“Ray Noorda often tells the story …”: “Note on the PC Network Software Industry 1990,” Harvard Business School Case N9-792-022, rev. September 5, 1991, p. 5.
failure of “a better PC”: For an example, see the story of Digital’s Rainbow in Glenn Rifkin and George Harrar, The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment Corporation (Chicago: Contemporary Books, 1983), pp. 203–42.
Chapter 4: They’re Everywhere
“Wal-Mart … is competition …”: “Electronic scanning of the Uniform Product Code (UPC) at the point of sale began in Wal-Mart stores in 1983.… Electronic scanning and the need for improved communication between stores, distribution centers, and the head office in Bentonville, Arkansas, led to the investment in a satellite system.… Wal-Mart’s two-step hub-and-spoke distribution network started with a Wal-Mart truck-tractor bringing the merchandise into a distribution center, where it was sorted for delivery to a Wal-Mart store—usually within 48 hours of the original request.” “Wal-Mart Stores, Inc.,” Harvard Business School Case N9-794-024, rev. April 26, 1994, pp. 6–7.
“once Wal-Mart moves to town …”: “Few local merchants can compete against sprawling 50,000-square-foot stores whose notions counters alone dwarf many rural mom and pop concerns. Nor can many match Wal-Mart’s direct-from-factory prices, which are often cheaper than the wholesale prices local shopkeepers pay for their merchandise. As a result, down-town business districts begin to empty, leaving fewer sponsors for Little League teams and a smaller pool of advertisers for the high-school yearbook. ‘When Wal-Mart comes in, something has to go out,’ observes Rex Campbell, professor of rural sociology at the University of Missouri.” “How Wal-Mart Hits Main St.: Shopkeepers Find the Nation’s No. 3 Retailer Tough to Beat,” U.S. News and World Report, March 13, 1989, p. 53.
“category killer” strategy: “A significant type of specialty chain that evolved during the 1980s was the ‘category killer.’ Modeled after Toys “я” Us, category killers were single-line stores with in-depth inventories in such areas as sporting goods, office supplies, and electronics.” Sandra S. Vance and Roy V. Scott, Wal-Mart: A History of Sam Walton’s Retail Phenomenon (New York: Twayne Publishers, 1994), p. 86.
Staples: “To get to know its customers, Staples has been compiling lots of information about buying habits and storing it in a massive database.… Staples uses this knowledge to locate new stores where they will be convenient for their customers—such as in neighborhoods with lots of law offices.… Staples wants to do everything it can to get its best customers coming back to its stores. Since the database knows who those folks are, Staples can try to win their loyalty by offering them special discounts.” “How One Red-Hot Retailer Wins Customers Loyalty,” Fortune, July 10, 1995, p. 74.
“provide an environment …”: “B&N [Barnes & Noble] has opened six outlets in the area, including a 35,000-square-foot store stocked with 125,000 titles that opened last fall less than two miles from the Tattered Cover.… [T]o fight back, [the Tattered Cover] has extended hours, added a coffee bar, and opened a 7,500-square-foot satellite store in downtown Denver. Next month, [they’ll] open a restaurant atop the flagship store, which is adjacent to Denver’s elegant Cherry Creek Shopping Center. So far, however, [they] refuse to discount.” “Chain-store Massacre in Bookland?” Business Week, February 27, 1995, p. 20D.
“Next was in financial difficulties …”: “The company that only two years earlier had gotten an infusion of $100MM from Canon was once again out of money.” Randall E. Stross, Steve Jobs and the Next Big Thing (New York: Atheneum, 1993), p. 301.
“Next, the software company …”: “Obsessed for years with hardware, Jobs, 37, now recognizes that Next’s ‘crown jewel’ is not its sleek computer but its operating system—[the] software it comes with.… So now Jobs is making a bold and desperate move to save Next by transforming it into a publisher of software that runs on other companies’ computers.” “Steve Jobs’ Next Big Gamble,” Fortune, February 8, 1993, pp. 99–100.
Charlie Chaplin’s reaction to sound: “Early in 1931 he had made several statements to the press: ‘I give the talkies six months more. At the most a year. Then they’re done.’ Three months later, in May 1931, he had modified his opinion slightly: ‘Dialogue may or may not have a place in comedy.… What I merely said was that dialogue does not have a place in the sort of comedies I make.… For myself I know that I cannot use dialogue.’” David Robinson, Chaplin: His Life and Art (New York: McGraw Hill, 1985), p. 465.
