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Innovating for Failure: Government Policy and the Early British Computer Industry.

Innovating for Failure: Government Policy and the Early British Computer Industry These two books make important and highly complementary contributions to our understanding of the British computer industry. With the aid of extensive archival resources not previously mined by historians, each documents the history of an institution that figured prominently in the industry, and each pushes beyond the confines of that institution to provide broad insights into the industry as a whole. The books also share a common theme of failure. Neither the public agency studied by John Hendry nor the private firms chronicled by Martin Campbell-Kelly succeeded in their objectives of closing the gap between the British computer industry and its American counterpart. The shadow of IBM looms large over both studies. These books thus form an important chapter in the story of British industrial decline, one which sheds a great deal of light on the modern American economy and one of its greatest successes.

Contrary to what the books' titles might lead one to believe, Campbell-Kelly's study covers much the broader territory. ICL and its antecedents hold much the same position among British computer firms that IBM does among American companies. Its roots go back to the early twentieth century, when the British Tabulating Machine Company (BTM) began acting as the exclusive distributor of punched-card tabulating machines in the United Kingdom and other English-speaking nations outside the United States. BTM operated under license from an American firm that eventually formed the core of IBM. In 1949 the companies dissolved their agreement, just as the punched-card firms entered the uncertain period of transition from electro-mechanical equipment to electronics and computers. A decade later BTM merged with its traditional competitor in the tabulating business, Powers-Samas, to form International Computers and Tabulators. A period of almost continual merger negotiations followed, involving the British government and virtually every manufacturer of computers other than IBM, and culminating in the formation of ICL in 1968. Far and away the largest British producer and firmly identified with the national interest, ICL set out to become the world's third largest producer of central processing units, which at the time represented IBM's greatest strength. Though unsuccessful in this endeavor, ICL continued to grow, and today it remains "Britain's leading information systems company."

Campbell-Kelly takes us through this history with a straightforward, chronological account. He devotes roughly half the book to the punched-card era, the remainder to the period since the BTM-Powers-Samas merger. The narrative moves forward through time in neat bundles. At the start of each, Campbell-Kelly assesses the marketing goals of the firm, the principal obstacles to achieving them, and the degree of success ultimately attained. For the punched-card era, with its comparatively stable technology and business relations, Campbell-Kelly defines the bundles according to traditional historical periodization. Later, product innovations and mergers dictate the breaks in the story.

Throughout this account Campbell-Kelly keeps his gaze closely on the very highest echelons of management. His primary sources come from the board papers of ICL, which date from the earliest years of operation of its ancestors. These records contain financial reports, strategic plans, and most important for Campbell-Kelly, documents relating to mergers and other relations with firms and government institutions outside of ICL. Campbell-Kelly has supplemented these sources with references from the secondary literature and a few other collections of primary materials, and for the later period he has interviewed many of the top managers.

The result is an unusual brand of official corporate history. In effect, Campbell-Kelly examines the history of the entire tabulating machine and computer industry from the perspective of its leading firm. We sit on its board and look out. Because ICL and its antecedents have always been so prominent in that industry, because they discussed mergers with so many firms and with government, and because Campbell-Kelly draws so ably on the secondary literature and his own analysis of the industry, the book provides a remarkably comprehensive and continuous survey of the data-processing business in Britain during this century. In this sense we get far more than we might expect from a study of a single firm. By the same token, the book does not often slice very deeply into the operations of BTM or ICL themselves. Campbell-Kelly says in the preface that he hopes his study will be of interest to students of corporate research and development. If that proves true, it will not be because it offers the intensive examinations of research management and development projects that have characterized most recent studies of corporate research. Even when discussing the issues of product innovation and market strategy that occupy most of his attention, Campbell-Kelly must infer a great deal from formal reports and proposals.

This book does not yield easy generalizations. It has no introduction or conclusion, and it lacks an explicit theme. At several points Campbell-Kelly encourages readers to draw their own conclusions. Yet it seems safe to say that the current running through this study is failure, and on this subject Campbell-Kelly is extraordinarily suggestive, if not explicit, in drawing his own conclusions. His technique, repeated at the beginning of almost every chapter, is to draw attention to the gap between expectations and accomplishments. Usually this involves a description of how BTM and ICL lagged behind IBM and its competitors, both in their abilities to sell existing products and to generate new ones in a timely fashion. Campbell-Kelly then gives ample voice to contemporaries who sought to explain this sluggish performance and remedy it. Since the firms seldom wanted for critics, this approach enables Campbell-Kelly to introduce many ideas into the discussion. He also does not hesitate to pass rather frank judgments on the performance of individual managers. Had Campbell-Kelly probed more deeply into the firm, he might have provided further insights (how, for instance, did the aristocratic management of BTM contribute to the firm's inability to develop its own manufacturing capabilities?). Had he been more willing to generalize, his ideas would be more accessible to students of industrial decline. But given his task of producing a comprehensive official history, his accomplishment in providing for a discussion of failure is a remarkable one that deserves attention from a wide audience.

