Page 105 - MS Year in Review 2020

In May 1982, Osborne began looking for a seasoned professional manager to

become president. The search process was not completed until the second week of
January 1983, almost nine months later.

Unfortunately, when a company experiences the kind of rapid growth that Osborne
Computer did, it is analogous to “dog years” (or years in a dog’s life). Each year of

rapid growth may not be equal to seven in a more stable company, but they are
experienced as though they were. For example, Osborne was aware of the need to
bring experienced, talented managers and supervisors into the company and did

so. Yet, in the three to six months required for employees to learn their jobs at
Osborne, the jobs had outgrown them.

Unless an organization has the infrastructure (including resources, operational
systems, management systems, and the managerial capabilities) required to

support this kind of rapid growth in advance of when it is actually required, the
company is playing a very dangerous game. As long as revenue continues to
increase and cash flow is there, the company can keep on going, even though there

are great problems, inefficiencies, even losses. However, if anything breaks the
momentum of increasing revenues and cash flow, the firm will then be caught in a

situation where all its problems will no longer have the financial slack to mask or
overcome them. This is exactly what happened to Osborne Computer in 1983.

In April 1983, Osborne was in the middle of a product transition from its original
core product, the “Osborne I” to a new product, the “Executive,” an IBM compatible

machine. Even though the “Executive” was a very promising product for the future,
and the company had already received orders amounting to more than $25 million
from dealers, the company still needed the revenues and cash flow from sales of

the “Osborne 1.” Unfortunately, the sales of this machine collapsed following the
end of a sales promotion that gave a free copy of “dBASE II” software with each
“Osborne 1” purchased. The company also had some 15,000 “Osborne 1”’s in

inventory, waiting to go into a dealer network already choking with unsold
machines. In brief, the life-sustaining flow of cash slowed sufficiently to bring

Osborne Computer to the verge of collapse.

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