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Telling the Electronic Century's Unfinished Story
Topics: Engineering-GeneralEconomics-Business CyclesGlobalization-Global StrategyTechnology-HardwareInventing
the Electronic Century: The Epic Story of the Consumer Electronics
and Computer Industries (The
Free Press) is the fourth major book by Alfred
D. Chandler, Jr., the School's Isidor Straus Professor
of Business History, Emeritus. It is the heretofore untold story
of the people, companies, countries, and economic forces that
shaped the infrastructure for an unprecedented new era of technology.
Beginning with the vacuum tube in the 1920s and progressing through
the inventions of the transistor, the integrated circuit, and
the microprocessor, Chandler's dramatic tale holds lessons
for managers in any industry, as the Pulitzer Prize - winning
historian revealed in a recent conversation with the Bulletin.
How did you approach this enormous project?
For Inventing the Electronic Century, my basic purpose
was to bring the historian's broad perspective to bear on
an untold story. I wanted to record where, when, how, and by whom
technical knowledge was commercialized into the new products that
laid the foundation for this era. I realized that I ran the risk
of telling a story that isn't yet finished, but for the privilege
of recounting its progress to date, I was willing to take that
chance.
What are some of that story's highlights?
One striking aspect is that by the mid-1980s, the United States
had almost entirely lost both the computer and the consumer electronics
industries before it recovered in computers with the coming of
the PC. By 2000, Europe's withdrawal from consumer electronics
and computers (except for software) was nearly complete.
A century before, the early architects of the consumer electronics
path had been three competing industrial forces: the United States,
Europe, and Japan. Today, in consumer electronics, only three
companies - Sony, Matsushita, and Sharp - remain on
that path, and they are all in Japan. In computers, the Japanese
have been and remain major challengers to the U.S. industry, with
growing market share in large systems, servers, and software.
These have been extraordinary developments. The national industries
that invented the infrastructure for the Industrial Century did
not compete, conquer, or die in the manner of the national industries
that created the infrastructure for the Electronic Century. I
wanted to find out why.
Amid
these complex shifts of dominance, one key theme you cite has
to do with "paths of learning" in organizations. Can
you offer an example?
Sony's role in Japan's path to global conquest is
probably the best example. In the wake of the devastation following
World War II, Sony acquired from Bell Laboratories one of the
first licenses issued to a foreign company to produce the transistor.
Focusing on miniaturization, Sony became the first mass marketer
of small transistor radios and followed with the development of
the first transistor-based microtelevision set. Then came the
Walkman, the basic VCR, the CD, the CD-ROM, the DVD, and the PlayStation,
all capitalizing on Sony's technical capabilities and learning
in areas such as marketing, production, and distribution.
This is what I call a "virtuous strategy," which basically
means that the learning and profits from an early innovation are
then applied to the next one. As a manager, if you understand
that, you'll succeed; if you lose sight of it, you'll
fail. In contrast to Sony's approach, RCA, having achieved
world dominance in its industry in the 1960s, fell off the "virtuous"
path by diversifying into areas in which its managers had no learning
base - businesses such as mainframe computers, car rentals,
frozen foods, and savings and loans. I compare this disaster to
a Greek epic, in which RCA is lured away from its core capabilities
by "Sirens" consisting of the business press, the academy,
and Wall Street, for whom conglomerates were then the business
model of choice.
Extending this analogy, the Fates - in the form
of government officials intent on monopoly-busting - also
intervene.
That's correct. In the late 1950s, just as the Electronic
Century was being formed, the U.S. Justice Department settled
antitrust suits with IBM and RCA, paving the way for learning
in these firms to be sold or leased to any applicant. Gene Amdahl,
who had been the chief designer of IBM's 704 and System 360
and 370 that dominated world markets, left IBM, hoping to start
his own company. Unable to raise $40 million to fund his venture,
however, he took his learning to Fujitsu, thus permitting the
Japanese to capture global markets in large systems outside the
United States. Never has a single deal so formidably shaped a
major national industry.
What themes will you explore in your next book?
Originally I had conceived of writing a single volume devoted
to the consumer electronics and computer industries and
the chemical and pharmaceutical industries. But the differences
between those pairs of sectors were just too great. So the second
book will examine this question: Why were the Japanese chemical
and pharmaceutical industries unable to enter the U.S. and European
markets, at the very same time their compatriots in consumer electronics
and computers did so successfully?
It sounds like an intriguing study.
It fascinates
me, and it keeps me healthy!
- Nancy O. Perry
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