Tech's First Great Entrepreneur

O N T H E HORIZON HISTORY LESSONS BY GLENN RIFKIN Tech’s First Great Entrepreneur Ken Olsen created a giant computer firm but thought PCs were “toys.” n September 1987, Kenneth H. hardly have imagined at that founder of Forrester Research. Olsen, the founder and CEO instant that in less than five Having received funding from of Digital Equipment Corpo- years he’d be ousted in disgrace Gen. Georges Doriot, the famed ration, stood before several by the board as the company’s venture capital pioneer in Bos- Ithousand customers, employees, fortunes sagged and, six years ton, Olsen built “the first great and reporters to bask in the after that, his company would be venture-backed technology firm,” glow of his company’s triumph. subsumed into Compaq Com- Colony adds. Known throughout the computer puter and later HP. A Calvinist and a scientist, industry as DEC, it was celebrat- Olsen founded DEC with Olsen believed deeply that one ing not only its 30th anniversary $70,000 in seed money in 1957, did the right thing by selling only but also its emergence as the just a few years after graduating the best products to customers hottest company in the technol- with an electrical engineering and that by building the high- ogy industry. Second only to IBM, degree from MIT. He set up shop est quality computers, buyers DEC was a Fortune 50 company in an old Civil War–era wool mill would flock to his doors. He had with more than $12 billion in sales in the tiny blue-collar town of deep disdain for marketing and and 120,000 employees around Maynard, Mass., 20 miles west of advertising and focused instead the world. Boston, and there built one of the on satisfied customers’ word of Having recently been dubbed most admired companies in the mouth to sell his wares. “America’s Most Successful burgeoning technology industry. For about 30 years, Olsen’s Entrepreneur” by Fortune “He was the first great entre- strategy and vision worked to magazine, Olsen clearly enjoyed preneur in the technology busi- perfection. Olsen’s greatest this pinnacle moment. He could ness,” says George Colony, the achievement might have been Predictions Worth Regretting Ken Olsen’s misjudgment of PCs is one of many prognostications that didn’t pan out. “Stock prices have reached what looks like a permanently high plateau.” —Yale Professor Irving Fisher in 1929, just before the stock market crash and the Great Depression. “That’s the most expensive phone in the world and it doesn’t appeal to business customers.” 18 Briefings On Talent & Leadership the open management style he created for the company, provid- ing freedom and responsibility to people and expecting them to exercise it successfully. He fostered an engineering- centric culture in which excel- lence and quality ruled the day, and top engineers clamored to work for DEC. Olsen and DEC effectively created the minicomputer industry. Back in the 1960s, high-end computer power resided only in the hands of Digital Equipment white-jacketed data-processing Corporation’s visionary high priests who controlled the founder, Ken Olsen, corporate mainframe computers. with Bill Gates in 1992. Those mainframes were massive, multimillion-dollar machines and usually made by IBM. So DEC introduced smaller, refusing to lay off employees, even had already chosen IBM as the de cheaper, yet still powerful in difficult economic times. facto standard. Once the industry machines. Its PDP and VAX lines But Olsen, who died at age trendsetter, DEC began to zigzag of minicomputers became so pop- 84 in 2011, ultimately became a while trying to fend off new com- ular—particularly with engineers victim of his myopic view of the petitors and found itself futilely and scientists—that the company industry. He made his fortune chasing new markets. could barely keep up with selling proprietary hardware and Perhaps most damaging, demand. DEC’s fortunes soared software and refused to acknowl- Olsen refused to identify a suc- and Olsen became a wealthy edge the popularity of the Unix cessor, believing nobody could corporate patriarch. A big bear of operating system, which could be run the company but him. As the a man, Olsen was intimidating used by multiple vendors. Olsen technology market shifted, this and sometime cruel. He could referred to Unix as “snake oil.” In visionary was blinded by his own publicly lash out and humiliate the late 1970s, he openly deni- stubborn hold on the past. DEC JPhoto by Pam Berry/The Boston Globe via Getty Images executives. But he was also deeply grated personal computers, calling couldn’t adapt, even after Olsen’s religious and believed in a fun- them “toys” and saying, “The per- ouster. The once great company, damental responsibility for his sonal computer will fall flat on its the subject of admiring books and employees, whom he considered a face in business.” DEC eventually articles by organizational behav- Photography by: family. DEC became legendary for built its own PCs, but the market iorists, ultimately disappeared. • “In five years’ time unemployment could go to 15 percent without any difficulty at all in America.” —Richard Branson in 2010. Five years later unemployment was 5 percent. “There is no danger that Titanic will sink.” Phillip Franklin, vice president of the company that produced the ship, in 1912. “That’s the most expensive phone in the world and it doesn’t appeal to business customers.” —Microsoft CEO Steve Ballmer on the iPhone, in 2007. Issue No. 31 19.

Load more