“Anna Christie … was both a critical and commercial success …”: Barry Paris, Garbo: A Biography (New York: Alfred A. Knopf, 1995), p. 194.
“a ‘10X’ change in the productivity of shipping …”: “[T]he conventional system eventually came to be associated with relentless increases in cargo handling costs.… When expressed in 1870 prices there was a sixteen-fold increase in [loading] costs [between 1870 and 1975].” The Shipping Revolution: The Modern Merchant Ship, Conway’s History of the Ship (London: Conway Maritime Press, 1992), pp. 42–43.
“a worldwide reordering of shipping ports …”: “[In 1959, the Port of Seattle] was the subject of countless hand-wringing editorials that proclaimed the obvious—it was dying. The Port altered course and became one of the most dynamic ports in the country; the unquestioned leading port north of Oakland, and the sixth busiest container port in the world.” Padraic Burke and Dick Paetzke, Pioneers and Partnerships: A History of the Port of Seattle (Port of Seattle, 1995), p. 85. “Singapore, for the past five years the world’s busiest port, has now surpassed Hong Kong as the world’s busiest container port.” “New Hub in Southeast Asia: Singapore Manages to Supplant Hong Kong as the World’s Number One Container Port,” American Shipper, June 1991, p. 93. “The marine terminals of New York have been eclipsed since the 1960s by those on the New Jersey side of the harbor, which are better equipped for modern shipping because they have more land and easier access to railways and highways. Government-owned terminals in Manhattan, Brooklyn and Staten Island have been unable to keep up, losing about $40 million annually in the last two years, with little prospect of breaking even in the near future.” “Questioning the Viability of New York in Shipping,” New York Times, August 30, 1995, p. A16.
“ports that didn’t adopt …”: “San Francisco does barely 10% of the shipping trade of Seattle, Oakland or Los Angeles.… What happened here (in San Francisco) started nearly 30 years ago, with the advent of containerized cargo.… [W]hen goods were sealed in large metal containers, uniform in size, easily loaded onto trucks or rail cars, the finger piers were obsolete, and San Francisco became a shipping cemetery.… During the 1960s, the shipping repair business employed 20,000 people in San Francisco. Today, barely 500 work on dry-dock operations here.” “Past and Future Collide on San Francisco’s Waterfront,” New York Times, February 10, 1995, p. A8.
“modified their strategies to take advantage …”: “[NCR’s] System 3000 line, based on Intel Corp.’s 80×86 microprocessors, reaches from portable and pen-based computers; to desktop PCs and workstations; to servers and mainframe-class, parallel-processor computers.” “NCR/AT&T: One Era Ends … Another Begins,” Electronic Business, May 1993, p. 37. “H-P, once a nonfactor in the PC business, is now streamlined, nimble, and growing faster than market leader Compaq.” “Hewlett-Packard: The Next PC Power,” Fortune, May 1, 1995, p. 20.
DEC and PCs: See Rifkin and Harrar, The Ultimate Entrepreneur, p. 242.
“Digital broke into the world of computers …”: “In late 1962, DEC won its breakthrough order. International Telephone and Telegraph bought fifteen PDP-1s to control its message switching systems. This order gave Digital the confidence and financial ability to become a general systems supplier.” Ibid., p. 44.
“IBM … blamed weakness in the worldwide economy …”: “IBM executives blame their financial performance on other factors, which are beyond their control. Foremost among them: U.S. capital spending patterns, which Akers and
his lieutenants say have been disrupted by tax reform.” “Computers: When Will the Slump End?” Business Week, April 21, 1986, p. 63. “We have this sparkling product line.… And we do have an economic environment that has resulted in customers’ delaying and deferring decisions. That can’t go on forever.” Interview with John Akers, Fortune, July 15, 1991, p. 43.
“Chen described his switch …”: “Steve Chen, the reclusive supercomputer designer whose last company folded two years ago, has resurfaced with a new firm that embraces a technology approach he once shunned.” “Supercomputing’s Steve Chen Resurfaces in New Firm,” Reuters, June 27, 1995.
“an analysis of the history of business failures …”: “Bad things happen to good companies for three reasons: Firms leave their markets, markets escape from firms or both happen simultaneously.” Comments by Richard S. Tedlow in a seminar at Intel, October 7, 1993.
Young people’s comfort with computers: “63 percent of children ages 11–17 would rather use a computer than read a book; 59 percent would rather use it than watch TV.” San Jose Mercury News, April 10, 1995, p. 1A.
