Tuesday, July 7, 2009

How proudly we fail: how 25 innovative tech companies die

I recently wrote a story for Datamation.com that looked at 25 companies that are no longer with us but were ahead of their times with innovative products. Before you write in and say that I missed your favorite, I wanted to take a few moments here and talk about some of the interesting trends that I saw from this list. The reasons for failure could be broken down into five general categories:

Corporate hubris and hijinks. Tech companies don't have the best record when it comes to staying on task, and this is especially true when they merge or start to bleed their best people. Look at Ashton-Tate's dBase. When they were at their height of their powers in the 1980s, thousands of people around the world studied their programming language and built databases on PCs (I was one of them). Then they lost their way and were sold to Borland in 1991, and that was the beginning of the end for both the company and its flagship product. Borland had a competing database product and couldn't sustain dBase. Or Banyan's VINES networking operating system, which also had a loyal customer base and had innovative directory services applications long before they were implemented by Novell and Microsoft. How about Digital Communications Associates, maker of the 3270 Irma boards? They quickly disappeared after 1994 when Attachmate acquired them.

The market evolved past them. Columbia Data Products made the first clone PCs back in 1982, not long after IBM came out with their model. They lasted five years, and the market moved on to more efficient suppliers like Dell and HP. Ironically, we got some other innovation from Columbia that they were less known for, the SCSI storage interface that was used for many years to connect hard drives to PCs. AST Research was another one who had a dominant share of the peripheral expansion market in the 1980s, only to see many of these peripherals integrated into PC motherboards.

Bright people working in the wrong company. Just because you have a collective brain trust doesn't mean that you are going to live long and prosper. Sometimes the chemistry is wrong, or the circumstances not quite right. Take First Virtual Holdings, one of the pioneers of Internet payment systems. Their founders went on to develop key products for Paypal. General Magic founding fathers went on to develop key parts of several phones including iPhone for Apple, Android for Google, and to help start eBay.

The Osborne effect. One company even is notable for its failed strategy of pre-announcing products that killed any demand. Osborne Computers was the early leader of portable PCs that weren't all that portable – at close to 30 pounds and a few inches too big to fit under an airline seat, they were a bear to fly with. Nevertheless, when Osborne announced a new version in 1983, everyone stopped buying the current models.

Engage lawyers. Sue everyone. Repeat as needed. Research in Motion uses this tactic to the present day, even though it has lost its share of suits in the creation of the Blackberry smart phone and millions of dollars. SCO/Caldera Systems has done something similar for early Unix inventors. Sometimes winning a lawsuit can be the death of a company too: Witness Stac Electronics that won $120 million from Microsoft on their disk compression technology, something that is now part and parcel to just about every operating system.

Take a look at my trip down memory lane here: http://tr.im/rcro

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About Me

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David Strom has looked at hundreds of computer products over a more than 20 year career in IT and computer journalism. He was the founding editor-in-chief of Network Computing magazine, and now writes for Baseline, Information Security, Tom's Hardware, and the New York Times.