Dealers of Lightning (80 page)

Thus they spent a futile morning with Kearns and McColough, who
was still chairman of the board. Omstein found himself repeating in
Kearns's ear, like a mantra, "This lab will be gone inside of six months."
The third time, Keams turned to him with a steely glare and said curtly:
"I heard you."

"I came away thinking, he'll back his guys," Ornstein recalled.

The exodus did occur as they predicted, although not instantaneously. While Thacker left immediately to work with a startup com­pany marketing a paging device he had invented, many other CSL staff
members deferred their resignations until after the end of the year,
when their bonuses, retirement credit, stock options, and other perks
would vest for 1983.

But then the floodgates opened. "During that first couple of weeks in
January there were like two or three resignations a day, because people
had already done their looking around," Warren Teitelman remem­bered. "We would stand out in the halls afraid to read our e-mail,
because it would only say, well, we lost two principal scientists and
three senior scientists today."

There can be little doubt that Bob Taylor's bosses underestimated—
and more critically, misunderstood
—
his relationship with his labora­tory members. On an administrative level he had ceded the job of cor­porate politicking to Jerry Elkind; on a technical level he was vastly
overshadowed
by Butler Lampson
(as
was almost everyone
else). But
his role was always more subtle,
and
bound to seem different depend­ing on whether it was viewed
from
within the lab or without.
Taylor
had created the very habitat
that his
engineers and scientists depended
on
to pursue their work.
He was not
only the buffer between them and
the mundane concerns of
corporate
Xerox, but the indispensable light­ning rod for all the complaints
about
their arrogance and elitism.

"Taylor
sacrificed a lot of
his career
at
Xerox
so we wouldn't see
a
lot
of the bullshit," Alan Kay
remarked later.
This sentiment was widely
shared.
It
accounted for much
of their loyalty
to him (even among
those with whom he had clashed),
and even
more for their fear that
things would be immeasurably
different once
he was gone.

His
resignation marked the
passing of an era
at
PARC
that some
peo­
ple believed, perhaps correctly,
had
run out
its
string anyway.
To Spencer
and
Pake, Taylor was not merely
the strident
exponent of
CSL
privilege;
he
was
the defender of a stultified
regime.

"I
knew there was a high
risk we would
lose people," Spencer
recalled. "But by 1980 the
research center had
really come dead
in
the
water.
So
you'd had this wonderful
burst of
imaginative things, a great
burst of energy, and by that
time it was dead. I
had a feeling we
were
going backwards. Absolutely, the
place needed
a change.

"If I
had had my choice I would
not have
chosen to lose all of those
computer scientists. But in retrospect, it
may
have been a good thing."

Taylor meanwhile found a sponsor
for a new
lab.
It
was not
Hewlett-
Packard, as Pake and Spencer suspected,
but Digital
Equipment Corp.,
the maker of the PDP-10 minicomputer
that had
caused
CSL's very
first
flap with
Xerox
so many long years
before. "DEC
called to ask if
I
would
consult," Taylor said. "Then three of their real estate people showed up
and asked:
Where
should we build the lab?"

Selecting a site near downtown Palo Alto, on the far side of the Stan­ford campus from
PARC,
Taylor ultimately attracted fifteen
CSL
staff,
among them Thacker and Lampson, to the
DEC
Systems Research Cen­ter, Robert
W.
Taylor, director. The emigration of so many top scientists
to one place finally got Kearns's attention.
He
and his right-hand man,

Bill Glavin, flew to DEC headquarters outside Boston to implore Ken
Olson, its founder and CEO, to halt the raid on PARC. They even deliv­ered a rather fatuous warning that Xerox was a very large DEC customer
...
for the moment.

Nothing ever came of the threat. But as Kearns later recounted, a few
years later Olson pulled him aside at a corporate chief executive s confer­ence to complain about the Palo Alto SRC's independent-minded
engineers.

"We're having some difficulty with the group," he griped, "now that
we're trying to tie them more directly to the business strategy."

Kearns chuckled. "Ken," he said, "that's how you got them in the first
place."

Spencer, meanwhile, was left with the task of restoring the morale of
dozens of PARC engineers shocked and upset at Taylor's departure.
Shortly after the ouster he joined the Learning Research Group at one of
its last Pajaro Dunes retreats.

The atmosphere of change could not have been stronger. Kay and
his fecund imagination were gone. Adele Goldberg and Dave Robson
had published the first commercial guide to Smalltalk, which Xerox
had officially released to the public.

PARC's original three laboratories had fissioned into six, including
the Intelligent Systems Laboratory under John Seely Brown—spun off
from SSL, which was recast as the System Concepts Laboratory under
Goldberg. With the exception of the Optical Science Laboratory, which
was still headed by John Urbach, all of the original PARC labs had new
managers.

