-11/70 ramp (increase in demand for the product) had begun, with one thousand already installed. There were thirty-six thousand employees in 1977, a growth of 44 percent in one year! Although manufacturing was still growing (eight more plants would be added in the United States and Europe over the next five years), the culture was well established within the larger DEC world.

 

Load more


Details

Print Book
E-Books
Chapters

Format name
ePub
Encrypted
No
Sku
B000000023434
Isbn
9781605093024
File size
2.81 MB
Printing
Allowed
Copying
Allowed
Read aloud
Allowed
Format name
ePub
Encrypted
No
Printing
Allowed
Copying
Allowed
Read aloud
Allowed
Sku
In metadata
Isbn
In metadata
File size
In metadata