GUEST POST from Greg Satell
When people like to tell stories of historic corporate missteps, the story of Xerox and the Macintosh is near the top of the list. As the tale goes, the corporate giant spent a fortune to create all the technology that the famous computer was based on, but failed to market it and let Steve Jobs steal it out from under them.
But that version leaves out important context. Yes, Xerox did create the technology. It was also true that Steve Jobs, while touring the company’s research facility, understood that he could use it to make a revolutionary consumer product. But it wasn’t a blunder. Steve Jobs was there because Xerox had invested in Apple at bargain prices, not because they were tricked in some way.
The story has deeper implications, because the myth of Xerox’s blunder influences how firms invest in technology. The truth is that Xerox’s research strategy was visionary and incredibly successful. In fact, it likely saved the company. So rather than looking at the story of Xerox and the Macintosh as a cautionary tale, we should see it as a model to replicate.
The Xerox PARC Strategy
When Peter McColough took the helm of Xerox in 1968, it was at the top of American industry. An incredibly profitable business, it had a culture devoted to technical excellence and produced the world’s best performing copiers. Over the years it also developed a great sales and service organization that built strong relationships with its customers.
But it was becoming clear that trouble was looming. Japanese competitors like Canon and Ricoh started selling simpler, cheaper copiers, based on 20-year-old technology, that were easier to use and needed less maintenance. Rather than staffing a “copy room,” companies could place these smaller, less expensive units on every floor.
Xerox was getting disrupted. It continued to innovate, but most of those efforts were going toward making its copiers better and better at things people cared less and less about. McColough saw the nascent computer industry as an opportunity and sought to control the “architecture of information.
“It was a great phrase,” someone would later say, “because no one knew exactly what it meant.” To that end, he created the Palo Alto Research Center (PARC) and located it 3000 miles from Xerox’s headquarters. He hired Bob Taylor, already considered a visionary for his work on ARPANET and told him to staff it with the best minds in the emerging field of computer science.
The Incredible Success Of The Laser Printer
It was around this time that the company hired a young engineer named Gary Starkweather. He was a guy with big ideas, but soon found he didn’t fit in well at Xerox. Part of the problem probably had to do with his background. Copiers were largely based on chemistry and Gary’s interest was optics. In particular, he was excited about lasers.
But it was more than that. Gary wanted to build something outside the copier business and the higher-ups just didn’t see how it fit in with their business. In fact, his boss actually threatened to fire anyone who worked with Starkweather on the project.
Eventually, he had enough. He marched into the Vice President’s office and asked, “Do you want me to do this for you or for someone else?” In the business culture at the time, this was considered unheard of behavior, clearly a firing offense. Yet fate intervened and destiny had something very different in store for Gary Starkweather.
As luck would have it,news of Gary’s work made it across the country to PARC, the fledgling computer lab that Xerox had recently established in California. The researchers there had developed a graphical technology called bitmapping, but had no way to print the images out until he showed up. His development of the laser printer was not only a breakthrough in its own right, but with the decline of Xerox’s copier business, it actually saved the company.
Leveraging PARC Technology
No one disputes that the number of groundbreaking technologies created at PARC was astounding. The graphical user interface, networked computing, object oriented programing, the list goes on. Virtually everything that we came to know as “personal computing” had its roots in the work done at PARC in the 1970s.
Yet Xerox never became successful in the computer industry, which is why so many question the strategy. That’s the wrong way to look at the investment, however. You wouldn’t evaluate a stock portfolio against all the companies you could have bought, but on how the portfolio performed and by that measure PARC was a magnificent investment.
Clearly, the development of the laser printer paid for the investment of PARC many times over. It also mildly profited on its shares in Apple (although not nearly as much as it could have if it held on to them longer). Xerox PARC technology also led to a number of spinoffs, including 3Com, Adobe and Synoptics, just to name a few. Xerox had shares in many of them.
Many look at these companies and see lost opportunities for Xerox, but that’s a red herring. There is no way that any company could have pursued all of those opportunities. As Henry Chesbrough put it in Open Innovation, “The success of some of these departing spinoffs was largely unforeseen—and unforeseeable. When they left, these spin-offs were more like ugly ducklings than elegant swans.
When you add it all up, even the supposed “failures” of PARC provided enormous value for Xerox.
If You Don’t Explore, You Won’t Invent And You Will Be Disrupted
In the late 1960s, Xerox faced a problem without a clear solution. With many of its key patents expiring, it was losing its chokehold on the industry it had created. That’s what led its visionary CEO, Peter McColough, to create PARC, which invented breakthrough technologies, incredible profits and saved the company.
Yet many see it as a cautionary tale because of all the possibilities it wasn’t able to pursue. Steve Jobs once said that “Xerox could have owned the entire computer industry, could have been the IBM of the nineties, could have been the Microsoft of the nineties.”
Maybe it could have. But you don’t judge a strategy on what could have been, but on whether it solved the problem it was designed to solve. Xerox was facing irrelevance and extinction. Its copier business was dying and it desperately needed technologies that would provide new sources of revenue for a company that was quickly becoming irrelevant. In that context, Xerox PARC succeeded enormously.
In researching my book, Mapping Innovation, I found that the most important thing that great innovators do differently is that they are actively seeking out new problems. In other words, they not only continue to hone their existing processes and practices, they go actively look for areas where they can make an impact.
The truth is that innovation needs exploration and that’s never efficient nor can it be optimized, but it can be done cheaply enough to be sustainable. For large enterprises that usually means investing in labs, but even small business can access world class research by connecting to larger institutions, such as government labs and universities.
It’s a fairly simple equation. If you don’t explore, you won’t discover. If you don’t discover you won’t invent. And if you don’t invent, you will be disrupted.
— Article courtesy of the Digital Tonto blog
— Image credit: 1 of 1,550+ FREE quote slides available at http://misterinnovation.com
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