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Hot Negative: Why the Media Miss the Business Message
CHAPTER 3:
THE DEMISE OF DIGITAL EQUIPMENT CORPORATION: WHAT MADE THE DIFFERENCE AT DEC?

Digital Equipment Corporation's story has been fully reported but left virtually untold. No one ever asked why seventy thousand employees had to be fired. No one ever questioned the need to turn around the company. No one ever wondered how it went off in the wrong direction in the first place.

It was always reported that some product strategy or another was critical. Missing the office market because a workable word processor could not be developed was one such story. Failing to make a personal computer a couple of times must have been it. Not being able to market the alpha chip technology was big news for a while. Open systems were debated in the press for years. When the end came, the details of the final deal were listed for all to see, but no one tied anything together.

For twenty or thirty years people doing business with the company would walk away shaking their heads. No one in the business world had ever seen anything like it. The media reported the numbers and tried to make sense of the product mix, but that wasn't the story.

How the place was being run was the real story. It wasn't hot negative, because few business stories are. Its lessons are well worth learning, and they have little to do with what made it into print over the years. Ironically, the end was signaled more dramatically by a competitor's ad rather than a news story.

The ad was thirty inches wide by twenty-three inches high. It filled two complete national newspaper pages with one word, with letters six inches high. It said "Worried?" In the fine print at the bottom of the page, Hewlett Packard took credit for buying the space and having its ad agency, Saatchi and Saatchi, design the piece. The typeface was "sans serif" and each letter was set in a dark box. It was the logo of Digital Equipment Corporation with the word "Worried?" substituted for the word "Digital." The ad was pulled the next day when Digital's lawyers protested trademark infringement. It was already set to run in Fortune and Business Week, and their print deadlines had passed, so those pages appeared.

When a company underwrites a stock offering, the Securities and Exchange Commission requires that a legal notice advertisement be run to announce the availability to the general public. They are referred to in the investment community as "tombstone ads" because their required layout and design resembles a graveyard headstone.

Hewlett Packard, the number two company in the computer industry behind IBM, inadvertently seems to have run the death notice for one of the nation's Cinderella high-tech players. At a fire sale price of nine billion dollars, Compaq Computer Corporation acquired DEC (pronounced "deck") in 1998, including its two billion dollars in cash, and thus closed out the history of the Massachusetts maverick company founded forty-one years before.

What happened? What was the difference between success and failure? There is no dispute that Digital was different from the very beginning. That difference fueled its shooting star growth. The story may be complex, but the business strategies and practices are easy to understand. The fundamentals can only be ignored for so long. Succeeding despite yourself is often identified as a new approach, a new discipline. Success does indeed hide a multitude of sins. To give DEC its due, it did innovate management theory in some ways that might be made to work for others, but most marveled that DEC could get away with one of the most unorthodox approaches to business ever devised.

A high-margins, high-growth industry will allow anyone to manage anything any way they want to, if they can stay on top of the bubble. DEC rode on top of its expanding business bubble for longer than anyone outside of the company ever expected.

Let's take a look at DEC from a management point of view. That is the real story. When thirty-one year old Ken Olsen and his twenty-eight year old partner Harlan Anderson emerged from their M.I.T. research labs in the late fifties, one thing was certain: they were engineers, not businessmen. Their plan was to commercialize their computer knowledge by debunking the high priests of high technology. They would put computers in the hands of those using them instead of requiring users to go on hands and knees into the glass and air conditioned temples of the mainframe gods that were then the self-appointed keepers of the computer kingdom. A holy war is not a bad business strategy to begin with. The actual business plan was modest and conservative. A learn-as-you-go approach can be made to work, provided you don't attempt to invent management at the same time you are inventing products. Being able to do one is no assurance that you can do the other.

