In 1981, Adam Osborne, a British computer designer, announced his new product, the Osborne I. Initially, people at the West Coast Computer Fair were unimpressed. Even though it was announced as the first portable computer, it seemed bulky, and the screen was too small. Until a magazine called InfoWorld noticed the price tag of $1,795, which included a software bundle worth $1,500, making the Osborne I a hell of a deal. As Mark Dahmke said in BYTE Magazine, “Only $295 – in a way you are getting a software package with a computer thrown in for almost free.”
Described as the “Volkswagen of the microcomputer – cheap, reliable, and handled standard programs well,” by Jerry Pournelle, who wrote a different article for BYTE Magazine, he described using it at the California Institute of Technology (Caltech), during the Voyager I’s arrival to Saturn, “After the meetings I had a dozen scientists who were ready to go buy an Osborne I. I was able to type without disturbing the meeting at all, it was quiet, efficient, and not at all distracting.” As mentioned above, Osborne I had many virtues; in addition to its cost and durability, much of its design was geared towards creating a reliable, sturdy, and portable computer.
The Osborne I could even play some text-based games that were popular at the time, like Hamurabi, a text-based game where you play a Babylonian king ruling over your subjects, or another popular text-based game called Colossal Cave Adventure, where you played an explorer looking for treasure in a mysterious cave. The Osborne I, equipped with a phone adapter, was also used by the Israeli newspaper Maariv in 1981 to enable reporting from any location.
Even though all these virtues were given to his product, Adam Osborne was unhappy with the Osborne I, and only two years later, announced two new products to improve his creation: Osborne Executive and Osborne Vixen. The Executive was going to be more expensive, but feature significant improvements over the Osborne I. The Vixen was going to be a more portable version with a bigger screen. This announcement was accompanied by a short decline in sales of the Osborne I, creating a cash flow problem that resulted in the company going bankrupt that same year of 1983. This phenomenon has been referred to as the “Osborne Effect,” which occurs when a company announces a future product, leading to customers cancelling or deferring orders of the soon-to-be-obsolete product, ultimately bankrupting the company. When done correctly, the pre-announcement of new products can be of immense benefit to a company, as it can lower the cost of the current product, create media hype and investment hype on the company’s future, and confuse or intimidate competitors. The problem with the Osborne I was that when they tried to discount the product, there were still no buyers, and they ended up in a more precarious condition.
Some people have criticized the traditional narrative of the downfall of the Osborne company, solely blaming the announcement of the new products. In 2005, a technology journalist, Robert X. Crengely, explored how poor investments on the company’s part, in particular, how they produced more Osborne I computers than were needed, on the market created the conditions for its downfall. That, along with competitors like KayPro, are capturing a significant portion of the portable computer market. That being said, there are clear examples of the Osborne Effect in other companies. In 1978, Northstar Computer announced a new version of its floppy disk with double the capacity of the old one, plummeting the sales of the existing model, and bankrupting the company. Perhaps a more notable example of the Osborne Effect was the video game company Sega, which announced its next-generation system only two years after launching the Sega Saturn game system. The eventual release of the Dreamcast by Sega ended up being a significant flop, as people were worried that Sega was going to come up with a new generation video game system, and no one was willing to invest, both on the consumer end and on the video game production studios.
After the failure of Osborne Computers, Adam Osborne went on to write a best-selling memoir about his experience with his company called Hypergrowth: The Rise and Fall of the Osborne Computer Corporation. He later founded a company that produced inexpensive computer software, Lotus 1-2-3, a spreadsheet program similar to Excel, but it ended in a lengthy legal dispute, as he was accused of stealing software from other companies. His final business venture was a company named Noetics, which developed software aimed at creating artificial intelligence. Have you ever experienced or seen the Osborne Effect? This is always a reminder that when creating better and improved products, we can sometimes get ahead of ourselves.
Be sure to check out the Osborne on display at the Pavek Museum of Electronic Communication!
Links
https://archive.org/details/byte-magazine-1982-04/page/n213/mode/2up?view=theater
Byte Magazine Volume 07 Number 04 – Human Factors Engineering : Free Download, Borrow, and Streaming : Internet Archive
https://archive.org/details/byte-magazine-1982-06/page/n349/mode/2up?view=theater
Byte Magazine Volume 07 Number 06 – Interactive Videodiscs : Free Download, Borrow, and Streaming : Internet Archive
https://books.google.com/books?id=Cz4EAAAAMBAJ&pg=PA1#v=onepage&q&f=false
InfoWorld
https://web.archive.org/web/20090628080856/https://www.pbs.org/cringely/pulpit/2005/pulpit_20050616_000856.html
I, Cringely . The Pulpit . The Osborne Effect | PBS
https://economictimes.indiatimes.com/magazines/panache/the-osborne-effect-why-tech-giants-stay-silent-on-their-next-big-thing/articleshow/119654869.cms?from=mdr
The Osborne Effect: Why tech giants stay silent on their next big thing?