Fundamentals of Business

The Computer Industry circa 1983

The computer business had its 1923 in 1983 when the IBM PC emerged as the industry standard. Apple, like Ford had a dominant market share in 1983 but lost it because it failed to adapt to the dominant market standard for personal computers: Open Architecture.

Open Architecture computers are those which have hardware, software, and add-ons supported by a multitude of vigorously competing suppliers! Open Architecture dragged along the IBM PC technical standards (including the PC bus, Intel's 8088 architecture, and MS-DOS) just as the closed steel body chassis dragged along the internal combustion engine and rear wheel drive.

Apple has spent the last decade losing market share with its proprietary products. Its sales pitch has been that its products are easier to use. Apple is probably right; but it doesn't matter. Ease of use is less important to the market than Open Architecture. Now it is also less important than being the overwhelming market standard that generates a revenue stream in excess of $150 Billion per year. This revenue stream continues to attract and pay for the latest and best innovations in hardware and software.

IBM, like Apple, squandered its opportunity to dominate the very standard it, accidentally, created. It tried to regain control of the market with proprietary technology (like Micro-channel, VGA graphics and OS/2) and its (then) dominant distribution system. It even wasted time with sub-standard products like PC Junior. (We're probably seeing other companies reprising this error with their proposed $500 Internet terminals).

Both Apple and IBM thought they could get the customers to trade Open Architecture for ease of use or improved technical performance. They were wrong. Some day this reality will sink in on their highly paid executives. Their legions of ex-customers figured it out years ago.

The companies that have succeeded in the PC business have done so by enhancing the market standard without replacing it, and/or by developing superior manufacturing and distribution systems for the market standards. Intel has aggressively enhanced the performance of its market standard CPUs. Microsoft, at an arrogantly leisurely pace, continues to improve the performance of its operating systems. Companies like WordPerfect, Intuit, and Lotus succeeded (for a few years) because their products enhanced the standards. Compaq succeeded at first because it enhanced the standards with improved portability. It sustained its success in a commodity market by improving its own manufacturing and distribution systems.