Departing from M.I.T.'s Lincoln Labs where they had worked on the SAGE (Semi Automatic Ground Environment) Air Defense System for the U.S. Government, Olsen had a new idea and a new technology to bring to the computer world. Communications with the mainframes of the day was by electric typewriter and punch cards. You typed in commands, added data and programs by stacks of cards, and then the answers printed out on rolls of paper. It seemed normal at the time. The task that Olsen had been assigned in the SAGE System was to get text to appear on radar screens. The big cathode ray tubes displayed "live" electronic returns from aircraft in the form of blurred blips on the screen. They were re-painted each time the sweep of a rotating antenna received a renewed reflected signal from the aircraft being illuminated with radio frequency energy.

With hundreds of blips on a screen at any one time and each of them moving with each new paint, they somehow had to be numerically labeled, and then those labels had to be made to follow or track the aircraft.

With a touch of a button, Olsen made a tiny electronic circle appear in the middle of the screen. With a stick control, the circle could then be moved to cover a radar blip, numbers could be typed in next to it, and the whole little designator could then be assigned to a tracker who would keep the one on top of the other as they moved about.

While he was at it, Olsen worked on a map that appeared on the screen and a method of electronically going to any point on that map and being able to zoom in on a specific area, with that spot becoming the center of the screen and the map shifting accordingly.

All this eventually translated into the DEC PDP-1 (Programmed Data Processor), which had a computer screen and keyboard. It was launched in 1959 at $120,000 per copy, and DEC was off and running. Olsen had become the father of interactive computing.

We are told that children learn the most in their first few years as they form their own particular view of the world. DEC developed a different view of the world from its very beginning. Its founders had both come from an academic research lab. The venture capital firm that offered them seventy thousand dollars for their start-up in return for 77% of the company (Olsen and Anderson were definitely not businessmen) was headed by a Harvard Business School professor. They were told to hire a third person with a business background. They never got around to it.

Their first employee was Ken Olsen's younger brother, Stan, who joined them from M.I.T. Their first products, Transistorized Logic Modules, were sold back to their colleagues at Lincoln Labs. An early member of their board of directors was Jay Forrester, a professor at M.I.T.'s Sloan School of Management and Olsen's former boss at Lincoln Labs. Olsen's policies at DEC were taken directly from M.I.T.'s operations manual. The first salesman at DEC was Ted Johnson, an electrical engineer from Cal Tech with an MBA from Harvard. He was paid a straight salary. The first computers produced at DEC were sold to research labs. Each had to be customized and programmed for a specific task. ITT bought fifteen PDP-1s for telephone switching systems, and the market began to shape the company. Engineers were building computers for other engineers. Groups of engineers at DEC worked as if they were doing graduate school assignments. When homework was late, shipments were missed. By 1963, DEC had sales of $11 million and a management system like no other.

Olsen had set up a "Works Committee," and although he was reported to be a perfect gentleman one on one, he was all over his people in Works Committee meetings. Conflict management was becoming the DEC style. Olsen viewed it as working ideas through a process.

No one in the media thought any of this either odd or newsworthy at the time. To assign accountability when things went wrong, DEC was divided into competing product groups. Product line managers were given complete authority to get their jobs done. The only control was budgetary. They had to plead their case before the Works Committee. This unorthodox approach provided complete freedom for product development. Olsen seemingly gave up control over what was going on by putting each group in charge of its own destiny. They, in turn, had to bargain with sales, manufacturing and marketing for the resources they needed to get their product out the door.

The lack of central direction was difficult for many to adjust to, but for those that could master this unique culture, the sky was the limit. Olsen let things develop, and when they looked like they would be successful, he would jump on the bandwagon. When things weren't working, the budgets dried up. This "system" is credited with DEC's incredible growth record. It was possible for people to have two or three bosses.

The internal communications challenge to make all this work required that everybody be allowed to talk to anybody about anything across all lines of management at any and all levels. This bizarre structure caused Harlan Anderson, DEC's co-founder, to quit. After he left, no other company employee besides Ken Olsen ever sat on DEC's board while he was in command. At the same time, Jay Forrester left the board and Gordon Bell, DEC's lead engineer, went on sabbatical to Carnegie Tech to teach. Olsen's pressure cooker did not work without a price. The year was 1966 and sales were at $23 million. The Works Committee became the Operations Committee, and Olsen had re-invented DEC in such a way that few could explain it, and no one could diagram its structure. Everything had to be worked through consensus. It had "survival of the fittest" as its credo. Ted Johnson, who now headed up sales, described his position at the time as having to sell his services to each product group for his funding, and then have to deal with Olsen, who believed that a quality product sold itself.

