The Ten Commandments for Business Failure - Don Keough [8]
Over time, many, many successful companies have failed to take important risks at critical points, and they have paid a price. Some have merely stumbled and found later redemption, but quite a few have not only fallen but disappeared. In the 1980s alone, 230 companies disappeared from the Fortune 500. In fact, only 16 of the 100 largest companies that were around in the early 1900s are still with us. Who knows how many of the tombstones in the graveyard of capitalism should bear the epitaph “Here lies a company that died risk free.”
Perhaps one of the most dramatic and widely studied business histories of risks taken, and subsequently risks not taken, is the well-known story of Xerox. It has a full measure of both triumph and tragedy.
Xerox’s roots go all the way back to 1906, when it was known as the Haloid Company. As such, they had been successfully manufacturing photographic paper in Rochester, New York, for forty-one years when, in 1947, they took a big risk on a revolutionary idea that everyone else had passed up. Chester Carlson, a relatively obscure inventor from Queens, New York, had spent years trying to interest anyone in his “electrophotographic” copying. “Carbon paper works just fine,” people said, and more than twenty companies, including IBM and General Electric, turned down Carlson. They greeted his invention with what he described as “an enthusiastic lack of interest.”
Carlson eventually contracted with the Battelle Memorial Institute in Columbus, Ohio, to help refine his process. There Haloid found the invention and obtained a license to develop and market a copying machine based on Carlson’s technology. A professor of classical languages at Ohio State University is credited with the term “xerography,” derived from the Greek words for “dry” and “writing.”
When I first came to know Haloid-Xerox, as they had been renamed, they were a moderately sized, rather stodgy firm. There was nothing pretentious about them. Their offices in Rochester had plain rubber-tile floors and metal desks and they were populated with engineers wearing plastic pocket protectors and earnest expressions. But there was an atmosphere of excitement about the place and a mood of passionate dedication.
Then in 1958, a decade after taking on Carlson’s idea, a plain beige and brown metal box rolled off the pilot assembly line. It was the world’s first automatic plain-paper copier, and when it was launched in 1959 as the Xerox 914, suddenly, in offices across the nation carbon paper became a quaint relic of bygone days. And a new noun, a “Xerox,” and to the chagrin of their trademark attorneys a verb, “to Xerox,” entered the global lexicon.
The 914 went on to become one of the world’s most successful industrial products. More than two hundred thousand units were made between 1959 and 1976, the year the company stopped production of the 914. Today, the Xerox 914 is part of American history as an artifact in the Smithsonian Institution.
Xerox had grown to more than $1 billion in revenue in less than ten years based on taking a risk on a single technology. Then they temporarily lost their way because they stopped taking risks—on their own inventions, no less.
They moved their headquarters out of Rochester to the more glamorous Stamford, Connecticut. The rubber-tile floors gave way to thick carpets and the metal desks were replaced with fine wood ones. Most of the people at headquarters were “box” guys. They had grown up and grown rich with the boxy Xerox copiers, and selling more copiers was how they saw the future unfolding.
Meanwhile, in 1970, the company had set up a research facility in Palo Alto, California. In 1973 the facility demonstrated the Alto. It was the first “personal computer,” with a graphics-oriented monitor with icons, overlapping “pages” on the screen, and a funny little thing called a mouse.
At that moment Xerox had at least a five-year