Digital Equipment Corporation founder and longtime CEO Ken Olsen died this week at 84. I never met Ken Olsen, but I have a sense of him through his products. The first computer I ever programmed was a PDP-1 accessed over an old TTY terminal from my junior high school. At one point in the 1980s I owned a PDP-8 I bought as salvage and installed in my California cellar. Not only did that old PDP-8 give me many hours of fun as I brought it back to life, it also heated my bungalow! So when I think of Ken Olsen, I think of industrial-strength computers.

Avram Miller did know Ken Olsen and has a recollection of Olsen here.  But the most telling story about Olsen that Avram tells isn’t in his blog.  It was about how he and Ken Olsen bought one of the first IBM PCs and disassembled it on a table in Olsen’s office.

“He was amazed at the crappy power supply,” Avram said, “that it was so puny.  Olsen thought that if IBM used such poor engineering then Digital didn’t have anything to worry about.”

Clearly Olsen was wrong.

I find this little story very telling because it shows Olsen in 1980 very much stuck in the late 1960s when it came to what mattered and what didn’t in a computer.  Yes, having a robust power supply was good for computer reliability, but not as important as having a great operating system and applications. But that’s not the way Olsen saw it.  In a world that had to that point been dominated by computer companies building expensive products aimed primarily at engineers, he simply had no concept of a computer as a consumer product.

No wonder Olsen and Digital together pretty much missed the personal computing revolution. They thought robustness was a prime virtue and that the market would not only wait for it, but would pay a premium for it, too. Fat chance.

Practically from that moment when Olsen and Miller had the IBM box apart on that table, Digital peaked as a company.  Yes, readers will comment that the Rainbow 100 was great (though I don’t remember it as being so) or the Professional line was, well, very professional, but the computing market had already moved past professionalism and into the mainstream when those boxes were introduced only to fail.

Olsen lasted as Digital CEO for another 12 years and to be fair the company had another chance to succeed after Olsen’s departure, but again they blew it.

In the early 1990′s DEC was quietly becoming a PC network powerhouse.  They finally figured out what companies with thousands of PC’s needed and were slowly building a family of products.  Sure Novell was the powerhouse during this time, but I think DEC had a better enterprise perspective.  Their wide area networking was mature and they were in a better position to support TCP/IP than others.  Towards the end DEC’s networking group was their only growth division and was very profitable.

Then CEO Robert Palmer (Olsen’s successor) severely cut the networking division’s budget.  DEC had a window of opportunity to become a major force in the PC and network industry and Palmer killed it.  DEC could have been Cisco.  Instead, he put all of DEC’s marbles into their Alpha (AXP) development, another hardware platform.  It was the same kind of mistake that Olsen had made before him. Digital didn’t sell enough AXP systems to keep the company afloat.

DEC had a lot of employees.  In any given market DEC usually had at least twice as many people in its branch offices than either IBM or HP.  They had armies of folks back at HQ too.  Most companies find a way to measure the value of their employees.  In sales i its easy, value can be determined by how much you sell and how much profit the company makes from your efforts.  In product groups you can determine how much profit is created by your product.  By the size of their workforce I don’t think DEC gave enough attention to the value each person was bringing to the company.  When DEC ran out of money, the fall was big and painful.  It was hard to watch.  Years later when I meet former DEC employees a common thread of discussion is on how badly the business was managed.

While Ken Olsen invented the mini-computer and started DEC, in the end it was not a sustainable business simply because of bad management.

Simply being smart is not enough.

When Olsen relinquished control it was already too late.