The products were of good quality and they were being sold to customers who knew how to make use of interactive computing in their research labs, and for the business applications they had them programmed for.

DEC was an engineer's outfit. Olsen's belief was that the product drove the market. He continued to raise conflict management to new levels. DEC was definitely different. The no-commission sales force was certainly different. Olsen had invented the mini-computer industry, a system of product line conflict management, why not a new way of selling? Salesmen were called sales engineers because they would be selling engineering elegance to engineering customers. So long as that were to be the case, it worked. Everything at DEC seemed to be working, and even though no other organization on earth worked that way, DEC was growing at such a rate the assumption was, at least internally, that everything they were doing must be right.

Olsen's engineering and business philosophy stated that interactive computers should be elegant in their engineering approaches and that technical literature should be so comprehensive that potential customers could buy what they needed without the help of conventional sales representatives. Once the product was sold, teams of service engineers provided the ultimate in technical support through long-term contracts.

The wedding of customer and product resulted in a business marriage that could and did extend into the foreseeable future. Service income is usually highly profitable revenue and can account for almost half of a computer company's sales and profits. Being first into the scientific market with interactive computing and being virtually unchallenged for many years, DEC's installed base became the driving force for constantly upgrading technology. The fact that IBM was tied up for thirteen years in a federal anti-trust case is an interesting sidelight. An engineers' company, run by an engineer, servicing an engineering marketplace, became almost a closed loop. Sales and marketing, which in most companies provide product direction because of their interaction with the marketplace, were considered mere add-ons to the organization at DEC.

In 1972, Olsen persuaded Gordon Bell to return as V.P. of engineering. In 1977, DEC passed the one billion dollar per year sales mark. Bell's product strategy foresaw the coming confusion in the industry as each new product required the customer to convert to its new approaches.

Bell conceived of VAX (Virtual Address Extension) as the long-term answer to the company's need for direction. He would build a family of computers that would have a common base. Customers could be upgraded without having to make massive data conversions. Bell saw, ten years in advance, the future of networked computing. He didn't have the complete vision, as history would prove, but for the foreseeable future, his vision became the driving force behind DEC.

The mini-computer industry with DEC in the lead was coming into the undefended underside of the mainframe giants as they fought for the big business among themselves.

When things are going right in a big way, the perception is that of being invincible, bullet-proof, of having manifest destiny on your side. All of that and more was true at DEC. How could it be otherwise?

IBM had long since begun to take notice. But neither they nor DEC noticed a quirky little start-up in Cupertino, California, with the unlikely name of Apple and a product called a personal computer. It not only had a crackerjack, if unlikely, engineer, but it was headed up by a sales genius named Steve Jobs.

DEC would eventually give new meaning to the term "being caught in the middle."

All the while, even in this lightning-driven industry, events moved in glacial slow motion. Decisions were delayed, catch-up strategies took years to unfold, and mistakes haunted their perpetrator for decades.

Incredibly, it took until the mid-eighties for Gordon Bell's VAX strategy of compatible, communicating networking computers to give DEC its final big push.

DEC completely missed the advent of the personal computer because Olsen, the creator of interactive computing, could not understand how anyone could want to use a computer for other than complex engineering tasks, research or high capacity business applications. He could not see beyond his own personal experience, nor could he conceive of low-cost computers. The money was in the big budgets of his customers.

IBM, showing uncharacteristic flexibility, set up a skunk works in Florida and did a total end-around to take on Apple with the massively marketed IBM-PC. The personal computer's place in small business was legitimized by an actor impersonating Charlie Chaplin selling IBM-PCs and all kinds of software for fun and profit. An unintended consequence of IBM's master stroke was the creation of Bill Gates, but that is yet another poorly reported story.

Slowly but surely IBM began coming down into DEC's world as DEC continued to move upward into IBM's domain. The personal computer industry began to rise up underneath DEC, first unleashed by IBM and Apple, and then by a host of clone upstarts who didn't seem to understand the rules of the game. They were making new rules as they went along.

