Ken Olsen, Digital and disintegration - Digital Equipment Corp.'s Kenneth H. Olsen

Ken Olsen's departure from the $14 billion company he started the same year Sputnik was launched marks more than just the end of one regime and the beginning of another. It marks the passing of an era for the entire computer industry.

He has been a great visionary. The PDP pulled computers out of the glass house forever. It pioneered interactive computing. Digital's scalable VAX architecture provided customers a new level of security against obsolescence. Its networked, distributed systems set the stage for today's most important new products.

He has been a great entrepreneur. Few of them stick around for three decades. Especially in the computer industry (the names Canion, Jobs, Perot, and Wozniak come to mind). Of those who do, not one has been as effective as Olsen has been at Digital.

He has been a great manager. Growing from backshop tinkerer to mega-company manager is an unhappy transition for most entrepreneurs. It is true that Olsen always appeared to derive greater joy from talking about new products than managing his F50 company. But he deserves great respect for the zeal and success with which he attacked each new challenge.

If he's so great, why must he go? For all the vision, for all technical wizardry, Ken Olsen appears to have underestimated the gravity of the mitosis and metamorphosis of the computer industry.

To Digital's greatest challenge is a complete modernization. The company must be rebuilt around the new market reality. Microprocessors (Alpha), general-purpose systems (VAX), desktops (VAXstations and Intel PCs), and its host of services are different enough to warrant a wholly new corporate philosophy and structure. In many ways Olsen's abrupt departure affirms the rapidity with which disintegration has overtaken the industry.

What's next? Successor Bob Palmer, who apparently offered Olsen an acceptable mix of engineer, entrepreneur, and bottom-line manager, needs to refocus the independent businesses and development teams that compete for resources. His task is closer to that of a juggler than a butcher: toss everything up in the air, extract like components and then focus, focus, focus. One word that has been heavily used to describe him -- tough -- will hold him in good stead over the coming months.

His actions will be neither easy nor popular. Change is hard. Layoffs are excruciating. Despite first-class people and technology, Digital's future will be anything but easy. Fortunately, this is the bottom. Digital will experience another six to nine months of ugly financial news and painful change before anything gets better.

But behind every cloud is a silver lining. We offer another word for Digital's coming months and years: opportunity. Digital is a goldmine waiting to be tapped. It has been held back by an amorphous corporate organization that has stifled innovation and inhibited product delivery. Unshackled by corporate bureaucracy, individual businesses within Digital will have every chance to prosper. Then the company would be poised for comeback.

Some of its many varied businesses will thrive, driven by the same qualities that drove Digital for years, uncompromising engineering and dedication to customers. Others may not. Their failure would be a lesser evil than subsidising their losses.

As for the new boss, he will likely be measured by a completely unrealistic yardstick: the performance of his predecessor. Better metrics of his success might include important things that Digital never did before. Bob Palmer might do well to minimize hardware development and focus on delivering innovative software and services. Maybe he can leverage Digital's relationship with Microsoft and bundle new products with Windows: a names service, distributed computing tools, and CASE tools. Perhaps he should beef up Digital's OEM chip, storage, and systems businesses, and let them sink or swim once and for all.

Transforming Digital calls for nothing less. After all, Microsoft's margins are a lot more attractive than Gateway's. Questions that challenge Digital's conventional wisdom are the questions of the day.

COPYRIGHT 1992 International Data Corporation
COPYRIGHT 2004 Gale Group