Spencer took it as his duty to communicate to Alan Kay's old group how
different the world had become. The PARC of Jack Goldman and
George Pake, of researchers following their instincts into a new world
without the least concern for corporate imperatives, was gone. Pake's
original deadline
—
the ten-year grace period before Xerox would see
results from PARC—had passed. In that time the center had given the
company the laser printer, Ethernet, and the technology of the Star, but
there was more to do. Henceforth the researchers would have to play a
more direct role in helping the company exploit their knowledge. People
like Taylor, with his worldview of scientific research and corporate profit
as two somehow antagonistic forces, were now in the way.

"I can still see myself sitting with Spencer on the steps looking out at
the dunes, toward the water," recalled Diana Merry. "I was trying to
get him to explain to me why he thought he had to push Taylor out. He said “Well, you know, he just wouldn’t play on the team.”

Xerox could have owned the entire computer industry today. Could have been, you know, a company ten-times it’s size. Could have been IBM of the nineties. Could have been the Microsoft of the nineties."

The speaker is Steve Jobs, interviewed for a 1996 public television
documentary on the history of the personal computer. The castigation
is familiar fare. Almost everyone aware of PARC's achievements also
has heard the corollary that Xerox, having invented the technology
underlying present-day personal computing, committed the monu­mental blunder of letting it slip through its fingers.

This image of Xerox as a company uniquely maladroit at exploiting a
new technology offers the incontestable allure of a high-concept Holly­wood melodrama, in which the protagonists are the inventors of dazzling
innovations and the villain is the dead hand of corporate bureaucracy.
The record is certainly damning: Xerox had the Alto; IBM launched the
Personal Computer. Xerox had the graphical user interface with mouse,
icons, and overlapping windows; Apple and Microsoft launched the Mac­intosh and Windows. Xerox invented What-You-See-Is-What-You-Get
word processing; Microsoft brazenly turned it into Microsoft Word and conquered the office market.
Xerox
invented the Ethernet; today the bat­tle for market share in the networking hardware industry is between
Cisco Systems and 3Com. Even the laser printer is a tainted triumph.
Thanks to the five years Xerox dithered in bringing it to market,
IBM
got
there first, introducing its own model in 1975.

Nor does the saga lack aspects of comic opera. There is
Bob
Potter
beating John Ellenby in the battle of cost analysis, then losing the battle
of the marketplace with an obsolescent machine; Harold
Hall
launching
the company's most far-reaching new product initiative with
a
second­hand staff of ten; Jim O'Neill vetoing the sale of five printers to Lawrence
Livermore National Laboratory because it might cost
Xerox
$150,000
over the contract term, in a period when the company's profits ran at
more than $350 million a year.

When a
PARC
invention survived Xerox decision-making and reached
the market, the determining factor was usually a stubborn champion
placing his career on the line. One thinks of the difficult gestation of the
9700 laser printer: Jack Goldman flying two executives to
PARC
for an
eleventh-hour demonstration of its superiority over the CRT-based
"Superprinter," followed by Jack Lewis's ignoring three successive direc­tives to kill the project. The factors governing the corporation's decision­making on dozens of occasions when its future hung in the balance were
not technologies and opportunities, but personalities and politics.

Yet to chalk up the mixed fate of
PARC's
technologies purely to
Xerox's
blundering, as has been done for many years, is misleading.
It
encourages
others to believe that the commercializing of advanced new technologies
is easy, provided only that one has the will to do so; and that a company's
early domination of a high-tech market will reward it with an unassailable
competitive advantage for decades to follow.
It
presupposes that a corpo­ration should invariably be able to recoup its investment in all its basic
research—a mindset bound to lead not to more effective corporate-
funded basic research but simply to less of it. And it overlooks Xerox's
generous funding of
PARC
to this day
—
despite the extinction of
SDS,
which the research center had been created to serve.

***

The notion that Xerox squandered a golden opportunity to monopolize
the personal computer business—that it "fumbled the future," to para­phrase the title of a 1988 case study—rests on several very questionable
assumptions. One is that any company can control so polymorphous an
industry for very long. The fact is, the technologies of personal comput­ing bestow their commercial favors with great capriciousness.