DEC's rocket ride continued with the VAX. The late eighties were like no other years. In 1987, DEC hit $9.3 billion with $1 billion in profit. They proclaimed a "window of opportunity"! There was no way that a marketplace of research labs, academia and pure engineering applications could continue to support DEC's growth spurt. They had to get a sales organization that could sell on a rug the same way they sold in a product design environment. It was too late in the game for a culture change, but DEC gave it their best shot. Some of the last players in may have been some of the best, but those hiring them had no idea how to manage them. There are few things more dangerous than a super sharp sales force and a dull sales management group. The worst of both worlds were now coming together.

Gordon Bell had left DEC for the second and last time in 1983. Olsen's personal genius and his concept of interactive engineering computing developed in the sixties had propelled DEC in fits and starts through the seventies. Bell's strategy lit the fuse in the eighties, even though he was long gone. The third genius never materialized at DEC. He, or by this time even she, might have been there, but Ken Olsen's system at DEC chewed up talent at an inordinate rate. One person every ten years may be all it takes, but you must have that person in place in the technology environment. DEC didn't!

The high-water mark was hit sometime in 1989 or 1990. One hundred twenty thousand plus employees worldwide, $11-plus billion in sales, and $1.3 billion in net profits is big business.

There also was a big story being missed big time by those in the media.

At this juncture, with the company located all around me, I had to take a look at DEC from the inside. Through a friend, I met with a public relations person from their headquarters at The Mill in Maynard, Massachusetts. By this time they had taken over all one million square feet of the Civil War era blanket factory where Olsen and Anderson had started. (It was rumored that blankets had been made for both the North and South.)

The VAX was getting longer and longer in the tooth, and the media was being rather direct in its criticisms of Ken Olsen's management style, or lack thereof. They didn't know what to make of it. At the time, I was trying to expand my occasional guest appearances on Boston's ABC-TV affiliate, WCVB-TV's evening news magazine show, Chronicle. Without identifying the program, I asked if Ken Olsen might be interested in replying to his critics from the Boston Globe by appearing on a half-hour business show on local television. The idea was passed up the line to the head of P.R., and in a few days some positive interest was expressed.

I went to see the executive producer of Chronicle, Mark Mills, to find out if he would hire me as a free-lance producer to do a Chronicle story on DEC. He was not very positive in that he had a pretty heavy payroll of talented producers, and from a television standpoint I was not in their league. I had to agree, but I did point out as best I could that he and his staff didn't know too much about business and that his print competition had made DEC a pretty hot local story. Almost hot negative, as a matter of fact.

Pretty much to explain to me in a nice way that television was not my calling, he said that if I could get Ken Olsen to agree to spending four or five hours outside of his office with no editorial say over the content of the show, he would consider the idea.

Knowing what to ask for, I went back to DEC, identified Chronicle (the highest-rated news magazine show in the Boston market), and put my cards on the table. They then spoke the immortal words at DEC: "Ken likes the idea." I then said that I would like the use of a helicopter for some aerial shots. DEC had a dozen or so of them that actually flew private scheduled airline routes between DEC facilities in the Greater Maynard area (i.e., eastern Massachusetts, New Hampshire and a Digital Equipment Corporation-based gate at Boston's Logan International Airport). No one batted an eye. The helicopters were not executive perks at DEC; they were used by any and all employees who wanted to avoid traffic in going from place to place. This egalitarian policy further emphasized just how different DEC was and how indifferent they appeared to be to the cost of anything. In doing the case study, we were told that DEC had state-of-the-art video-conferencing facilities that no one used because it was sexier to take the helicopters.

Back I went to Channel 5, having "gotten the order" at DEC. The meeting was worth the price of admission. "They said what?" I said, "Yes." And to give the production some visual values, I said I had them provide us a helicopter. Mark Mills wanted to meet with the DEC P.R. people to confirm all of this. We did, and they did.

