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Functional Grammar

Technology, in general, has done a lot for human beings. Without the development in technology it is possible that the pyramids would never have been built and neither would we be able to communicate with each other from remote places all over the world. Yet, it cannot be imagined that the face of business today would be so affected by a simple invention which was created by scientists in the early 1970s but was totally ignored. This invention is the personal computer. When computers were originally large machines that needed to be housed in buildings, the scientists at Xerox PARC had already developed the precursor for the personal computer.

In fact, they did not realize that they had stumbled upon what is perhaps the most influential invention in recent time. With the computing and processing speeds increasing exponentially over the past few years in accordance with Moore’s Law, which theorizes that computer speeds will just continue increasing as technology allows for more transistors per chip every few months, computers have taken the path Xerox never thought it would. Over the years, Moore’s Law has been shown to be true and a new breed of even faster processors has been developed nearly every month.

As such, this brief discourse will highlight the development of the personal computer at PARC (Palo Alto Research Center) in light of the management decisions that could have and should have been made by Xerox. This will involve plans on how to commercialize the technology innovations from PARC and use them to the advantage of Xerox. This will also include a brief history of the inventions at PARC in order to provide a clearer picture of the proverbial gold mine of technology that Xerox had developed.

The Xerox PARC center located in California was responsible for the invention of the Alto which is widely considered to be the world’s first personal computer. This was a groundbreaking invention because it was never thought that the immense power and sheer size of mainframe computers could be shrunk into sizes that would allow individuals to own one in their own homes. In fact, PARC was so revolutionary that it was even able to create other inventions that have the potential to change the way business is done.

By creating the world’s world processor, local area network, laser printer and mouse, PARC and Xerox had the opportunity to dominate the market but were unable to do so because of corporate problems. While there is no doubt that PARC was highly successful, this opinion was not shared by the top executives at Xerox. Instead, what they saw was a branch that developed these technologies but was unable to create commercial success. When Xerox finally realized the advantage that it had, it had become too late and the market was saturated with other computers that were faster and cheaper.

The mistakes that were made by Xerox are now glaringly obvious but still it is important to take into consideration the size of the company and the challenges that it faced. According to Douglas K. Smith and Robert C. Alexander, the key to success lies in being able to take these technological innovations straight from the drawing board and into the hands of the consumers are quickly as possible. It is important to allow the consumer to have the innovation immediately in order to create a “first to market” advantage.

At this time, Xerox was a large and powerful company that made most of its profit exploiting the advantage it had in the photocopying industry. It also created a bureaucracy that delayed the release of the personal computer on to the market because it believed that there was no future for such product and that the company, with its monopoly, could rely mainly on its current corporate earnings. The recommendations that are to be made in regard to the commercialization of the innovations started by PARC can be summarized into three main ideas.

The first reason being that Xerox needed to bridge the communication problem between the mother company and the branches. This is because not all the branches of Xerox were functioning as a cohesive unit due to certain differences in corporate philosophy. The next reason is that management was not well versed in technology and was more profit oriented. This resulted in the company being unable to capitalize on the innovations. Finally, all of the problems of Xerox can be traced to its corporate culture that was as inflexible as it was big.

Xerox had grown so large that it was not able to manage its assets properly. The first lesson here is that in order to commercialize the innovations that were created there is a need to clear the channels between the mother company and the research and development branches. As the Xerox model shows, one of the main problems is the fact that PARC and Xerox had not maintained clear communication. The head of Xerox, Peter McColough, was the face of Xerox and he was involved in anything and everything that the company did.

By creating what he termed the “architecture of information,” he set out to create PARC as a branch that would lead Xerox into the next decade. However, the main problem was that while PARC had indeed lived up to expectations and developed a reputation for brilliance, it was also haughty and arrogant in its culture. The problem, therefore, was not that Xerox did not take the initiative to capitalize on the innovations at PARC but rather that there was a miscommunication.

Xerox did not exactly know what PARC had developed and PARC was unwilling to adequately explain this to management at Xerox. This created a gridlock that made it nearly impossible for any innovation at PARC to be quickly commercialized. As such, in order to avoid this problem, there is a need to reform corporate culture and open up the communication channels within the same company. The success of every company depends on the interoperation of the different branches be it logistics, human resources or even marketing.

It is clear from this that in order to commercialize an invention there is a need to know what the invention is and is capable of doing and such knowledge is hinged upon fostering open communication between the branches in the company. The second problem of Xerox was that the corporate culture of top management was similar to that of American Car manufacturers. By concentrating on the large and high profit equipment, Xerox was never inclined to create small and less expensive high quality machines.

