Fumbling the Future: How Xerox Invented, Then Ignored, the First Personal Computer.

Fumbling the Future: How Xerox Invented, then Ignored, the First Personal Computer.

In the early 1970s, computer scientists at a California research center called Xerox PARC built a machine, the Alto, that is considered to have been the world's first personal computer. PARC, in fact, was the theoretical spawning ground for the then-revolutionary notion that the immense power of mainframe computers could be brought to the desktops of individuals. PARC produced many other computer firsts--a pioneering word processing language, a "local area network" through which computers could talk to each other, a laser printer, and a "mouse" for moving characters on the computer screen.

Measured scientifically, these were remarkable achievements. Measured by business standards, however, PARC was a disappointment. Xerox was unable to translate its technological prowess into commercial success. When the company finally introduced a computer based on PARC technology into a market flooded with competitors, the machine was too expensive and too slow.

Authors Douglas K. Smith and Robert C. Alexander, management consultants, show that great science will be wasted unless a company is flexible enough to get good products out of the labs and into the hands of customers--quickly. Xerox had become wealthy and powerful from its near-monopoly in photocopying; net income rose from $3 million in 1959 to $348 million in 1974. But while profits climbed, a bureaucracy that wags called "Burox" settled in.

The head of Xerox, Peter McColough, personified the enlightened business statesman--dabbling in Democratic politics, serving on prestigious charitable boards, spending millions of Xerox dollars to sponsor educational television. He moved corporate headquarters from gritty Rochester to preppy Stamford. McColough also became enamored of something he called "an architecture of information," and in 1970 he commissioned the creation of the Xerox Palo Alto Research Center (PARC) to try to figure out what that grandiose phrase meant.

PARC scientists quickly developed a reputation for brilliance matched only by a reputation for bad manners. An alumnus of the center admits, "PARC suffered from a whole lot of arrogance. If you didn't understand automatically, you were `stupid.' It's hard to get a good hearing that way." An irreversible case of communications gridlock set in between PARC and the rest of the corporation.

Meanwhile, back in Stamford, Xerox was following the same path as American car manufacturers by concentrating on large, high-profit equipment while giving little consideration to the Japanese, who were selling smaller, less expensive, high-quality machines. The resemblance to the car industry was more than coincidental--Xerox management was loaded with senior financial executives recruited from Ford Motor Company. Problems kept mounting. Big customers defected when Kodak introduced a better copier. The Alto languished in the PARC labs. Yet, despite revisions of the organization charts, soaring pronouncements from top executives, and more money poured into research, Xerox was unable to change. When the PARC scientists proudly displayed a personal computer at a 1977 management conference, the wives of the Xerox executives were enthralled by the graphics, the mouse, and the color printers. But the men, who had little understanding of office automation and a macho aversion to typewriter keyboards, peered in a standoffish way and asked, `Oh, can it do that?'"

Fumbling the Future is not an easy book. The identities of the characters get blurred. Key passages of the book discuss technical aspects of computers. And the book ends abruptly, with the resignation of PARC's director in 1983. It needs a wrap-up chapter with the authors' analyses and conclusions.

Nevertheless, Fumbling the Future is a superb case study of an organization at war with itself. Two conclusions can be drawn from the book--one cautionary, the other heartening. The alarming theme is that American business is very thin in engineering know-how at the top. "Engineering ignorance beset all senior executives at Xerox," Smith and Alexander write. "No one had ever run a product development program...there was no one who could say that such and such should cost less or should be doable faster." This problem goes beyond Xerox. According to McKinsey & Co., the management consultants, American companies are suffering from an "engineering gap" because they bury engineers deep within their organizations and give them little or no authority for the final product. The Japanese, in contrast, give their engineers wide authority, lots of contact with customers, and overall responsibility for the end product. Superior design and engineering--not total dollars spent on research and development--are the major reasons why so many Japanese products work better and cost less.

The second, more encouraging theme is that, in an entrepreneurial economy, for every corporate behemoth like Xerox that gets paralyzed by oncoming headlights, there are hundreds of small, sleek enterprises ready to leap ahead. Although Xerox has made a comeback in the copier business, it is still losing prodigious sums of money in electronics. Fully half of the company's profits now come from a financial services arm, which sells stocks and insurance, and Xerox is frequently rumored as a target for takeover and breakup. And it wasn't Xerox, but brash start-ups like Sun Microsystems, Apple Computer, Compaq, and Microsoft that converted the best of PARC's technologies into thriving new enterprises. Some of PARC's brightest scientists now work for these firms. Xerox may have fumbled the future, but its fumble also provided the opportunity for fast-moving new competitors to race ahead and make the personal computer as ubiquitous in the workplace as--well, a Xerox machine.