Ford: “In an industry in which market share has always been a key to profitability, every other automobile sold in the United States in 1921 was a Model T.” Richard S. Tedlow, New and Improved: The Story of Mass Marketing in America (New York: Basic Books, 1990), p. 150.
“Alfred Sloan … saw a market …”: “‘The changes in the new model should be so novel and attractive as to create demand for the new value and, so to speak, create a certain amount of dissatisfaction with past models as compared with the new one.’” Alfred Sloan, quoted, ibid, p. 168.
“General Motors had taken the lead …”: “General Motors surpassed Ford in terms of both profit and market share in the 1920s and outperformed Ford in profit every year from 1925 until 1986.” Ibid, p. 171.
“Cray … unable to maintain operations …”: “In a bitter final chapter signifying the decline of the supercomputer industry and the fortunes of its founding father, computer pioneer Seymour Cray said Friday that his company, Cray Computer Corp. was seeking Chapter 11 bankruptcy protection after failing to raise an additional $20 million to continue operations.” San Jose Mercury News, March 25, 1995, p. 2D.
“airlines … place a cap on commissions …”: “Delta, staggered by its bloated costs, said it made the move as part of its plans to eliminate $400 million in marketing expenses, and $2 billion overall, by 1997. ‘It took a lot of nerve to do this,’ said Vincent F. Caminiti, Delta’s vice president of sales.” “Delta Caps Its Commission on Ticket Sales: End of Fixed 10% Fee Aims to Cut Costs but Risks Angering Travel Agents,” Wall Street Journal, February 10, 1995, p. A2.
“agencies instituted a policy of charging customers …”: “American Express Travel, the country’s largest agency, said last week it will charge $20 a ticket on domestic flights costing less than $300 and credit the fee toward cruises or tour packages. Carlson Wagonlit, the No. 2 agency, will charge a $15 fee to first-time customers who travel alone and book no other services.” “Coffee, Tea and Fees,” Time, February 27, 1995, p. 47.
“40 percent of all agencies might go out of business …”: “The American Society of Travel Agents said in a preliminary estimate that as many as 10,000 of its 25,000 members could be put out of business.” Ibid., p. 47.
For the impact of the 1906 Food and Drugs Act on patent medicines and the pharmaceutical industry, see James Harvey Young, Pure Food: Securing the Federal Food and Drugs Act of 1906 (Princeton, NJ: Princeton University Press, 1989).
“the phone company could not require the use of its own equipment …”: “In 1968, in a landmark decision known as Carter-fone, the Federal Communications Commission … had ruled that the ‘terminal equipment’ market should be opened up for the first time to companies other than AT&T.… [The FCC] decided that independent companies making new communications devices like answering machines and mobile radio phones should be allowed to interconnect with AT&T’s switched phone network, a privilege that had been previously denied to them. Suddenly, phone users could buy non-AT&T equipment and plug it into the telephone lines at their homes or business.” Steve Coll, The Deal of the Century: The Breakup of AT&T (New York: Atheneum, 1986), pp. 10–11.
“the U.S. Government … brought suit …”: “On March 6, 1974, MCI filed a sweeping antitrust suit against AT&T seeking hundreds of millions of dollars in damages.… On Wednesday, November 20, 1974 … on the fifth floor of the main Justice building at 10th and Pennsylvania, the attorney general met with several antitrust division lawyers to discuss the AT&T case.… Shortly before eleven … the AT&T lawyers arrived.… [The lead lawyer] retained by AT&T stood up to begin AT&T’s presentation.… [He] began puffing on a pipe [and addressed the attorney general], ‘Before we start our presentation, I’d like to know exactly what your state of mind is on this case.’ … [The attorney general replied] ‘I intend to bring action against you.’” Ibid., pp. 52, 65, 67–68.
the breakup of the Bell System: “Once again, in 1974, the Justice Department sued AT&T.… After dragging on for nearly eight years, the suit was settled by consent decree in January, 1982. AT&T agreed to divest itself of its 22 operating companies, while retaining Western Electric, Bell Labs, and long-distance communications.… Judge Greene [later] issued his Modified Final Judgment (MFJ).… Under the MFJ, the 22 Bell operating companies were reorganized into seven Regional Holding Companies.…” “AT&T and the Regional Bell Holding Companies,” Harvard Business School Case N2-388-078, rev. March, 1989, pp. 3–4.
“long-distance market …”:
AT&T 60%
MCI 20%
Sprint 10%
LDDS 3%
Wilted 1%
Other 6%
Arsen Darney and Marlita Reddy, Share Reporter: An Annual Compilation of Reported Market Share Data on Companies, Products and Services. Table 1216, p. 318.
