The encyclopedia · Strategy & Leadership · Strategic decision · 1992
Wang Laboratories was a $3B giant, then missed the PC revolution and filed Ch.11
Wang Labs dominated word processing in the 1980s — then the PC made its dedicated hardware obsolete and the company filed for bankruptcy.
Wang Laboratories
What happened
Wang Laboratories was founded in 1951 by An Wang and Ge Yao Chu in Cambridge, Massachusetts. At its peak in the mid-1980s the company had $3 billion in annual revenue and over 33,000 employees, making it one of the most prominent computer companies in the world. Its dedicated word processors were the standard in corporate America.
The rise of the general-purpose personal computer made Wang's dedicated hardware obsolete. The company's proprietary operating system and software could not run on IBM-compatible PCs, and An Wang made the strategic decision to keep the company's products proprietary rather than embrace open standards. The company also placed a disastrous bet on the minicomputer market just as it was being commoditised.
Wang Laboratories filed for Chapter 11 bankruptcy protection on 18 August 1992. The company had posted losses of $424 million in 1989 and $386 million in 1990 as revenue collapsed from its peak. It emerged from bankruptcy on 20 September 1993 as a much smaller software and services company, and was eventually acquired by Getronics in 1999.
Why it happened
- An Wang refused to make the company's products compatible with the emerging IBM PC standard, betting that proprietary systems would retain their premium
- The dedicated word processor market evaporated almost overnight as general-purpose PCs running WordPerfect and Microsoft Word offered equivalent capability at lower cost
- Succession planning failed: An Wang handed control to his son Fred Wang in 1986, who lacked the experience to lead a $3 billion company through a technological transition
The lesson
When the platform shifts, a proprietary bet is a bet against the entire industry — and the industry always wins.
Sources
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