In many respects, Hendry's book is the inverse of Campbell-Kelly's. Focusing on the public sector, Hendry concentrates on one component of its activities regarding computers, the policies of Lord Halsbury as director of the National Research and Development Corporation (NRDC) from 1949 to 1959. The subject serves as little more than a footnote in the history told by Campbell-Kelly (who, indeed, cites Hendry's book, using the far more appropriate working title of NRDC and the Early British Computer Industry). Although narrowly focused, Hendry is eager to draw lessons. He makes the theme of failure explicit, and his book's greatest assets are its analytical introductory and concluding chapters.

As Hendry eventually makes clear, his is a story of an endeavor that could not possibly have succeeded, because NRDC had been given a self-defeating mission (what Hendry refers to as "terms of reference"). It was created to address two concerns regarding patents: that patents generated through public support of research might unfairly enrich private parties; and that such patents might not move quickly into productive use. To head off the first problem, NRDC would take possession of the patents. To overcome the second, the agency would encourage their exploitation by private parties. This second function, of course, flew directly in the fact of the concerns about fairness. Recognizing the conflict, the government restricted the funds available to encourage commercial use and insisted that they be repaid, so that NRDC would function as a self-supporting endeavor. Any additional patents generated in the course of a project receiving support from NRDC would pass to the government agency.

Following Lord Halsbury as he tries to entice Britain's data processing firms into deals with such scant bait, one does not know whether to laugh or cry. Halsbury, who made frequent trips to the United States and closely monitored IBM's early successes in marketing electronic calculators and computers to its traditional business customers, became convinced that Britain's computer industry would succeed only if one of its electronics firms merged its technical expertise with the marketing experience of either BTM or Powers-Samas. As Campbell-Kelly shows, such mergers eventually came to pass, in part because of government incentives. But Halsbury lacked the resources to force the issue, and apparently he also lacked the will or the means to change the terms of reference, though Hendry does not raise this possibility.

These two books ultimately converge on the same issue and the same moment in time. Why, they ask, did Britain's computer industry fall so far behind during the critical period from the end of the Second World War, when British designs and installations compared quite favorably with those of the United States, to the early 1960s, when IBM penetrated so deeply into the market with its 1401 and System/360 machines? The solution, they make abundantly clear, consists not in identifying a single cause that explains an otherwise inexplicable phenomenon, but in sorting through many factors that in their abundance make failure appear inevitable. Both Hendry and Campbell-Kelly have concentrated their sifting efforts on the managerial aspects of the question, and with good result. No doubt Britain's computer industry would have performed better had BTM not brought a conservative, aristocratic style of management to it. Poor product development contributed further to its troubles, as did hamstrung government programs.

Yet one senses in reading these studies that the most important factor of all rests outside the institutions, in the marketplace, and beyond that in the realm of culture. At critical points in each book, we encounter what seems to be the foundation stone of the story--the lack of enthusiasm for tabulators and computers among British consumers. The sluggishness of the market restricted opportunities to attain scale economies. More important, it deprived the British industry of the primary source of vitality that drove its American counterpart. In both the tabulating business and the critical early years of the computer industry, consumers in the United States had a great deal of input into the designs of the equipment. Suppliers did not just produce standard machines. Working closely with customers, they arranged hardware and software to perform particular services. At the onset of the Cold War, the American government pumped huge sums into the hands of consumers, further invigorating this process just as the electronic computer came into being. IBM, a firm with a long tradition of placing representatives in every corner of the market, listening to customers, and maintaining flexible manufacturing capabilities, thrived. Campbell-Kelly and Hendry have described with revealing insight the largely unsuccessful efforts of British managers to create in hothouse fashion an IBM of their own. Like those managers, they have concentrated on issues of product design, organization, and scale, not on the environment that had nurtured IBM's organic growth.

Steven W. Usselman is assistant professor of history at the University of North Carolina, Charlotte. His studies of technological innovation and corporate strategy in the American railroad industry have appeared in the Business History Review and other journals. He is currently completing a study of product strategy at IBM leading to the System/360 computer.
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Author:Usselman, Steven W.
Publication:Business History Review
Article Type:Book Review
Date:Jun 22, 1990
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