Kenneth H. Olsen

Cofounder of Digital Equipment Corporation

• Born: February 20, 1926
• Birthplace: Bridgeport, Connecticut
• Died: February 6, 2011
• Place of death: Indianapolis, Indiana

Primary Company/Organization: Digital Equipment Corporation

Introduction

Kenneth H. Olsen is cofounder of Digital Equipment Corporation (DEC, or Digital). His love for engineering and his philosophy of getting the job done and giving the customer value made his company a leading competitor against IBM in computer sales in the 1980s. He developed a management style unheard of in the 1960s, placing faith in and giving latitude to his employees. In 1992, Olsen resigned as president and chief executive officer (CEO) of the DEC, which was bought by Compaq in 1998 for $9.6 billion.

Early Life

Kenneth Harry Olsen was born to Oswald and Elizabeth Olsen, whose families were of Swedish and Norwegian descent, in Bridgeport, Connecticut. Oswald was a fundamentalist Christian and believed in discipline, but his son, who like his father was quiet and determined, needed little supervision. Oswald was an engineer by trade and an exceptional machine tool designer. He instilled in his sons a love for mechanical and electrical things, allowing them to tinker with the tools in his basement. Olsen helped fix neighbors' radios and once set up a radio transmitter with assistance from his brother Stan. Olsen and his brother broke into a local radio station with their transmitter to broadcast a jingle that Stan had written, “Murphy's Meatballs.” In high school, Olsen played center for the Stanford High School football team.

Just as World War II was coming to a close, Olsen joined the U.S. Navy. He never saw combat, but he received useful technical training. In one year, he completed the electronics technician training course and ran his ship's radio shack. This served as a springboard to his study of engineering after he returned to civilian life. Thanks to the G.I. Bill, Olsen was able to enter the Massachusetts Institute of Technology (MIT) in February 1947. Instead of studying electronics, as he had initially planned, he studied electrical engineering at the encouragement of his professors. In 1950, he was given the chance to work on the Whirlwind, a computer built to power a cockpit flight simulator for the Navy. MIT also created Lincoln Laboratory in Lexington, Massachusetts, to conduct further research in defense systems. Olsen was chosen as one of four hundred highly skilled engineers to work on the Semi-Automatic Ground Environment (SAGE) defense system, for which Whirlwind had been the base. Olsen helped produce a test computer for SAGE within nine months, establishing a reputation as an efficient, determined, and skilled worker.

In 1953, Olsen became the liaison for Lincoln Laboratory and the International Business Machines Corporation (IBM), which had established a subcontract with the laboratory. However, Olsen was stifled and frustrated at IBM. MIT had exposed Olsen to a certain degree of working freedom that could not exist in the business world of IBM. Olsen became fed up with the bureaucracy of IBM and described his work there as akin to “going to a communist state.” He believed that he could do what IBM was doing, only better. He was ready to start his own company.

Life's Work

To start this new computer company, Olsen enlisted Harlan Anderson, with whom he had worked on the Whirlwind. They went to American Research and Development Corporation (ARD), a venture capital company, for investment backing. They got the support of George Doriot, the French founder of the company. Doriot, impressed by Olsen's demonstration of playing Bach on his computer, took a liking to Olsen. Doriot's disbelief in making quick profit and selling out enabled the two engineers to get their start-up funding. ARD invested $100,000, expecting $70,000 in shares in exchange. As a result, ARD would own more than 70 percent of the company. Believing the term computer to be ahead of their time, Doriot suggested the company of Digital Equipment Corporation (DEC). In 1957, DEC was born.

Because of their extremely tight budget, Olsen and Anderson cut corners wherever possible. They rented out space in an old woolen mill (the Mill) that dated back to the Civil War, in Maynard, Massachusetts, not far from Lincoln Lab. They used whatever desks and chairs came with the space instead of refurnishing, and they even refused to buy doors, considering them too expensive to purchase and install. Instead of buying insulators, they used bottle caps. “Spend as little as possible,” was DEC's motto. If they could do something themselves they would, even if they had to build a machine to do it. Olsen's wife even came to the Mill from time to time to sweep floors. An advertisement was placed in newspapers seeking employees, and engineers from MIT were recruited. Although Olsen had founded a new company, he wanted to keep some of the work ideals he had learned at MIT, chiefly openness and honesty, and to create an environment that fostered new ideas and tolerated mistakes. DEC progressed quickly, and by the end of its first year it had twelve employees and had made $94,000 selling its digital laboratory modules and digital systems modules. Doriot was impressed yet saddened, because companies with such early successes usually failed quickly. Little did he know what staying power DEC would have.

