New Book Review: "The Limits of Strategy"

New book review for The Limits of Strategy: Lessons in Leadership from the Computer Industry, by Ernest von Simson, iUniverse, 2010, reposted here:

In my opinion, it is amazing that so few reviews have been posted for this extremely insightful effort by Ernest von Simson, veteran consultant and co-founder of Research Board, an international think tank that investigates developments in the computing world and how corporations should adapt. Ever since an editorial on cloud computing in "The Wall Street Journal" mentioned this book in passing in March 2011, I have been working through the dense but conversational 400-pages that von Simson offers the reader, arriving at the conclusion that not only is this book one of the best business texts I have ever read, it should be considered required reading for the business- and technology-minded in school, as well as anyone involved in strategic decision making in the workplace.

Not only does von Simson present very detailed notes from many of his conversations with business leaders from 1974 through 2000 when explosive changes in the computer industry took place, he provides insightful analysis throughout, while even briefly discussing the initial failed business efforts of he and his wife, Naomi. In the words of the author, their friends prescribed that they "build a group of clients, major companies that needed to mesh their strategies with the exploding world of computing", "investigate what developments were coming, what adjustments they should make, and how to integrate information technology into their operations", and "scrutinize all the major technology companies and advise our clients on what the IT leaders were doing, how good they are, and who was ahead in which new fields."

Later, von Simson notes that "by the time we sold the Research Board to Gartner Group in 1999, we had written nearly one hundred reports. Every year, we would assess the overall condition of the industry – which companies were doing what, and how well; what big breakthroughs seemed near. We also researched how the largest enterprises used new technologies to the best advantages as well as demographics and the labor force and the relationship of IT departments to the other activities in a company. What we learned, we recorded in thousands of written pages and in our memories. The lessons learned over that entire period are distilled and related here."

While this text provided natural follow-up to recently read texts "The World's Newest Profession: Management Consulting in the Twentieth Century", by Christopher D. McKenna, and "IBM and the Holocaust", by Edwin Black (see my reviews), what sets this work apart from these related efforts are two seemingly opposed characteristics: industry-wide breadth, and intimacy that is only available through face-to-face interaction. However, as with these other sizeable books, a review limited to the space available here is difficult, so what follows are some quotations that I especially appreciated and which hopefully prompt other visitors to read through the pages of this text, even if only by skimming, if that is even possible.

In chapter 6, "First Movers: The Dawning of the Personal Computer", Sam Bernstein, VP of Marketing at Commodore Computing, is quoted as saying that "in 1970, when everyone else was selling calculators for $1,000, [Victor] had one for $195. We thought that the entire industry would sell 100,000; actually, as prices declined, fifty million were shipped (a classic case of price elasticity). Everyone asked us, 'What about service?' I said, 'Nonsense. For $195, let them send it to the factory.' They said, 'What about salesmen? How will customers learn to use their equipment properly?' I said, 'For $195, let them teach themselves.'"

In chapter 7, "Defeated in Succession", the author notes that "during the seven years of pointless internal dithering, the Doctor [An Wang] had remained determined to leave the company to his son, notwithstanding the availability of a more capable choice. But could the old man listen to his born successor as Tom Watson Sr. had listened to his? It's impossible to imagine Fred saying, as Watson Jr. had told a journalist after his father died: 'My father and I had terrible fights. He seemed like a blanket that covered everything. I wanted to best him but also to make him proud of me. I really enjoyed the 10 years with him.' Instead, it appeared, Fred received a vote of no confidence from his parents, though he was allowed to remain on the board."

In chapter 11, "Self-Accelerating Economies of Scale: Apple, Microsoft, and Dell", von Simson recounts when he and Naomi first met Steve Jobs just three days before Apple's 1983 introduction of the Macintosh, when during their meeting Jobs "leapt to a whiteboard and began sketching a visual analogy: By the 1890s, the telegraph was already fifty years old, and 25,000 people worked as trained operators. Someone may have suggested putting a telegraph key on every office desk to expand communications, Steve said, but it was impractical and time-consuming to teach everyone Morse Code."

"About the same time, though, the telephone was invented. The function was the same – communications – but now anyone could talk or even sing to anyone else, no training required. In just ten years, 200,000 telephones were installed. Steve Jobs was selling to people who could use the telephone; Digital, IBM, and the others were still targeting the telegraph operators. Price and ease of use, he concluded, carried implications for sales approach, customer training, and field maintenance similar to those experienced previously by the makers of electromechanical calculators."

In chapter 12, "Choosing the Wrong War: IBM Takes on Microsoft", in the midst of the author's recounting of his visits to Microsoft in Redmond, quotes "Big Blues: The Unmaking of IBM", by Paul Carroll, a "The Wall Street Journal" reporter, as writing "One of the biggest fights IBM and Microsoft developers had came when a Microsoft developer took a piece of IBM code that required 33,000 characters of space and rewrote it in 200 characters, 1/160th of the original space." Comments von Simson, "the episode makes the IBMers seem muddily stupid. Certainly, Microsoft had the advantage in attracting brilliant computer science graduates steeped in the latest programming techniques from the best universities."

"But IBM had years of experience tightening 'path lengths', that is, the number of instructions in the path to complete any routine." Later, "Mike Maples was correctly philosophical with us: 'We faced Hobson's choice – either delay release for a year or go to market with what we had and learn from early-user experience. We chose the latter.' Good strategy, great product, but not necessarily a model of disciplined or efficient programming." Although many practitioners today might argue otherwise, this philosophy is much in line with "The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses", by Eric Ries (see my review).

In chapter 18, "Squandered Competitive Advantage: IBM Mainframes and Minicomputers", after the author remarks that "competitive advantage can be squandered by executive indecision in a surprisingly short time", and "a delayed decision can be far worse than a mediocre decision", describes his IBM visit following the 1981 reorganization, during which time a merge or discontinuance of five midrange product families was discussed with Mitch Watson."

"Mitch offered four alternatives: "(1) create an outer skin of compatibility by making applications programming languages like COBOL work identically everywhere, (2) mask the differences with a software layer of microcode while leaving the underlying hardware and software, (3) find each mini a distinct market niche, and (4)
kill a couple. 'That last would make some customers unhappy', allowed Watson. Yes, 'but the only assurance we'll regain economies in manufacturing and field support is to simplify our product line,' added the planning manager, Mike Maples."