Rewiring The Computer Business

Like a force of nature, the advancing technology in microprocessors has reshaped the landscape of the computer industry. Slowly at first, but now with alarming speed, ever-cheaper computing power has eroded the economic foundations of the industry. Vertically integrated plants and massive research facilities that once were assets have turned into liabilities, and such giants as IBM, dec, and Unisys have been forced into painful cutbacks.

Deconstruction--breaking down the old organizations into leaner, more competitive units--is now under way in the computer industry. In terms of sheer efficiency, deconstruction makes a lot of sense. After some wrenching adjustments, it could make the U.S. industry more competitive. As various deconstructed product groups and marketing divisions are exposed to the forces of the market, their strengths and weaknesses will stand out in sharp relief.

For example, IBM should wind up with better drives for its computers and a badly needed source of new revenues by permitting its Adstar disk-drive unit to seek customers outside Big Blue and by forcing it to compete for business within the parent company. Unisys, after drastic cutbacks, has found that it cannot add much value in such areas as building pcs. Instead, it can profit by focusing on selling information systems to customers in a few industries it knows best. And Digital Equipment Corp. figures it can do the same by encouraging its disk-drive operation to spread out and find new customers outside the mother ship.

So deconstruction offers exhilarating prospects for beleaguered computer makers. Industry executives, however, will be challenged as never before as they carry out their deconstruction plans. With investors breathing down their necks, CEOs may not give their newly independent units enough time to get their bearings. At the first signs of trouble, the temptation to pull the plug and cut losses will be enormous. Certainly, when exposed to the harsh environment of the market, some parts of the business will wither. But computer executives must be sure to hold on to their most distinctive assets: the people, the technology, and the vision that make their products valuable. Otherwise, deconstruction will be just plain destruction.