Ken Olsen, who has died aged 84, drove the second great wave of computing, taking the industry from large mainframes to networks of smaller, cheaper minicomputers that could be used by small companies or scientists and engineers. Digital Equipment Corporation (DEC), which he co-founded in 1957, grew into the world's second-largest computer company, with more than 100,000 employees and a peak turnover of $14bn. In 1986 a Fortune magazine cover story called Olsen "arguably the most successful entrepreneur in the history of American business".
Just six years later, however, he was forced out of the company. The market had moved on to microcomputers such as the IBM PC, launched in 1981, and DEC was rapidly being left behind.
Olsen, who had been the hero of a generation of computer engineers, became better known for his gaffes. These included saying that "the personal computer will fall flat on its face in business", and in 1977, somewhat out of context: "There is no reason for any individual to have a computer in his home."
In 1998 Olsen suffered the ignominy of seeing his beloved company taken over by Compaq, one of the upstart PC manufacturers, for $9.6bn, then absorbed into a former rival, Hewlett-Packard. Although he had severed relations with DEC in 1992, its downfall was painful for him.
DEC had developed its own PC, the Rainbow, but it did not follow IBM's standards and sold badly. DEC was positioned to do well out of the growing importance of communications, and its computers were used to run much of the early internet, but it often lost out to Sun Microsystems. Bill Gates wrote his version of Basic – used to found Microsoft – on a DEC computer, and later Dave Cutler, DEC's star programmer, took his team to Microsoft to write Windows NT, the basis for XP. DEC even created Alta Vista, the web's leading search engine until Google arrived. There were other missed opportunities. DEC had the talent but, outside minicomputing, was never able to convert its innovations into substantial businesses.
Olsen was born in Bridgeport, Connecticut, to parents of Norwegian and Swedish descent, and developed a schoolboy interest in electronics, particularly radio. His father was a mechanical inventor with a workshop in the basement, where Ken and his younger brother, Stan, built crystal sets and a one-valve radio.
When he graduated from high school in 1944, he was drafted into the US navy and spent his first 11 months being given what he described as "an excellent education in electronics". The fighting ended before he completed his training, but he served on a cruiser and visited Korea and China.
The GI Bill enabled him to study electronics at the Massachusetts Institute of Technology (MIT), and after graduation he became a research assistant in the university's computer lab. There he worked under Jay Forrester on the valve-based Whirlwind computer – the first to show real-time data on a display – and America's Sage air defence system. He also led the development of computers based on transistors. Having learned how to build systems at MIT, Olsen decided to go into business.
In 1957 he and his colleague Harlan Anderson founded DEC in a disused woollen mill at Maynard, just outside Boston, and their first recruit was brother Stan. At the time, the data-processing industry was dominated by IBM, which installed and maintained room-filling million-dollar mainframes. DEC sold small, fast modules that smaller organisations, universities and even individuals could use, if they could write their own software. The modules led to the creation of the first stand-alone minicomputer, the PDP-1 (Programmed Data Processor-1), launched in 1960 for only $110,000. This was also the hardware on which the world's first video game, Spacewar!, was created – by Steve Russell at MIT.
The PDP range achieved worldwide success, particularly the PDP-8 – the bestselling computer of its day – and the PDP-11, for which the C programming language was written. In 1977 DEC went from 16-bit minis to 32-bit super-minis with the even more successful VAX range, investing $1bn to fight toe-to-toe against IBM. But by then, the minicomputer age was approaching its end and the microprocessor, or "computer on a chip", was starting to take over with the aim of making powerful computers by bundling cheap microprocessors together.
Other minicomputer companies such as Data General, Prime and Wang were also devastated. These four had been mainly responsible for creating the "Massachusetts Miracle" – a cluster of hi-tech companies around the Route 128 technology corridor near Boston. Only Hewlett-Packard went on to greater things, possibly because it was the founding company in Silicon Valley, California.
Olsen's engineering-based approach showed in his systematic notes of what he hoped for in a wife. When he was an undergraduate, a young Finnish woman, Eeva-Liisa Aulikki, came to stay with his next-door neighbour. They did not get on well, but in a summer break from MIT, Olsen got a job in a ball-bearing factory in Sweden, then set off for Finland to woo her. They were together for 59 years.
In 2003 the couple made a donation to establish the Ken Olsen Science Center at Gordon College in Massachusetts. Olsen was a long-term supporter of this Christian college, and had joined the evangelist Billy Graham on the board of trustees in 1961. Eeva-Liisa died in 2009. Their son Glenn also predeceased Olsen. He is survived by his daughter, Ava, his son, James, Stan and five grandchildren.