Digital Equipment Corporation had helped lead the minicomputer revolution of the 1960s and 1970s. By 1992, according to Richard Rumelt, a strategy professor at UCLA, it had been losing ground for several years to newer 32-bit personal computers, and there were serious doubts that it could survive for long without dramatic changes.
That year Rumelt sat in on a strategy discussion among DEC’s senior executives. When he wrote about it in 2011, he simplified matters by pretending that only three executives had been present.
“Alec” argued that DEC had always been a computer company and should keep integrating hardware and software into usable systems. Call it Boxes. “Beverly” thought the only distinctive resource DEC had to build on was its customer relationships, and pushed for Solutions to customers’ problems. “Craig” held that the heart of the industry was semiconductor technology, and wanted the company to put its resources into designing and building better Chips.
The plans didn’t fit together. Chips and Solutions would each be a dramatic transformation, in Rumelt’s view, needing wholly new skills and ways of working, and no company could carry out two deep transformations of its core at once.
Ken Olsen, DEC’s founder and chief executive, had asked the group to reach a consensus. It couldn’t. A majority preferred Solutions to Boxes, a majority preferred Boxes to Chips, and a majority preferred Chips to Solutions. Whichever path the group picked, a majority preferred something else. It was the paradox the French philosopher Nicolas de Condorcet had first pointed out.
So the executives compromised on a statement: “DEC is committed to providing high-quality products and services and being a leader in data processing.”
Rumelt did not count it as a strategy. He called it “a political outcome reached by individuals who, forced to reach a consensus, could not agree on which interests and concepts to forego.”
On July 16, 1992, Olsen said he would retire as head of the company he had founded 35 years earlier. DEC immediately named Robert Palmer, a vice president of manufacturing, to succeed him, effective October 1. The company was expected to announce heavy losses and deep job cuts the next week.
Palmer, who by Rumelt’s account had headed DEC’s semiconductor engineering, made it clear that the strategy would be Chips. “One point of view had finally won,” Rumelt wrote. “But by then it was five years too late.” In his telling, Palmer stopped the losses for a while but could not hold back the ever more powerful personal computers that were overtaking the firm.
In June 1998, Compaq completed its acquisition of Digital Equipment.