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Be Aware Of Business Life Cycles

Paul Willax Staff writer

As mere mortals, we are all too familiar with the natural cycle of birth, growth, maturity and expiration. We structure our lives and careers around it.

It is difficult to understand, therefore, why so many managers lose sight of the fact that one of their most important responsibilities is accommodating and exploiting the lifecycles of their enterprises.

Q. I’m a CEO of a midsize company and I have a hard time getting my managers to understand that, if we don’t keep “re-inventing” our business, we are going to be left in the dust by competitors who do it better and faster. Can you give me an example to help make my point?

A. One of the most instructive examples comes from the “word processing” industry. It’s an industry where, for over 350 years, change came slowly. In the past 35 years, however, those who depended on glacial movements in the marketplace were quickly written out of the picture.

As early as the mid 1600s, English monarchs were granting patents to support attempts to convert handwriting to a more efficacious mechanical process. It took another two centuries for someone to come up with a device that would actually write type.

Despite its promise, the going was slow for the new invention. In the 20 years subsequent to the Civil War, only 1,200 of the new-fangled typewriters had been sold. But then, in the mid 1880s, a chap named Alexander Brown convinced his bosses at the L.C. Smith Shotgun Co. in Syracuse, New York, to manufacture his much improved version of the typewriter.

Initially adopted by business firms to speed up clerical functions, it was soon popularized by Mark Twain and adopted by creative writers and then the masses.

Everyone, from correspondents to chiefs of staff, continued to depend on the clanking clunkers that had been the standard for generations. After World War II, IBM emerged as king of the market with the electric typewriter, a wonder that promised fatigue-free typing for generations to come.

The economy grew rapidly after the war, and the costs associated with written communication and record-keeping begged more efficiency. In 1951 An Wang set out to create a new, much improved desktop machine for producing, editing, storing and printing strings of words and numbers. His innovation quickly eclipsed the IBM Selectric.

By the end of the 1980s, the sales of Wang Laboratories topped $500 million and, because of its superior editing, formatting and storage capabilities the once popular electric typewriter was being written about in history books. The pace quickened, making the lifecycle of the “Wang” word processor considerably shorter than that of the typewriter.

Dr. Wang had failed to anticipate the word-making impact of the personal computer with which his machine was incompatible. His company entered Chapter 11 in 1992. The personal computer had arrived with a bang, killing Wang, and fueling the rise of a whole new gaggle of firms that had emerged to facilitate even faster, cheaper and more effective writing and publishing.

In the late 1970s, the director of a college marching band and a computer professor teamed up to invent WordPerfect, a word processing program that allowed writers to use their PC’s. Introduced in 1982, the program became a best-seller, in five years racking up annual sales of over $100 million dollars.

But WordPerfect failed to appreciate the competitive incursion of Microsoft, which introduced a much improved version of Windows in 1990. Windows featured a state-of-the art word processing capability. Those in charge of avoiding change at WordPerfect pooh-poohed the need to create a Windows version of their product.

Within two years, WordPerfect was on the ropes and, in 1994, Novell Inc. offered to buy the firm for $1.4 billion. (When the deal was announced, Novell’s stock tanked so the stock deal was finally valued at about $900 million.)

Novell obviously misread the shape of the enterprise cycle it acquired. Within a year and a half, Novell recognized its oversight and sold off what was left of WordPerfect along with some other holdings for less than $200 million.


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