Microsoft: The RCA Analogy
February 26, 2009
When I worked at Booz, Allen in the late 1970s, I was quite impressed with Harvard MBAs who could explain certain business events with aplomb. Most of these examples had a punch line, almost as if Bob Hope or Groucho Marx had gone into business, not vaudeville. The punch line was often delivered by these glossy, sleek, confident masters of the universe with a rising tone. Like a question except you were supposed to be floored by their brilliance.
I recall one afternoon in a class at the Harvard Business School where my boss (William P. Sommers) was giving a lecture about technology to the 100 people jammed into a lecture hall. After his prepared remarks, several students and the faculty member (I think it was the fellow from RCA who headed the laser research at RCA at one time) asked if Dr. Sommers and I would look at a new case. The case as it turns out concerned the laser technology applied to data storage. The reason I remember this was a fluke of memory. The article here by Joe Wilcox “Ballmer: RCA Is Our Role Model” took me back in time.
The dog Nipper was a great image in RCA’s salad days. By 1979, Nipper was a dog for sure.
By 1979, RCA was a loser in my opinion with Discovision and helium neo laser tubes which gave way to the wonderful infrared semiconductor laser diodes. Think a foot in diameter and bulky. The other charming feature was laser rot. I had been working on two projects. One was the study of world economic change. Former secretary of the treasury William Simon was one of the fine, friendly folks on that project. My lowly job was to analyze the relationship between R&D expenditures and forecast orders across several high tech sectors. I don’t remember the exact numbers, but my analysis suggested that RCA was not just falling behind. RCA was a goner. The other study was about innovation in 10 high tech firms scattered around the world. RCA was not one of the companies we were studying, but I do recall interviewing a number of executives from RCA who had moved to Thomson (the French outfit, not the newspaper Thomson), Hitachi, and eight other big guns. My recollection is after three decades was the departure of smart people who seemed to know which way the wind was blowing.
Which did you want in your auto for music?
Now, sitting with the Harvard prof and a handful of well fed, glossy MBAs to be, I was reading about RCA and its bumbling of its laser opportunity. To make a long story short, RCA did not pursue the data path, leaving the field wide open to other companies who leapfrogged hapless RCA. RCA had the technology and the market share. RCA was swallowed by GE and then sold to Thomson-Brandt SA, which became Thomson SA. For most people, RCA is a second tier, maybe a third tier brand. RCA and laser technology don’t line up in most folks’ mind I would assert.
What’s this mean?
When I read that Steve Ballmer sees RCA as Microsoft’s role model I was struck by my memory and these observations:
- Microsoft may be on the same trajectory as RCA. Big money in R&D but no ability to match the outputs to products that will allow the company to continue to grow and hold the imagination of consumers
- A buy out, not a break up, may be in Microsoft’s future. Smart money (I use the term with a touch of cynicism) may decide that it can do a better job with the Microsoft operation than Microsoft’s current batch of executives. Like GE, the confidence of management may then run into the magnitude of the problem. Microsoft, then, may be dumped as GE sold RCA. The future? A second or third tier brand.
- Microsoft really does follow the path of RCA which leads to a steady loss of market share. No one steps forward in the present economic climate to buy the company. As a result, Microsoft sputters along with its share price falling below yesterday’s close of $17. In short, more of the same as the company winds down.
MBA think is sometimes helpful. Most MBAs can look at the cost of a square yard of carpeting and ask, “Does this include installation?” The MBA can then calculate the cost of the carpeting plus installation. This habit of mind is interesting but it does not follow that MBA analyses can provide much more than a punch line to an event. The need today is for executives who understand customer problems and can deliver solutions that delight the customer.
A more suitable role model for Microsoft might be Google challengers Amazon, Facebook, or Twitter. Maybe the Vizio outfit? MBA think could help each of these companies, but MBA think will not create these types of companies. Last time I checked most of the financial issues I read about are a result of MBA think. Sleek and confident, the MBA method may not be the right one to deliver what Microsoft requires.
Stephen Arnold, February 26, 2009
Comments
-
- Subscribe to Beyond Search
Feature archive
News archive
-