The corporate philosophy that had gained ground within top management was the philosophy that with higher margins came more profits. It was unheard of, at Xerox, to create a product that had relatively small gains. After all, Xerox was already a behemoth corporation and the monopoly that it had allowed it to impose its will. When smaller companies, such as Kodak, began developing smaller, cheaper and high quality copy machines, Xerox began to take notice of its dropping market share. In response to this, Xerox attempted a corporate reorganization that was aimed at revitalizing its corporate culture.

This was to no avail and was the reason that when in 1977 PARC scientists introduced the personal computer; most of the executives were turned off by the idea and shot down the personal computer that these PARC scientists had created. Herein lays the second recommendation for Xerox; being able to recognize that the key to corporate success lies in generating profits in the long run. The management at Xerox was so concerned with the profit margins that it failed to see that the same result could be achieved and perhaps even better by creating a product that had smaller margins but higher volumes.

This strategic mistake is something that large companies often face. In the case of Xerox, their position as a monopoly prevented them from seeing that the personal computer was a product that could generate billions of dollars in sales for them. The basic law of economics is that under the supply-demand model the price level of a good essentially is determined by the point at which quantity supplied equals quantity demanded. The law of supply and demand predicts that the price level will move toward the point that equalizes quantities supplied and demanded.

When the equilibrium point is such that producers are able to earn maximum profit for every unit that is sold there is an incentive for them to produce more goods. In other cases, profit can be generated by forcing the producers to innovate or find other ways by which to reduce the cost of production. This is best illustrated by the scenario when the price is stable since the only way to increase the profits is to decrease the production cost per unit. Applying this thinking, Xerox should have realized that with more expensive and high profit items, the opportunity loss and risk for the company would be larger.

Given the investments that needed to be made, it would have to put more per unit than the smaller cost and smaller margin personal computer. As such, Xerox completely disregarded the basic economic laws. Instead of reducing the risk by spreading it out in small increments, such as the personal computers, it decided to take the other direction. Therefore, in order to effectively commercialize an innovation, a company, or top management for that matter, must realize the risks involved and be open to new ideas, particularly in the fast changing industry of technology.

Perhaps the greatest problem with Xerox was that it was too caught up in its size and industry advantage that it no longer felt the pressure to continue with innovations and build up its industry lead. An examination of the corporate structure at Xerox reveals that there is a mismatch on several levels. Just as brilliant as the scientists at the Palo Alto Research Center were in creating new innovations, the management at Xerox was just as ignorant of these technological advances and innovations.

It was the worse pairing that anyone could ever imagine because while the scientists were literally capable of inventing the future, the top executives were unable to imagine the future. This “miscommunication” is a result of the cultivation of a corporate culture that is not hand in hand with the vision of Xerox. With the corporation virtually at war with its own self, the innovations of Xerox were largely ignored and often fell subject to the politicking and intrigue of top level management. The facts are simple.

With the top management of Xerox having zero experience in running any form of product development program, it was impossible for them to bridge the gap from development to commercialization. They had no idea of how the ideas could be created faster and more efficiently. This created a huge problem for the organization because now they had a team that was capable of creating things faster and more efficiently but not the know-how for its commercialization. It is true that while the engineers were given free rein on their creations, they were no however given any authority for the roll out or commercialization of the product.

This lack of authority and relative autonomy is one of the main problems of American corporations during 1980, particularly Xerox which just buried their engineers and scientists in a research center but never really allowed these people to do much more. Therefore, it was safe to say that this miscommunication was also a result of the prevailing corporate hierarchy that did recognize the advantage of having scientists and engineers but not the will to allow these people to take charge.

It was as if the corporate functions were so centralized that they paralyzed the company. As previously mentioned, Xerox fumbled the future when it ignored the innovations at the PARC facilities. By being inflexible and unyielding, Xerox ensured its demise and the survival of other small companies that were not afraid of innovating and were certainly not averse to making just a bit lesser per unit sold. Instead of jumping at the opportunity that was presented, Xerox examined, criticized, shelved and eventually released the product too late.

It has a clear tactical advantage that was shot down not because the executives were being cautious with the corporate profits but rather because of poor management and debilitating corporate culture. As the word Xerox is currently synonymous with photocopying, the word personal computer could have and should have borne that same distinction and association had it not been for the slight ignorance at Xerox. Works Cited: D. K. Smith and R. C. Alexander (1988), `Fumbling the Future: How Xerox Invented. Then Ignored, the First Personal Computer` (New York: William Morrow & Co. , 1988)

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