What’s the “Osborne Effect?”

It’s a particularly tragic story of a self-imposed disaster that could have been avoided by the innovator getting out of the echo chamber and basing business decisions on reality, not over-exuberant fantasy. It demonstrates that innovation must be managed properly, just like any other business operating segment.

Back in the early 1980s, the Osborne Computer Corporation was a pioneering Silicon Valley maker of personal computers. In 1981, Adam Osborne, the founder of the company, developed, with design work from Lee Felsenstein, what was arguably the world’s first mass-produced portable computer.

The first Osborne 1 computer shipped in July 1981. Demand was huge, and in just twelve months the company grew from two employees (Osborne and Felsenstein) to 3,000 people and $73 million in revenue.

Of course, during this time a new and improved version was in the works. In early 1983, demonstrating a fatal lack of humility, Adam Osborne began showing the more advanced second-generation Osborne Executive computer to journalists, who then publicized the new model. Dealers, afraid of being stuck with unsold computers, began cancelling orders for the Osborne 1. Costly inventory piled up, and in spite of dramatic price cuts, sales of the Osborne never recovered. Losses, already higher than expected, continued to mount, and on September 13, 1983 the company declared bankruptcy.

The company had already announced yet another successor product, the Osborne Vixen, but went out of business before the Vixen could be established!

The Osborne Effect: Drawing attention to a new iteration of your product before it’s actually available for sale. Yes, change is relentless and increasing in speed—but winning leaders know that you need to be disciplined and in control of your workflow and product rollouts, and not always succumb to the urge to “Do it now!”

Four Action Items

To stay one step ahead of the competition, you need to:

1. Recognize and adapt to discomfort. Is it coming from an external source—or is it self-inflicted? Can you use it to innovate, or do you just have to get rid of it? Do you know when to adapt while sticking to your values?
2. Leverage disruption to your advantage. Change is not an event, it’s a steady stream. You can be victimized by it or use it to your advantage. Are you willing to get out of your echo chamber and hear about developments that are uncomfortable or even threatening?
3. Manage the rate of change—don’t let it manage you! Your people can only absorb so much change at one time. What’s your organization’s clock rate? Are you ensuring your employees ate not either stagnating or suffering from change whiplash—because both are equally bad!
4. Remember to be mindful of your product lifecycles. Innovation must be an integral part of your overall business strategy. Stay disciplined and stay on track!