IBM Gave Two Tiny Companies the Same Big Break, and Only Microsoft Made It Count
The winners were not luckier, they just did far more with the luck they got.
The Knowledge Project Podcast · Jim Collins — Good to Great — The Knowledge Project #67IBM needed an operating system for its new personal computer, the basic software that tells the machine how to run. It went looking to two very small companies.
One was Digital Research in Pacific Grove, California, which actually had a system for personal computers. The other was Microsoft in Seattle, which made computer languages and had no operating system at all. If anything, IBM first favored Digital Research, since Digital Research had the product.
For business researcher Jim Collins, the fact that both companies got the same offer from IBM is the whole story. With his colleague Morten Hansen, he spent two years learning how to study luck in companies that went from startups to beating their industries by ten times. They defined a luck event in a strict way: you did not cause it, it had potentially large consequences for good or ill, and it surprised you in its timing, its form, or the fact that it happened at all.
Then they went back through company histories and sorted every event that passed those three tests into buckets. They asked whether the big winners had enjoyed better fortune, fewer setbacks, larger windfalls, or better timing. The data could not show that the big winners had more luck. If anything, the comparison companies that failed to break through were luckier, but the difference was too weak to support that claim, so Collins calls it a wash.
What differed was return on luck. Faced with that identical stroke of fortune, an invitation from IBM, Digital Research squandered it by not following up on the invitation. Microsoft's Bill Gates recognized its value and went all over it once IBM came back from the West Coast, looking into getting an operating system.
Microsoft then treated that break not as a one-time win but as a first push. Even when some people laughed at early versions of Windows, the company kept building on it, turn after turn, compounding the original luck event for decades. The same luck arrived at two doors, and only one company turned it into momentum.
Questions people ask
What exactly is an operating system?
An operating system is the master software that manages a computer's memory, files, and programs. Without it, applications like a word processor or a browser cannot run. For IBM's PC, it was the essential layer between the machine and everything else.
What happened to Digital Research after it missed the IBM deal?
Digital Research continued for several years and its system remained in use, but it never captured the PC standard. Microsoft's system became the standard, with others following.
How did one contract turn into decades of dominance?
Microsoft licensed an existing system, adapted it for IBM, and then kept improving the product through successive versions of DOS and Windows. Each improvement brought more users, which brought more software, which brought still more users. That compounding is what Collins means by turning one lucky break into a flywheel.