“a cable network …”: In 1993, 57 million homes (61.4 percent) had cable. Statistical Abstract of the United States 1994, U.S. Department of Commerce, issued September 1994, Washington, D.C. Table 882, p. 567.
Deutsche Telekom: “Mr. Sommer is expected to bring to Telekom a global business outlook and a feel for the hotly competitive world of consumer electronics.” “Deutsche Telekom Picks Ron Sommer as Its Chairman,” Wall Street Journal, March 30, 1995, p. B4.
AT&T and the Bell companies’ combined valuation. In December 1993, following the breakup, AT&T and its successor companies had an approximate market valuation of $60 billion. Capital International Perspective (Capital International S.A., Geneva, Switzerland), January 1984, pp. 330–32. In 1995, their market value was approximately $240 billion. The Red Herring, September 1995, pp. 110, 112.
Chapter 5: “Why Not Do It Ourselves?”
“the 10% rule …”: Andrew S. Grove, “The Future of the Computer Industry,” California Management Review, Vol. 33, No. 1, Fall 1990, p. 153.
“get ‘2X’ the price of Japanese memories”: “‘The DRAM manager would say: With this approach we’ll be able to get a price of ‘2X’ that of a standard DRAM, but unfortunately, we just didn’t like the ‘X.’” “Implementing the DRAM Decision,” Graduate School of Business, Stanford University, PS-BP-256B, 1991, p. 1.
Intel’s “public statements …”: Note the evolution of the phrasing: “Intel is a manufacturer of electronic ‘building blocks’ used by Original Equipment Manufacturers (OEMs) to construct their systems.” 1985 Intel Annual Report, p. 4. “Intel designs and manufactures semiconductor components and related single-board computers, microcomputer systems and software for original equipment manufacturers.” 1986 Intel Annual Report, p. 4. “The company originally flourished as a supplier of semiconductor memory for mainframe computers and minicomputers. Over time, though, the face of computing, and Intel, have changed. Microcomputers are now the largest, fastest-growing segment of computing, and Intel is a leading supplier of microcomputers.” 1987 Intel Annual Report, p. 4.
Chapte
r 6: “Signal” or “Noise”?
“an auxiliary one that would work with the 486 …”: “First of all, we positioned it as a coprocessor to the 80486 and made sure that it could be justified on that basis. We designed it as a standalone processor, but made it very useful as an accessory to the 486.” Comments of Intel designer Les Kohn in “Intel Corporation: Strategy for the 1990s,” Graduate School of Business, Stanford University, PS-BP-256C, 1991, p. 9.
“the advantages of RISC technology over CISC …”: “For many business applications, CISC may be both faster and cheaper.” “The Reality of RISC,” Computer World, March 22, 1993, p. 72. “It is now clear that those early ads showing RISC on a sharp upward performance curve as CISC leveled off were wishful thinking at best.” From an open letter from Michael Slater to the heads of IBM, Motorola and Apple, OEM Magazine, July/August 1995, p. 24.
Peter F. Drucker: “‘The entrepreneur,’ said the French economist J. B. Say around 1800, ‘shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.’” Peter F. Drucker, Innovation and Entrepreneurship: Practice and Principles. (Bungay, Suffolk: William Heinemann Ltd., 1985), p. 19.
Apple’s Newton criticized: “Instead of accolades, Newton became a running joke on no less visible a platform than Gary Trudeau’s Doonesbury comic strip.” “What Apple Learned from the Newton,” Business Week, November 22, 1993, p. 110.
W. Edwards Deming, Out of the Crisis. (Cambridge: Massachusetts Institute of Technology Center for Advanced Engineering Study, 1988).
Intel’s corporate culture: “A business like ours has to employ a management process unlike that used in more conventional industries. If we had people at the top making all the decisions, then these decisions would be made by those unfamiliar with the technology of the day.… Since our business depends on what it knows to survive, we mix ‘knowledge-power people’ with ‘position-power people’ daily, so that together they make the decisions that will affect us for years to come. We at Intel frequently ask junior members of the organization to participate jointly in a decision-making meeting with senior managers. This only works if everybody at the meeting voices opinions and beliefs as equals, forgetting or ignoring status differentials. And it is much easier to achieve this if the organization doesn’t separate its senior and junior people with limousines, plush offices and private dining rooms.” Andrew S. Grove, quoted in “My Turn: Breaking the Chains of Command,” Newsweek, October 3, 1983, p. 23.
Only the Paranoid Survive Page 18
