This book tells the story of the greatest failure of a corporation in our time to create marketable products from truly great research. It starts by telling the story of how PARC was conceived and how it operated.
In 1973, a number of researchers at Xerox PARC demonstrated the "Alto". The Alto was the first "personal computer" designed not only on a human scale for a single individual but supported by a number of improvements that rendered it "instantly responsive to the user's demands", each of them revolutionary in the computer field. They included: a graphics-oriented monitor with "icons" and overlapping "pages" on the screen that was coordinated by the "mouse" input device; a word-processing program "for nonexpert users"; a local area network, the "Ethernet"; and an object-oriented programming language that combined data with certain commands, which hugely simplified computer operations.
These attributes represented nothing less than a paradigm shift for the computer industry, away from the punch cards, unwieldy printouts of results, obscure programming codes, and the awkward time-sharing arrangements that were the hallmarks of mainframe computers. At that moment, Xerox had a full five-year head start over its future rivals. (Amazingly, PCs have changed little. with the exception of incremental improvements, from this fundamental prototype.)
Unfortunately, few at Xerox headquarters understood the importance of these developments. From its beginning, many executives at Xerox headquarters viewed PARC as a kind of uncontrollable island of insolence and arrogance. When Xerox managers visited PARC, they were struck by the rudeness and counter-cultural feel of the place. For their part, PARC researchers viewed headquarters with open disdain at the leadership's inability to understand not only what PARC was doing, but the jargon they were forging.
The mutual distrust between headquarters and its Palo Alto lab neither encouraged Xerox executives to learn about how PARC's inventions might fit into the modern office nor allowed PARC's managers to sell their inventions to the company's manufacturing units. Even worse, PARC had no one in Xerox's top leadership to champion their product ideas or even to get things done - at the moment when PARC's technological innovations were ready for commercial development, the Xerox Corporation was entering a prolonged period of crisis, the "lost decade" of the 1970s.
To the shock of many Xerox leaders, Japanese manufacturers came up with a number of basic innovations in design, greatly enhancing the reliability and performance of their copiers while reducing their cost. With this stunningly executed strategy, the Japanese manufacturers succeeded in turning Xerox's supposed comparative advantages (of a huge sales force and repair facilities and patented technolgies that were being squeezed of every last drop of their value) into unsustainable liabilities.
It was in this context - a crisis of rapidly diminishing market share, with financiers and accountants ascendant within the Xerox bureaucracy - that PARC managers were attempting to sell their revolutionary inventions. Unfortuately, the top leadership at Xerox had turned its attention to investigating the methods of Japanese companies, in particular the techniques of total quality management, which would occupy the attention of David Kearns, the new Xerox CEO, into the 1980s.
Beyond the numbers, PARC was pitting itself against the corporation's incentive system: because the Xerox manufacturing divisions had quarterly targets it had to meet, adding an entirely new line of products threatened to disrupt the flow of revenues, which meant they wouldn't get their bonuses.
Moreover, as an embryonic business that could only promise growth somewhere in the future, the Alto III attracted little attention at headquarters - Xerox managers had long grown accustomed to massive returns rung up at the click of a button on a leased machine, in the hundreds of millions of dollars. In light of this expectation, the Alto III appeared too small to bother with.
In December 1979, Steve Jobs had visited PARC and was working to incorporate the software capabilities he had observed into the first mass-market personal computers. In addition, Jobs, Bill Gates, and others had begun to hire researchers away from PARC: disgusted by the obtuseness of Xerox headquarters regarding their work, many of them were yearning to move to more entrepreneurial environments. They felt that they had accomplished virtually all that they could at PARC.
Nonetheless, with approval from headquarters, a number of PARC's best engineers had begun to develop the Star workstation. Unveiled at a computer trade show in April 1981, the Star generated great excitement. Packed with many of PARC's best features, such an as-it-would-print document screen and electronic mail, the Star was unlike anything that had ever been sold in the industry. However, once on the market, the Star quickly revealed a number of drawbacks. First, with so many features that required processing power, it was extremely slow. Second, it was also too bulky for many offices. Third, it retailed at over US$16,000, pushing it out of reach of all but the richest of corporations. Fourth, the Star lacked a spread sheet, which many office executives wanted, and its "closed" software system would not run those offered by other companies.
While criticized as a typical engineering product with an over-abundance of esoteric features, the Star was far more a reflection of Xerox headquarters: recalling the runaway success of the 914 monopoly, they had assumed that the Star would set the de facto standard for an entirely new industry, which Xerox would again dominate - regardless of the price. Even worse, they had failed to appreciate that this time, the company faced some extremely nimble and hungry competitors.
Xerox had also failed to train its copier salesmen regarding the vision behind, and unique features of, the Star: it was supposed to be the first step in Xerox's re-making of the office environment. Unfortunately, accustomed to selling copiers to lower-level managers, Xerox salesmen understood little of this and many had no idea who to approach within corporations with this revolutionary new product. From their experience with the blockbuster early copier 914, they - along with the leaders in their company - were accustomed to marketing hardware, whereas the Star's principal advantages came from its software. Talk about implementation failure!!
In August 1981, IBM introduced the personal computer (PC). While far more primitive and less user-friendly than the Star - with no mouse, no Ethernet capability, no icons, no multi-tasking windows - it was priced at less than US$5,000. Quickly surpassing the Star in sales, the IBM PC set the standard for the emerging market of affordable personal computers. For all intents and purposes, Xerox would view the PC revolution, which it had virtually created, from the sidelines - it had squandered a lead of over 5 years!!!
Following the failure of the Star workstation, morale at PARC plummeted. To make things worse, in 1981 Xerox appointed a new director at PARC, Bill Spencer, who failed to grasp the unique chemistry of the computer lab. Spencer immediately locked horns with Bob Taylor, who resigned and took most of his top staff with him to DEC. This marked ended Xerox's effort to fundamentally reinvent the modern office.
Nonetheless, PARC could boast a few commercial successes. Most prominent of these was Gary Starkweather's laser printer, which he had moved to PARC to develop in 1971. After a few years of work perfecting the device and a long and difficult period of promoting it from within Xerox, Starkweather was able to convince the company to manufacture a version of his machine in 1977. Though Xerox had barely beaten IBM to the market with the product in spite of a three-year technological lead, its laser printer became one of the best selling Xerox products of all time, eventually becoming a US$2 billion business per year. Its acceptance within the company was made easier by the fact that it was largely a hardware product, with technology familiar to Xerox.
This is meaty stuff, and the authors cover it well and the book is very very well written. It is best when telling the story of the disconnect between PARC and Xerox HQ in an effort to explain the failure, though the technical aspects of how PARC operated are summarized well (and never in excessive detail). This is at heart an organizational behavior book, not a how-to (or how to not) innovate book.