Rev: Aug, 2012

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

The Lab That Ran Away from Xerox

Bro UttalFrom Burgelman et al, Strategic Management of Technology In-

novation

Contents1 What is PARC

2 Examples of Failure

3 Reasons for Loses

4 Changes of Organization

3

What is PARC

■ Xerox’s Palo Alto Research Center (PARC)– Established: 1970– Location: Palo Alto• Near Stanford University• Mecca for talented researchers

– Received $150 Million in 14 years• A half of PARC’s money: Research in Computer Science

The other half: Research in the Physical Science

■ PARC as Main R&D Facility for Xerox

Xerox’s laser printers PARCComputerized Office Systems

Designing custom chips to be used in future copiers

CAD(computer aided design) & AI(artificial intelligence)

4

Examples of Failure (1/2)

■ Research areas of PARC– Laser Printing– Distributed Computing– Ethernet (Network connecting different types of office equipment)– Graphic User Interface (GUI)– Object Oriented Programming– Ubiquitous Computing Most of research result failed in commercialization except laser printing

■ The Alto– Developed in 1973– Personal Computer– CRT display, Qwerty keyboard, Pointing device– Test marketed at the White House, Congress, a few companies, universities– Connecting work stations with Ethernet Liquidated the whole test-market group for rival machine called the “Star”(1980)

5

Examples of Failure (2/2)

■ Bravo– Text-editing software program for ALTO– Product’s market potential was missed Welcomed at Microsoft Corporation Microsoft Word: Streamlined version of Bravo

■ Smalltalk– Set of programming tools– Used to develop Lisa by Apple• Lisa: First personal computer applying GUI

Failed because of a high price($10,000) and limited software Opportunity of Apple’s next computer, Macintosh

Failing to translate first-rate researchinto money-making products

6

Reasons for Loses (1/2)

■ Big One-product Company selling Copiers– Big company• Slow decision-making process• Not making the modest efforts needed to probe emerging markets• Impaired management ability to move into small, fast-changing markets because of need to

concentrate on existing businesses Not recognizing the potential of personal computer Concentrating on clusters of workstations, not on freestanding personal computers

■ Lack of Systemic Process to utilize Resources (Human, Technology)– Hands-off Policy & Looses Management Performing research irrelevant to Xerox’s business– Lack of communication channel between PARC and the other parts of company• Weak ties to the rest of company• No channel for marketing products based on the researchers’ efforts

Difficult to develop strategies for applying new technologies into copiers

?Ethernet, PC, Display, Graphic Technology, etc.

7

Reasons for Loses (2/2)

■ Biggerism– Xerography: Longest homers on record Pressure that every product must be a home-run to justify the costs of marketing and

development Preferring to build absolutely the best office system instead of developing other prod-

ucts bit by bit

8

Changes of Organization

■ Efforts to Boost PARC– Employing New Director, William Spencer who was a veteran of two decades at Bell

Labs– Strengthening the ties between PARC and the rest of company• Holding meetings a couple of times a year at PARC with Xerox’s division managers• Starting joint hiring program

– Understanding the market

■ PARC as a subsidiary of Xerox– Separating PARC from Xerox• PARC commercializes the R&D result of Xerox without delay• PARC expands the fund from strategic partners and supporting new businesses• Xerox participates as a stakeholder and utilizes R&D resources of PARC

Xerox invests $7,000 a year to PARC for a while as in the past and finds new strategic investors

9

Discussion Questions (1/3)

■ Loose management from headquarters let PARC be creative but Xerox failed to commercialize technologies because of a lack of clear strategies and proper pressure. If you were the CEO of Xerox, what would you do to find balance be-tween encouraging creativity and managing the organization?

10

Discussion Questions (2/3)

■ PARC had sufficient resources (especially, human resource) but it failed in commercialization due to a lack of process for technologies. Discuss about cases in which a company gets success mainly with resource.

11

Discussion Questions (3/3)

■ One of main reasons why research results of PARC failed to be commercialized was the big company’s intention to concentrate only on typical processes or existing businesses which makes stable profit. Discuss about similar cases.