David Caminer, John Aris, Peter Hermon and Frank Land (1996) The World’s First Business Computer: User-Driven Innovation.London: McGraw-Hill Book Company, 401 pages, ISBN 0-07-709236-8
Reviewed by:
Professor Robin Mansell, Science Policy Research Unit, University of Sussex
Professor of Media and the Internet, London School of Economics
- A successful confectionery business in Britain, J. Lyons & Company, envisaged LEO, the Lyons Electronic Office, in 1949. By 1951 the company’s first computer had been designed and built. Lyons established a subsidiary in 1954, LEO Computers Ltd., to build and market its computers. John Simmons, former Chief Comptroller of J. Lyons & Company, is cited at the beginning of this book: ‘innovation is the lifeblood of successful business management. The past success of a business can be its own worst enemy…’. LEO Computers succeeded at first but its business subsequently declined. LEO’s story is told by its former employees and the book is organised into four main sections. The first documents the ‘motivation, passion and hazards’ as Lyons sought to capture a leadership position in a market that would become dominated by IBM. Other sections offer personal reflections by LEO’s designers, programmers, consultants and users. This is an engaging tale of entrepreneurship, leadership, market success and failure. More than this, it is a history with lessons for information technology designers and users today.
- In his history of IBM, Emerson Pugh observes that ‘remarkably the J. Lyons bakery was the first British company to build an electronic computer for business data processing’.[1] This book brings to light important characteristics of a ‘user-driven innovation’ process that yielded initial success. In 1951, LEO was in regular, time critical use within the company and it was the first computer system to run live office applications. In the 1950s IBM’s domestic and foreign revenues were growing at an average of 22% per year and the UK was the only significant market where IBM had less than half the business. Lyon’s innovative approach to information management gave it an initial ‘first mover’ advantage.
- Product and process innovations played a significant role in LEO’s early success. A single family-owned businesses’ need for improved management of information resulted in a computer design that integrated separate office tasks and reduced the need for repetitive clerical tasks. This need was very different to that which motivated defence-related computing in the US during the 1940s and 50s. By 1955, eleven companies in Britain claimed the capability to supply electronic computers and most supported scientific applications. In addition, developments in US business computing applications were regarded as being both too expensive and adhering too rigidly to punched card methods with ‘no real idea of organising a job for a computer’.
- In Britain systems analysis was central to the success of early applications. Business process analysis was time consuming and costly, but LEO Computers gained experience that enabled the company to provide increasingly complex business information applications. Early user organisations were expected to operate the new systems and even perform hardware maintenance. They were also expected to introduce major organisational changes and to redefine job functions.
- Successive generations of LEOs embodied substantial technical innovation including time-sharing, micro-programming, reliable test programmes, and a distinctive programming language. The use of magnetic tape as the medium for main data fields and for intermediate results between programmes was an innovation beyond the methods in use in the US at the time. New techniques were developed for time and motion studies of clerical work covering all facets of activities and LEO employees made extensive use of flow charts before writing code. They achieved high levels of accuracy and reliability and low maintenance requirements.
- The new LEO computer applications involved product, service and organisational (business process) innovations. The main criterion for acceptance of an application was whether it offered ‘clear cost savings as against conventional methods, or had to make the business process more effective as well as showing savings in costs’. LEO designers aimed to automate close to 100 per cent of a given activity while competitors focused on speeding up the most active transactions. Companies like IBM also had substantial investments in earlier generation technology, i.e. punched card machines, and they were slower to switch to magnetic tape to automate systems.
- Factors contributing to LEO’s eventual withdrawal included costs that were higher than those of competitors, but there were other factors. Lyons computer subsidiary was established without a clear view of the processes needed to build market share and no customer base upon which to build. Sales and marketing employees retained responsibilities for programming and aggressive marketing was not a significant part of LEO’s culture. David Caminer, former Director of LEO Computing Ltd., also suggests that ‘the degree of acceptance of change and the relative costliness of equipment in relation to salary rates placed UK manufacturers at a great disadvantage compared with their US counterparts in the respective home markets’. The UK government made few moves to procure new computer applications from the company or to support its R&D costs. In 1961 when LEO III entered the market, the company’s success had been achieved without government support and at a time when almost US$ 400 million had been awarded to IBM in R&D contracts by the US government. [2]
- None of these features can be singled out to account for the eventual reversal of LEO’s fortunes. Together, however, they account for the failure to succeed in an increasingly competitive market. The announcement of IBM’s 360 series in 1964 was preceded by the IBM 1401 computer. This product was capable of executing jobs, but not of integrating across a wide range of clerical tasks. LEO personnel appear to have missed the signals in the marketplace or perhaps to have been hindered by the secrecy surrounding developments in US computing. When IBM’s systems offered applications which did not demand a high degree of work re-organisation and the capability to integrate information processing systems, LEO was left behind. LEO management chose to continue developing applications that pre-supposed a willingness to engage in substantial business process ‘reengineering’ and LEO employees remained devoted to a close and detailed interaction with customers.
- Today, the poverty of the relationship between information technology systems engineers and customers for office information processing systems is increasingly cause for concern. Enormous cost overruns often accompany the introduction of information technology systems in companies seeking elusive productivity gains through their investment. Organisational change and work function interdependencies now are recognised as primary factors in information systems design and implementation. User-centred innovation is a much sought after capability by computer manufacturers and software houses.
- In the early period, the Lyons story is a classic case of a ‘lead user’. In some models of the innovation process, the user plays little active role in the generation or diffusion of an innovative technology. [3] von Hippel has shown that in some cases, however, a user will perceive the need for a product, conceive a solution, build a prototype and prove the value of the prototype through its use.[4] Foxall has studied users who, having invented a novel device and applied it internally, will act in an entrepreneurial manner to derive maximum benefit from its diffusion.[5] The user plays an active part in the development of the innovation for commercial exploitation either indirectly or by becoming a manufacturer as in the case of Lyons.[6] Successful lead users have requirements that eventually will be felt more widely in the market. In LEO’s case, the need for the specific combination of product, services and organisational innovations was not widely perceived by other users.
- The LEO pioneers assumed that their approach to meeting Lyons needs would be widely accepted by other organisations. Realisation of the crucial importance of coordinating information technology systems with business processes is occurring today and, as Frank Land suggests, ‘it is interesting to note that many of the ideas we put into practice at the time are now trumpeted as the latest solutions to the problems of intense business competition’. LEO championed unique information system solutions while the US led the market for business systems with packaged software solutions.
- In the 1990s, there is demand for customised software applications for decision support systems. At the same time, innovations in software development are enabling users to tailor systems to their own requirements. Systems designers and users will benefit from the lessons of LEO. The most crucial perhaps is the importance of the capacity to ‘re-personalise’ the information generated by computerised decision support systems.[7] Hardware and software suppliers will need to learn this lesson from LEO’s history. The capability to be responsive to users’ needs and to shape organisational change in ways that support positive work experience is likely to differentiate winners from losers in the information technology electronic commerce markets of the 21st century.