Personal computers have enjoyed a decade of spectacular growth


August 12, 1991|By Ron Wolf | Ron Wolf,Knight-Ridder News Service

Robert Noyce, the co-inventor of the semiconductor chip, was boasting to an electronics industry conference 20 years ago of the day when a room-sized $5 million mainframe computer might be squeezed onto a single sliver of silicon, perhaps the size of a dime.

A questioner who couldn't accept Mr. Noyce's stunning prophecy asked how he would feel if he accidentally dropped his tiny computer and lost it through a crack in the floor.

Mr. Noyce replied that he wouldn't care because it would cost only $1 or so.

The electronics industry still has not been able to produce the disposable $1 computer envisioned by Mr. Noyce. However, the price of a personal computer comparable to a vintage-1970 mainframe now stands well below $1,000. The size and weight have come down by similar amounts. In effect, the industry is 99.95 percent of the way to realizing that nearly unimaginable technological feat.

"In one decade, the personal computer has become a commodity item," said Judith Larsen, co-author of a history of the electronic industry in California's Silicon Valley.

It's unlikely that any technology in history had ever undergone commercial development and gained such widespread adoption so quickly.

A crucial milestone along the route occurred 10 years ago when giant International Business Machines Corp. entered the personal computer market with the introduction of its original PC. The IBM PC and its immediate successors established a clear direction for the fledgling industry, reassured confused customers and opened the way for a decade of spectacular growth.

As sales reached tens of millions of units, the robust market provided fertile conditions for squeezing vastly more power into ever smaller and cheaper packages.

IBM did not invent the personal computer. The company even remained on the sidelines during the late 1970s as others pioneered the market for small single-user computers. But when IBM finally decided to move, its sheer size, vast geographic reach and close relationships with large corporate customers quickly made it the dominant force in the business.

Perhaps the most remarkable aspect of the IBM PC was that the computer was hardly remarkable in any way. The machine embodied little new technology. IBM's engineers built the PC primarily from off-the-shelf components supplied by other firms.

IBM's greatest contribution may have been the realization that potential users of personal computers were not looking for dramatic advances in technology. With dozens of small companies offering personal computers that were incompatible with each other, buyers badly needed reasons to choose between competing alternatives.

When a new technology begins to reach the market, there usually is no agreement about the right way to do things, said Charles O'Reilly, a professor of business at the University of California, Berkeley, who has studied innovation in high-technology companies.

The early stages in the adoption of almost any technology are characterized by many small participants offering a proliferation of products, often in highly unusual and original forms, Mr. O'Reilly said. But as an industry begins to mature, a dominant design emerges.

In the early years of the automobile, the charcoal-burning Stanley Steamer was left behind as the new industry turned to vehicles powered by internal-combustion engines.

A decade ago, the personal computer industry presented potential buyers with similarly disparate choices. With the introduction of its PC, IBM established people's expectations for a personal computer -- how it should operate, what it should do, even what it ought to look like. The PC -- with its Intel microprocessor and DOS software -- became the personal computer equivalent of the internal-combustion engine.

In other industries, the convergence on a dominant design triggered a shift in the basis for competition. Manufacturers began to place less emphasis on major innovation and to work harder to improve their efficiency and lower their prices. Innovation didn't necessarily stop, Mr. O'Reilly said, but it tended to become more a matter of incremental enhancement.

As a new industry moves from product improvements to process improvements, the skills necessary for success also shift. Few of the early participants survive. In the auto industry, Henry Ford destroyed competitors with his assembly line.

The acceptance of the IBM PC as a standard initiated a brutal shakeout in the personal computer business. Few companies in the forefront a decade ago are still around 10 years later to reap the benefits of the huge industry they launched. Only IBM, Apple and Tandy have prospered.

Newcomers, such as Compaq, AST and Dell, were able to enter the business and win significant sales, but they did so by adhering to the dominant design and concentrating on efficiency in manufacturing, marketing and distribution.

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