One need look no further than the roster of companies that at one
time or another claimed a lead in computing to see how resolutely the
technology foils its tamers. The IBM Personal Computer became the
industry standard almost instantly upon its introduction in 1981; yet as
of this writing IBM's market share in desktop personal computers is
infinitesimal. Apple Computer's Macintosh, the most successful com­mercial expression of PARC's design principles, was launched in 1983
and by 1985 ranked as the world's most popular personal computer; far
from parlaying that advantage into a lasting franchise, Apple commit­ted a series of management blunders that today leave its very existence
in doubt. (At the very moment Steve Jobs was so self-confidently cri­tiquing Xerox's performance for PBS, his old company was sinking
toward a single-digit market share for the first time since the launch of
the Macintosh. It soon breached this dubious milestone.) AT&T, Sony,
even Exxon all tried to grab a share of the PC business by throwing
their marketing muscle behind the packaging of cutting-edge technol­ogy, and all suffered embarrassing flops.

At this writing Microsoft remains the single most formidable force in
the computer industry. This position it achieved thanks not to hard­ware but (as Butler Lampson, Alan Kay, and Bob Taylor predicted
would happen) to the power of software. Yet Microsoft is not without
challenges that may someday condemn it to the same fate as IBM,
whose market position was once considered every bit as unassailable.
These challenges include an antitrust attack by the government, the
appearance of new technology platforms in which its dominion is less
than absolute, and distracting and costly dalliances in entertainment
"content" and cable television services. Tomorrow may bring new,
unexpected threats. Whether Microsoft itself will be the "Microsoft of
the nineties," in Steve Jobs’s
phrase,
will not be known until well after
the turn of the millennium.

Another dubious assumption is that
Xerox,
simply by dint of its size
and marketing savvy, should have been well up to the demands of com­mercializing the Alto, Ethernet, and dozens of other orphaned
PARC
innovations. This argument is most often expressed as a question: "If
little Apple could sell personal computers, why couldn't big Xerox?"

The answer, of course, is that Apple was able to market the PC not in
spite of its small size, but
because
of it.

Commercializing a radical new technology often means betting the
company on the outcome. In 1981 this had decidedly different meanings
for Xerox and Apple. Xerox employed 125,000 workers, Apple forty.
Virtually Xerox's entire workforce was focused on selling one type of
product: the office copier. They represented decades of corporate invest­ment—hundreds of millions
of
dollars
—
in embedded training, technol­ogy, and customer service.

This might not have been an impediment if the customer bases for
copiers and computers were identical. But for the most part they were
quite different. Through the 1980s, copiers typically were high-volume
machines designed to be installed in central copy rooms inhabited by
clerks and secretaries. They were ordered by the same managers who
handled the purchases of typewriters and telephones. But computers
were systems, designed to support corporate professionals a rung or two
further up the ladder. Their purchasing came under the jurisdiction of a
new category of professional information manager, a breed entirely unfa­miliar to the platoons of copier salesmen on Xerox's payroll.

Apple, obviously, faced none of these issues. Young and agile, it was
in a perfect position to build suitable factories and a computer-
oriented sales force from the ground up—just as Xerox had been when
it chose to commercialize another innovative and suspect technology,
fifteen years earlier. In fact, the two companies' relationship perfectly
illustrates the "creative destruction" model of industrial evolution pro­posed by Joseph Schumpeter in the 1930s, in which entrepreneurial
opportunists snatch markets away from their anachronistic precursors.

Computers, moreover, did not lend themselves to the pricing regime
that many considered Xerox's most important invention: leasing the
copiers and charging customers by the page. When 250 Xerox salesmen
contemplated the Alto on Futures Day and wondered, "Where's the
click?" they were asking a question fundamental to the difference
between the old machines and the new. To sell computers, Xerox would
not only have to build a new land of machine, but also a new system of
compensating and motivating its more than 100,000 sales executives. The
combined task of retooling plants, retraining factory workers and sales­men, and adjusting to the mentality of a new set of customers resembled
that of turning a supertanker around in mid-ocean.

History suggests that corporations are seldom able to remake them­selves as thoroughly as a Xerox trying to turn into a computer company.
How many leading American corporations have survived multiple revo­lutions in industrial technology to stay atop the business pyramid for
more than two or three decades? With the exception of perennial leaders
such as General Electric and, possibly, Hewlett-Packard, the examples
are scarce. The more usual pattern is that a company is granted one or
two runs at the fence before it is finally overmatched by changes beyond
its control—as a sort of corporate Darwinism ruthlessly ensures that
openings will always exist for fresh entrepreneurial companies to arise
and nurture the technologies that make every generation's future.

Even under the best circumstances, the Xerox of the 1970s and
1980s was not a promising candidate to exploit a new technology, gov­erned as it was by the twin burdens of its culture and its business envi­ronment.

Its culture was formed by betting on a long shot and seeing it come up
trumps. For Xerox the spectacular, instantaneous success of xerography
has always been something of a mixed curse. While it brought the com­pany fabulous wealth, it blinded management to the fact that sometimes
the marketplace needs time to absorb new technologies.