âCreative Destructionâ is an aspect of the creative process, which is one of the systems at work when a company is inventing, innovating or researching new ideas or creations. Destruction inhabits a different sphere and most often is where over-funded and under-used knowledge gained through the creative process languishes. New ideas or inventions can remain stagnant and unused because a company might not realize what the knowledge can achieve or be applied to. In extreme cases, they might purposefully delay utilizing the insight so they donât cannibalize their own prior work.
Rajshree Adarwal, a professor at the University of Maryland, wrote about Creative Construction and Knowledge spillover. He points to Xerox as a concrete example of a company that grew too big for its own good: âevidence shows that many large, established companies find it difficult to take advantage of all the opportunities emanating from their investment in scientific knowledge.â Xerox was originally the Haloid Photographic Company was the only business to create a product based on Chester Carlsonâs invention, a process for printing images using electromagnetism, a drum, and dry toner. Itâd take the newly named Xerox Corporation 20 years, from 1938 to 1959, to refine the process enough to release the first commercial plain paper copier: the Xerox 914. Decades of research and investments paid off when they completely captured the copier market (they had just created).
Itâd only take ten more years for a researcher at Xerox to develop the laser printer, in 1969, which Xerox would withhold from developing a commercial version to keep from impacting their growing copier business. They wouldnât release a laser printer until 1976, two years after their FTC agreement to license their patent portfolio (for maximum revenue of 1/2% of profits).
The laser printer was withheld on purpose; Xerox recognized the usefulness of the design. What about places where they didnât recognize the utility or application? For that, there is one device that is easy to single out: a personal computer that designed with a single user in mind, the Alto computer. It was developed in 1974, and fifty units were donated to Stanford University. A majority of the computers were kept at the PARC, because their primary purpose was to help researchers, well, research.
What did the Alto personal computer bring to the table that previous minicomputers didnât? A GUI based interface, rather than strict command-line. A three-button mouse for pointing. An early predecessor to the Ethernet, where the computerâs networked features had packet features, decentralized processing (in the case of a computer could act as a printer server with no user interface). All of these groundbreaking features were essentially written off as âunmarketableâ by Xerox, whose eyes were firmly fixed on the copier market share it had grown to dominate and was in the process of losing.
By the mid-1970s, through a combination of xerography patents expiring and a FTC antitrust filing that forced Xerox to grant licensing options to its retained patent portfolio, Xeroxâs market share plummeted from 90% to a dismal 13%. The concept of launching a personal, personal computer wasnât not only in the books but not in the imagination.
Apple was shown PARCâs Alto computer, while they were designing the Lisa computer at the time, and it helped âgalvanizeâ the idea that the graphic user interface was the way to go.
James Turner of OâReilly News interviewed one of the engineers that worked on the Macintosh, Andy Hertzfeld. While discussing the myth or allegations that Apple (and Microsoft) stole ideas from Xerox, they related that Xeroxâs upper management just didnât care about anything that didnât involve copiers or paper. Turner notes, âI actually worked for Xerox AI Systems in 1986 and it was kind of frustrating because they really had the mentality there that if you couldnât sell paper and toner for [them] they werenât interested.â Others recall nicknames those upper executives were called behind closed doors, âtoner-heads.â
What about a company that did take advantage of their market share, innovation, and research? Xeroxâs ideas certainly werenât lost to time â they were disseminated through what Professor Adarwal calls âknowledge spillover,â where knowledge gained at one location spreads as employees move between companies or industries. We have Ethernet, ip4 and ip6 protocols, networked personal computers, mice.
AT&T took advantage of its research and innovation and its secure footing as an âallowedâ monopoly under US antitrust law in the early 1900s to pave the way from a national telephone network to the first commercial satellite launched into space.
Alexander Bell didnât only create the telephone, but a lesser known âphotophone.â Years before the first radio transmissions were broadcast, Bell communicated over 700 feet using light encoded with data to send an audio signal. He was issued the master patent for his photophone in 1880. This same technology would grow and develop, by AT&T in the next century, to become fiber optic communication. Without fiber optics, transpacific and transatlantic internet and telephone lines wouldnât be possible.
Itâs important to not settle for âgood enoughâ or grow too narrow-minded in any industry or field. The quickest way for any industrial leader to get cut down in their prime is deciding the place theyâre at is perfect and they donât need to innovate or diversify their holdings. Too many companies are so driven by data-driven metrics that they lose sight of the peripheral, the hard-to-quantify information, the âquality of lifeâ invention that doesnât have a place yet, but could if more âartisticâ liberties were taken with management decisions, rather than âby-the-numbersâ which promises steady growth over risk-taking innovation. Fortune favors the bold, and to see the company that took that risk and plunge by investing in Chesterâs xerography invention suddenly turn their heads at their innovative computer designs is a narrative no executive should want to retread.
Originally Posted at: Creative Destruction and Risk Taking
