The Innovator's Solution: Creating and Sustaining Successful Growth (Creating and Sustainability Successful Growth)

by Clayton

Consider AT&T. In the wake of the government-mandated divestiture of its local telephony services in 1984, AT&T became primarily a long distance telecommunications services provider. The break-up agreement freed the company to invest in new businesses, so management almost immediately began seeking avenues for growth and the shareholder value that growth creates. The first such attempt arose from a widely shared view that computer systems and telephone networks were going to converge. AT&T first tried to build its own computer division in order to position itself at that intersection, but was able to do no better than annual losses of $200 million. Rather than retreat from a business that had proved to be unassailable from the outside, the company decided in 1991 to bet bigger still, acquiring NCR, at the time the world’s fifth-largest computer maker, for $7.4 billion. That proved only to be a down payment: AT&T lost another $2 billion trying to make the acquisition work. AT&T finally abandoned this growth vision in 1996, selling NCR for $3.4 billion, about a third of what it had invested in the opportunity. But the company had to grow. So even as the NCR acquisition was failing, AT&T was seeking growth opportunities in technologies closer to its core. In light of the success of the wireless services that several of its spun-off local telephone companies had achieved, in 1994 the company bought McCaw Cellular, at the time the largest national wireless carrier in the United...