The Rise and Fall of Silicon Graphics

I was there around 97 (?) and remember everyone in the company being asked to read the book "The Innovator's Dilemma", which described exactly this situation - a high end company being overtaken by worse but cheaper competitors that improved year by year until they take the entire market. The point being that the company was extremely aware of what was happening. It was not taken by surprise. But in spite of that, it was still unable to respond.

Not only are virtually all organizational processes and incentives fundamentally aligned against effectively responding, the best practices, patterns and skill sets of most managers at virtually every level are also counter to what they must do to effectively respond. Having been a serial tech startup founder for a couple decades, I then sold one of my startups to a valley tech giant and ended up on the senior leadership team there for a decade. I'd read Innovator's Dilemma in the 90s and now I've now seen it play out from both sides, so I've thought about it a lot. My key takeaway is that an incumbent's lack of effective response to disruption isn't necessarily due to a lack of awareness, conviction or errors in execution. Sure, there are many examples where that's the case but the perverse thing about I.D. is that it can be nearly impossible for the incumbent to effectively respond - even if they recognize the challenge early, commit fully to responding and then do everything within their power perfectly.

I've even spent time sort of "theory crafting" how a big incumbent could try to "harden" themselves in advance against potential disruption. The fundamental challenge is that you end up having to devote resources and create structures which actually make the big incumbent less good at being a big incumbent far in advance of the disruptive threat appearing. It's hard enough to start hardcore, destructive chemo treatment when you actually have cancer. Starting chemo while you're still perfectly healthy and there's literally no evidence of the threat seems crazy. It looks like management incompetence and could arguably be illegal in a publicly traded company ("best efforts to maximize/preserve shareholder value" etc).

SGI could double down on their servers and supercomputers, which they did for a while, but without entry-level options, their product lines becomes the domain of legacy clients who are too afraid (or too smart) to port to cheaper platforms. And being legacy in a highly dynamic segment like HPC is a recipe for disaster. IBM survived because their IBMi (the descendant of the AS/400) and mainframe lines are very well defended by systems that are too risky to move tied to hardware that's not that much more expensive than a similarly capable cluster of generic and less capable machines. As the market was being disrupted from under them, they retreated up and still defend their hill very effectively.

The other movement they could do was to shift downwards, towards the PC, and pull the rug from under their workstation line. By the time Microsoft acquired Softimage and had it ported to NT, it was already too late for SGI to even try that move, as NT was solidified as a viable competitor in the visual computing segment, running on good-enough machines much, much cheaper than anything SGI had.

I think the real problem here is PC workstations, with Windows NT (later Linux) and an Intel chip, could do 90% of the SGI workstations for a fraction of the price. By workstation I mean an honest workstation with a high end graphics card, 10k RPM SCSI drives, and hundreds of megs of RAM.

The price of SGI workstations was "call us" which translates to tens of thousands of dollars per workstation. PC workstations didn't and couldn't replace all uses of SGI workstations. What SGI was not able to handle was the fact their customers suddenly having a viable option besides paying them tens of thousands of dollars for their workstations. Even their Visual Workstations weren't a real improvement cost wise as those were still overpriced compared to competitors' PC workstations.

ARM is the only one left standing from that era which with hindsight seemed so unlikely.

ARM had the advantage in that space of starting from the very low end, and being able to squeeze margins instead of being squeezed.