DEC served as an inspiration for both students and professional engineers. They saw DEC as the environment in which they could work creatively and well, given DEC's casual yet intense atmosphere. In June 1960, Chester Gordon Bell left MIT to work for DEC. He became DEC's second computer engineer. Olsen had set out to build computers, so in 1959, two years after starting the company, he and Bell started designing DEC's first one. Olsen thought that computers should be accessible to the individual, without the need of a programmer to run it. The result was the PDP-1, a breakthrough in computer technology, revolutionary for its small size (about the size of a refrigerator, which was very small compared to MIT's room-sized computers) and its accessibility: It did not need a sterile environment, nor did it need a professional programmer to tell it what to do. The machine was called a programmed data processor because Doriot remained cautious about attracting the attention and competition of IBM. By avoiding the term computer, DEC was able to enter the market without much fanfare. The PDP-1 did not have the same power as a giant mainframe, but for the relatively low price of $120,000 it had more computing power than customers expected. Olsen donated a PDP-1 to MIT to allow students to work with a real computer. He strongly supported the academic aspect of engineering, not just the commercial, and employed interns from MIT as well.

As DEC grew, new machines were planned. The PDP-2 was supposed to be a 24-bit machine, while the PDP-3 was going to be a 36-bit machine. DEC built neither of these machines, but it did create the PDP-4. The Canadian engineers who bought the first PDP-4, however, complained that it was too complex. The PDP-5 was built in response, serving as the precursor to the minicomputers DEC would build. At this time, Bell was developing the PDP-6, a 36-bit machine that was ultimately a failure. In 1965, however, the PDP-8 brought DEC into its own. The small computer was 12-bit machine and the size of a cabinet, allowing it to be placed on laboratory countertops. The PDP-8 was very powerful, especially in relation to its extremely low price of $18,000. Another benefit was that DEC neither produced software nor bought it from third-party software designers. Rather, DEC's customers could use whatever software they wanted on their machines, be it third-party or self-designed, making DEC's machines much more flexible than hardware with preloaded software from other companies. DEC gained a monopoly in the market of minicomputers, and imitations from other companies, such as IBM could not compete with DEC computers' size, speed, or power.

Olsen had a management style unusual for his time. He did not want to impose the system of hierarchy that he had experienced at IBM and that was common in most businesses. Olsen saw titles as meaningless if nothing got done and new ideas were not being created. To prevent this problem, Olsen established a management system that would later be known as “matrix management.” Every employee reported to two or three managers, which spreading the responsibility across managers. Although the matrix created a sort of organized chaos, Olsen was a strong believer in responsibility. Once an idea was pitched and approved, the person in charge was responsible for its completion, and if things went wrong, he or she had no excuses. Olsen had a reputation for criticizing employees for their mistakes, getting loud and aggressive. Nevertheless, he had a way of making people want to please him and to get back in his good graces. He also insisted on avoiding nepotism. After asking his brother Stan to help him start the company, Olsen refused jobs to other family members. This was his business, not his family's.

Despite some harsh principles, Olsen looked out for his employees. There existed at DEC an unspoken no-firing policy. If someone did not work out in a department, they were sent into a new one, until the right fit was found. This led to a strong bond between employees and Olsen. He even had his managers attend retreats to his lakeside cabin, where many problems could be solved while groups of managers took walks. Olsen fostered “group discovery,” leading conversations and discussions whereby the group would generally come to a consensus. He believed that this took much of the responsibility of decision making off his shoulders, as well as allowing his team to come up with the best solutions possible. Sometimes the organized chaos got Olsen in trouble, however. In the mid-1980s, management problems led to losses in revenue. The press said that Olsen had lost his touch and called for his resignation. Olsen was not ready to let go of his company, however, and he fought through this period, emerging strong on the other end.