Because of union-management contracts, I was assigned a line producer to run the crew and put together the show. Dick Amaral was thirty years in the business and didn't know quite what to make of me. He had never worked with a business professional. We were an oil and water mix. We did our best.

Having done independent industrial TV production some years before, I knew just enough to be dangerous. That is what drew Amaral the assignment. He was one of Chronicle's senior people. Amaral was every bit the television professional his credits said he was. He had network experience and the respect of his technical team.

We had two seven-and-one-half minute segments and a four-and-one-half minute segment to work with. It was agreed that I would be the close-out guest expert in the final four minutes.

I put together a story line that would attempt to explain the Alice-in-Wonderland world of Digital to the Boston television viewers. We would interview Olsen first at The Mill in Maynard, and then at DEC's computer museum at Marlboro about fifteen miles away.

In the morning of the day of the shoot, Olsen would be addressing a trade show group in Boston, so we would pick up some footage there as well.

I arranged a day with Amaral to survey all the locations to see what kind of set-ups would be appropriate, and also so no one would get lost on a tight schedule. Those things do happen.

Since all of the places were on the helicopter routes, I suggested Dick and I go by air. He declined in that he was not comfortable in a Bell Jet Ranger, having lost a fellow TV colleague in one several years before. I drove the interstates with Dick as the DEC helicopters flew overhead. He did agree to let me shoot a morning of aerials as part of the production to be mixed into the show at his discretion.

I wanted to be able to show the incredible sprawl that was DEC. Not only did they have The Mill, but when RCA dropped out of the computer field, DEC purchased their unfinished signature headquarters complex along Route 495, Boston's second ring of its famed Route 128 technology highway.

A further characteristic of DEC was to follow The Mill model and expand into closed-down strip malls. They would paint former supermarket windows gray and move whatever group that was hot and needed space into the complex. They added a painted circle in the parking lot for the helicopters. In New Hampshire, they built a brand new million square foot facility and out back constructed a little log cabin with a pot-belly stove and a location sign on it as if it were a railroad station to act as a place to keep warm while waiting for the flights to Boston. I had hoped that aerial views of all the chock-a-block full parking lots would somehow convey what a hundred thousand-plus jobs really looked like. At least this once the media would get as much of the real story as one short TV show could deliver.

On the first scheduled shooting day we rendezvoused with the helicopter in Boston. (It had been provided with an exterior television camera mount that was controlled from inside the cabin.) I took off with part of the crew while the van went to the last location for the aerials. Flying as a passenger and flying as a working crew member are two different things. The pilot was all business. By the time we had made multiple photo passes at all the locations I had suggested, I had had enough working helicopter experience to last me a lifetime.

Back on the ground we hit an inner city manufacturing plant and I was allowed to interview a production supervisor. The camera was set up over my shoulder and my questions would be cut out of the final tape, with only the worker's answers added in. When I ran out of questions, the supervisor kept talking for some reason, and we had a solid story of why DEC was such a great place to work.

Back to Maynard, The Mill and Ken Olsen. I had written a series of questions for the on-camera host, and true to my initial proposal, they were designed to let Olsen have his say. When we finished the first segment and headed to the computer museum location, I rewrote the second series of questions to build on what Olsen had said so far. Everything fit together as planned.

During set-ups and between takes, I had a chance to chat individually with Olsen. A nicer person you would never want to meet. It was easy, however, to detect the "CEO isolation" that was the result of thirty-odd years of essentially having your own way. Even with the common touch and being a common man, it is impossible to maintain any kind of a common-sense view of what is going on. A CEO of a major corporation (and of many minor outfits) is a person in a bubble. To be in one and riding another is unreal. Ken Olsen's world was unreal.

When asked about DEC's future direction, he conceded that neither the stock market nor the customers would set the course. The investment community was short-sighted, and he had to keep the long view. (Not bad so far.) Then he said that the customers were a poor source of information because, not knowing what was possible, they could not make predictions on what they wanted or needed. He said that his job was to make these decisions. He added that they were big decisions and he had better be right. He had been right before and wrong before, and he seemed to feel that he could be right again.

