At its peak in the late 1980s, Digital Equipment Corporation (DEC) had $14 billion in sales, 130,000 employees and was ranked among the most profitable companies in the US. DEC’s founder and CEO, Ken Olsen, was named “most successful entrepreneur in the history of American business,” by Fortune magazine. DEC tried on four separate occasions to transition from their traditional minicomputer business into personal computing. But each attempt failed, the company fell from grace and by 1998 DEC was sold to Compaq in a fire sale.
As Clayton Christensen puts it in his book, The Innovator’s Dilemma, they failed because of a culture clash with DEC’s traditional minicomputer business. They were used to 50 percent gross profit margins or more and did not understand this new low margin line of business.
The example of DEC’s demise also illustrates the essential difference between leadership and management. DEC was a very well-managed business. But CEO, Ken Olsen, was incapable of providing the game-changing leadership to spin off a separate business to pursue the new market that they were well placed to go after.
Leadership is about changing the game. Management is about keeping things going. Businesses need both. Good governance and sound processes are essential. However, it is not enough to stay viable as the market changes as the DEC example illustrates. History is littered with examples of well managed businesses that are no longer with us.
We need game-changing leaders who can take us somewhere new, who are willing to continually reinvent their organisations and themselves.
When Steve Jobs returned to Apple in 1997 he provided three examples of the principles of game-changing leadership.
- He averted a risk they faced by reducing Apple’s range of 15 desktop computers to 4 which pulled Apple back from the brink of bankruptcy
- In 2001, he added new value with the introduction of the first iPod which put 1000 tunes in your pocket
- He built on a strength that Apple already had with sleek design, beautiful interfaces and ease of use
How could you apply these three principles and change the game?
Best regards, Brian
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