In 1975, DEC came out with the VAX line of computers. They were based on the PDP-11, which had become outdated, allowing potential customers to be familiar with the machine's structure. However, the VAX helped move DEC into the new era of computers. During this period, the press started comparing DEC to IBM. IBM came out with a minicomputer of its own, the Series-1, to rival DEC's computers. DEC had had a monopoly on the minicomputer market for such a long time, however, that IBM could not compete in this area. It was the personal computer (PC), or microcomputer (as opposed to the larger minicomputers), that became IBM's signature product and eventually outcompeted DEC. Olsen failed to recognize the potential and appeal of the PC, and at first he dismissed the thought of DEC creating one of its own. It was not until IBM had successfully developed a line of PCs that DEC made one. Olsen took apart an IBM PC and laughed at how it had been slapped together. One year later, DEC came out with its own personal computer. By this time, however, IBM had monopolized the market. As a result, Olsen began to retreat from the PC market. In 1986, however, he returned strong, and Fortune magazine called him the most successful entrepreneur of all time, taking a company from nothing and creating a $7.6 billion corporation.

In the early 1990s, Olsen's company again struggled, this time as a result of an industrywide recession. DEC's low-priced microprocessors were not catching on and some of its other product lines were struggling as well. In 1993, after thirty-five years with DEC, Olsen left the company he had founded. Six years later, DEC was sold to Compaq for $9.6 billion. Although the company eventually lost ground, DEC had led in innovation for most of its life, creating machines that were often the first used by many of today's leading computer engineers.

Personal Life

Olsen met his wife, Eeva-Liisa Aulikki Valve, a Finnish exchange student, through his roommate in college. She decided not to finish college in the United States, so Olsen took a break from his work at MIT and followed her to Europe. Taking a job at a ball-bearing factory in Sweden, Olsen was able to reunite with Aulikki, and they soon became engaged. As the Cold War intensified, Olsen needed special permission to marry and bring his foreign bride back into the United States. Family connections with a friend in the U.S. State Department helped cut through the red tape, and Aulikki's father married the couple in December of 1950. Olsen brought her back home, and they soon had the first of three sons.

Olsen was always a religious man, never swearing, drinking, or smoking. He treated his employees more like family than people on a payroll, and almost everybody called him Ken. He was also a modest man: Even after his company's successes, he refused to move into a bigger house and continued to drive his trusty Ford. One day, a coworker noticed that he had been seen driving a Mercedes, and Olsen, embarrassed, admitted that he had borrowed his wife's car.

Olsen received many honors for his work, including induction into the National Inventors Hall of Fame, a seat on the Computer Science and Engineering Board of the National Academy of Sciences in Washington, D.C., and the Vermilye Medal in 1980. Olsen died February 6, 2011, in Indianapolis while in hospice care. He was eighty-four years old.

Bibliography

Earls, A. R. Digital Equipment Corporation: Images of America. Portsmouth: Arcadia, 2004. Print. Tells the full story of DEC and its contributions to the advent of the personal computer, the first computer games, computer networks, the Internet revolution. Includes photographs of people, events, and machines.

Kilbane, Doris. “Ken Olsen: Faith, Work, and Charity Support a Computing Career.” Electronic Design 59.16 (2011): 66–68. Web. 1 May 2012. An obituary focusing on the Olsen's innovative management style, philosophy, and philanthropy.

Rifkin, G., and G. Harrar. The Ultimate Entrepreneur: The Story of Ken Olsen and Digital Equipment Corporation. New York: Prima, 1994. Print. The story of how DEC launched the minicomputer revolution but botched the transition to the personal computer, in which IBM and Apple eventually triumphed, despite the company's innovative foray into computer-networking software. Suited for the technically initiated.

Rosenberger, Jack. “Ken Olsen, DEC President and CEO, 1926-2011.” Communications of the ACM 54.4 (2011): 20. Print. Obituary of Olsen.

Schein, E. H., P. S. DeLisi, P. J. Kampas, and M. M. Sonduck. DEC Is Dead, Long Live DEC: The Lasting Legacy of Digital Equipment Corporation. San Francisco: Berrett-Koehler, 2003. Print. The author, a consultant at DEC, provides an inside view of the key developments across the company's history, including insight into the influence of its founder and CEO, Olsen.

Scientific American, ed. Understanding Supercomputing. New York: Byron Preiss Visual, 2002. Print. A collection of fifteen articles published in Scientific American between 1995 and 2001 that together provide basic grounding in the technology of supercomputers.

Slater, R. “The Hermit of Chippewa Falls and His ‘Simple, Dumb Things.’” Portraits in Silicon. Cambridge: MIT, 1989. 195–206. Print. A brief biography of Olsen in this collection of sketches on pioneers in computer science.