The show ran Tuesday, March 6, 1990. Chronicle, true to its style, did a masterful job of production. In my segment, which was also done as an unrehearsed taped interview, I had to point out that Olsen's disdain for market input had to be considered technological arrogance. Although I didn't say it, I had remembered what I had learned over the years about market research. You were not allowed to use your brain because the sample size was too small. You had to test all kinds of approaches because they had the habit of turning up answers you were not looking for. Unfortunately for DEC, Olsen was sure he had all the answers.

The show received excellent ratings, and my career as amateur producer was given at least a temporary, if reluctant, extension at Channel 5. I mentally took aerial shots out of my production concepts.

As a result of working on the TV project, I was able to get a sense of what DEC was all about. True to its founder's roots in the fifties, it had not changed in the nineties. Its products were still doing things more elegantly and technologically better than anyone else's. They were still doing things at a very high price, and they still required extensive support and service. "User friendly" was not in the DEC vocabulary. "Fully supported" (at a profit) was DEC's strength.

But the world of computers was expanding in all directions beyond anyone's predictions. Businesses were having to learn technology or perish. IBM's approach ("We will take care of that") and DEC's approach ("We will explain all of this") were consistent from the beginning. What was rapidly changing was the marketplace.

Now there were economically priced suppliers who had workable technology that would both take care of customers and explain what was going on at the same time. The cost of the big boxes was coming down, and the new players in the business were beginning to cut margins and reduce costs. The contest between DEC and IBM as to who could operate with the highest overhead continued unabated. IBM said that they were and always had been the best bet, so why take the risk of dealing with someone who may not be around as the industry shakes out. DEC, on the other hand, said that we can do things no one else can do (at a price) and we can do it now (the network advantage), so why not pay the price.

Somewhere between safety for those who couldn't understand how things worked and the need for engineering elegance for those with unlimited budgets was a vast playground for some very nimble companies.

The stage was being set for DEC's end game and IBM's unraveling. The common factor in both companies was massive installed bases of product that were reliant on continued service contracts that would generate income for the foreseeable future, no matter what product or market strategy was pursued.

The big ones go down slowly, even in the fastest of the fast lanes. DEC was the more vulnerable of the two. Its product offerings were fair game for IBM, who protected its mainframe business (which refused to die) while cutting margins to go after DEC customers every place it could. DEC was forced to cut profits to keep business. Its sales organization and its management still had its engineering pedigree and its "elegant cost" of operations.

Growing up around both of these big guys was a Wild West culture with a "take no prisoners" mentality. No elegance and no appreciable overhead were required to pick off one industry application at a time from whatever angle was easier. Computer- assisted design? "We can do that better than they can because that's all we do, and it will cost you much less. Let's take a look at that bottom line."

Production control? "That's our specialty. We actually have more applications and accounts than either of the two big players. Besides, you are very important to us."

At DEC, two things began to happen. First, the earnings numbers started to shrink, even as sales maintained their levels. Then the bottom line went suddenly red in a big way. Olsen had no recovery strategy that he could articulate to the investment community. The stock price sank like a rock. As the losses mounted, so did the pressure on DEC's board of directors to do something.

Corporate governance is an inexact science. Management must run the enterprise. Yes, the board has fiduciary responsi-bility, but that usually is taken to mean that no one is stealing the place blind and that what is being done is legal and generally ethical. The responsibility that a board of directors must take seriously is to oversee succession planning. Is there talent coming along who will sustain the life of the company? This talent base is best developed inside the organization over an extended period. When a board must go to outsiders for a new CEO, it means that they have failed in a major responsibility. If they have to go to a turnaround strategy, they have further failed all concerned. Business reporters don't understand these concepts.

DEC was the creation of Ken Olsen. Gordon Bell was a sustaining force. The high attrition environment created by Olsen complicated management development in its traditional application, so when succession became a burning issue for the board of directors in 1993, the cupboard was bare.

It is hard to know the reasoning of the board in making their final and fatal move, but DEC was an engineering company that lived by the sword, and perhaps it was thought that engineering was its only logical salvation. Could DEC without Ken Olsen invent and engineer its way back to life one more time?

Their answer surprised the industry and the business world. He was Robert Palmer, a chip designer who had been deeply involved in the development of the alpha chip technology. True to DEC form, it was an elegant design that could do more technologically than what anyone else had in their inventory.

When the announcement was made that Ken Olsen was out and that Palmer was in, many people inside DEC had thought that the board had gone to the outside for Palmer. They didn't even know he worked there! Senior executives had been asked to make a videotape on what they thought was wrong at DEC and what they would do about it. Palmer's audition performance was judged best. He got the part!

If the alpha chip and its family of computers were to be DEC's salvation, what was needed was someone to take them to market in a big way. A circuit designer was an unlikely candidate to do the deed.

The sales force was at long last put on commission and the lay-offs were begun big time. Sales met its goals and made big bucks. Then to management's chagrin, this produced big losses at the same time because Sales cut prices to get the orders in. Because they never had a commission sales force, no one had ever learned how to manage one.

The lay-offs began with buy-outs. A package of benefits and severance pay was put on the table. The brightest, best and most confident snapped it up and left first. Next, the grim reaper was turned loose in the land. Massive lay-offs would cut overhead and restore profitability, which would allow the alpha strategy time to work. That at least was the plan.

"Cut your group thirty percent" was a typical directive. The four or five managers in charge did as they were told. No one ever thought that two or three of those managers should be part of the cuts. They sure didn't, and so they stayed, and a few more good people left. Seventy thousand employees were let go in round after round of lay-offs, and while sales numbers stayed up there, profits only rebounded in fits and starts. Alpha still was cutting-edge technology, but new customers were hard to come by outside of DEC's current installed base. DEC services business did open up new markets on its own by offering to manage the computer installations of customers who were using other than DEC equipment. They made a reputation for themselves as being the best in the business. They even landed Microsoft as an account and managed its home office computer network. They sold Compaq on the idea of doing their customer support. Meanwhile, the elegant alpha and Palmer were going nowhere fast. In a desperate last gasp, the alpha was sold to Intel to shore up profits. No one in the media questioned the non-existent logic of this move. All they did was write the story. It was ironic that at both its beginning and end, DEC was one man short. They never got around to hiring that third man who knew something about business in the beginning, and didn't have one man at the end who knew anything about business either.

As I was being driven down the aisles of the Saturn plant in Spring Hill, Tennessee, I was brought to the magic point in the assembly line where the body of the car descends from above as the engine and wheels come up from underneath and the mating creates a car. That was considered to be the highlight of the operation.

Thinking back on the experience, there was another place that perhaps was far more significant. This integrated, one-of-a-kind, massive factory was the most over-engineered set of electric trains ever created in the mind of man. The plastic panels of the car bodies were more costly than steel and had to be processed and painted separately. The lost foam casting of the engine blocks was, in a word, elegant. And there at the center of this engineering wonderland in Tennessee was this massive installation of DEC computers to make it all work.

The little cars that will never make a profit passing overhead were being controlled by the DEC computers that, because of their engineering elegance, could not make a profit in the new age of information.

The mating of the two perfectly illustrated the difference between being able to do something and being able to make money doing it. Making money makes a difference in every business. It's not easy to do initially and not easy to sustain over the long haul. Forty-one business years is a pretty good span of life for a business career. It's not a very long life for a business.

Sooner or later, time has a habit of running out on unlimited budgets-even those in the billions.

Neither of those big business stories ever reached the hot negative status required for some serious editors to begin asking some serious questions.

Earnings crashing and massive lay-offs are just treated as things that happen, like snow storms or traffic accidents.

In these two cases, I was fortunate enough to get enough first-hand personal information to put the big picture in focus. A couple of editorial page pieces and a local TV news magazine show wasn't much in the way of telling the story the way it should have been told. Fortunately, many business professionals can take what does get out and can put things together for themselves with sufficient accuracy to pick up the vital lessons that the media misses.

So much for giants. What about small to medium businesses that never surface in the press? Let's take a look at some of what we may be missing.



Jack Falvey
22 Cortland Drive
Londonderry, New Hampshire 03053
Email | T 603-432-5715 | F 603-537-0340
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