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Stay Paranoid: Top Survival Insights from Intel’s Andrew Grove, Part 1
 

Stay Paranoid: Top Survival Insights from Intel’s Andrew Grove, Part 1

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Intel’s former CEO Andrew Grove sits among business’s most eminent leaders. Grove’s highly celebrated business book, Only the Paranoid Survive, offers an intimate account of Intel’s darkest ...

Intel’s former CEO Andrew Grove sits among business’s most eminent leaders. Grove’s highly celebrated business book, Only the Paranoid Survive, offers an intimate account of Intel’s darkest hour. It was the mid-‘90s when Intel was forced to innovate or perish. The once rapidly successful semiconductor startup faced unexpected, overwhelming competition, a severely disrupted market and a team of bewildered, disheartened employees in desperate need of clear direction.

Grove sat at the fore of Intel during its passage through the “valley of death” and, remarkably, managed to transform Intel into the famed microprocessor manufacturer it is known as today. In this two-part guide, key quotes from Only the Paranoid Survive are arranged to deliver Grove’s most crucial lessons for dealing with disruption, innovation and change management.

Part 1 offers essential insights for discerning between common changes and truly monumental change – change that, if left undetected, is positioned to forcibly upset your entire business.

1. Strategic Inflection Points
2. Helpful Cassandras
3. Six Forces Affecting Business
4. The 10X Change

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    Stay Paranoid: Top Survival Insights from Intel’s Andrew Grove, Part 1 Stay Paranoid: Top Survival Insights from Intel’s Andrew Grove, Part 1 Document Transcript

    • WITH MALCOLM NETBURNStay Paranoid:Top Survival Insights from Intel’s Andrew Grove, Part 1 Malcolm Netburn Chairman and CEO of CDS Global
    • FORWARD: with Malcolm Netburn February 2013Stay Paranoid:Top Survival Insights from Intel’s Andrew Grove, Part 1Intel’s former CEO Andrew Grove sits among business’s most eminent leaders. Grove’s highlycelebrated business book, Only the Paranoid Survive, offers an intimate account of Intel’s darkesthour. It was the mid-‘90s when Intel was forced to innovate or perish. The once rapidly successfulsemiconductor startup faced unexpected, overwhelming competition, a severely disrupted marketand a team of bewildered, disheartened employees in desperate need of clear direction.Grove sat at the fore of Intel during its passage through the “valley of death” and, remarkably,managed to transform Intel into the famed microprocessor manufacturer it is known as today. Inthis two-part guide, key quotes from Only the Paranoid Survive are arranged to deliver Grove’s mostcrucial lessons for dealing with disruption, innovation and change management.Part 1 offers essential insights for discerning between common changes and truly monumentalchange – change that, if left undetected, is positioned to forcibly upset your entire business. 1. Strategic Inflection Points 2. Helpful Cassandras 3. Six Forces Affecting Business 4. The 10X Change© 2013 CDS Global. All rights reserved. 2
    • FORWARD: with Malcolm Netburn February 20131. Strategic Inflection PointsAt some point in every organization’s lifespan, it will be confronted with a dilemma: what used towork no longer can. Grove calls this juncture a strategic inflection point, an analogy taken from themathematical term that defines the exact point where a curve changes its directional sign. The shiftrequired to continue on is immense – if not impossible. Undergoing this shift is, according to Grove,likened to passing through the valley of death. The Strategic Inflection Point Business Reaches New Heights Inflection Point Business Declines – Only the Paranoid Survive by Andrew GroveBelow are key comments from Grove that will help you to recognize when your company meets astrategic inflection point and how to psychologically prepare for what lies ahead. A strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end. An inflection point occurs where the old strategic picture dissolves and gives way to the new, allowing the business to ascend to new heights. However, if you don’t navigate your way through an inflection point, you go through a peak and after the peak the business declines. You can’t judge the significance of strategic inflection points by the quality of the first version. … Consequently, you must discipline yourself to think things through and separate the quality of the early versions from the longer-term potential and significance of a new product or technology. The trouble was, not only didn’t we realize that the rules had changed – what was worse, we didn’t know what rules we now had to abide by. When you’re caught in the turbulence of a strategic inflection point, the sad fact is that instinct and judgment are all you’ve got to guide you through. But the good news is that even though your judgment got you into this tough position, it can also get you out. It’s just a question of training your instincts to pick up a different set of signals.© 2013 CDS Global. All rights reserved. 3
    • FORWARD: with Malcolm Netburn February 2013 I learned that the word “point” in a strategic inflection point is something of a misnomer. It’s not a point; it’s a long, torturous struggle. Customers drifting away from their former buying habits may provide the most subtle and insidious cause of a strategic inflection point – subtle and insidious because it takes place slowly.2. Helpful CassandrasIn Greek mythology, Cassandra was a truth-speaking prophetess cursed to never be believed byanyone. At every company, there are those employees who are often passed off as being paranoidin nature. Grove calls these employees “Helpful Cassandras,” after the mythological seer.Though they hold varying work titles, their roles typically call them to interface a great deal withthe outside world, causing them to be most immediately aware of up-and-coming shifts.Chances are, Grove says, you are already surrounded by a few of these Helpful Cassandras.You don’t even need to seek them out, says Grove, because they will likely come to you bearingwarnings that should be, at the very least, considered. The temptation will be to write them offin assurance that the sky is not, in fact, falling. However inconvenient, time should be taken toinvestigate the cause for your Cassandras’ paranoia. The Cassandras in your organization are a consistently helpful element in recognizing strategic inflection points. Middle managers – especially those who deal with the outside world, like people in sales – are often the first to realize that what worked before doesn’t quite work anymore; that the rules are changing. They usually don’t have an easy time explaining it to senior management, so the senior management in a company is sometimes late to realize that the world is changing on them – and the leader is often the last of all to know. Because they are on the front lines of the company, the Cassandras also feel more vulnerable to danger than do senior managers in their more or less bolstered corporate headquarters. Bad news has a much more immediate impact on them personally. Of course, you can’t spend all your time listening to random inputs. But you should be open to them. As you keep doing it, you will develop a feel for whose views are apt to contain gems of information and a sense of who will take advantage of your openness to clutter you with noise. Sometimes a Cassandra brings not tidings of a disaster but a new way of looking at things.© 2013 CDS Global. All rights reserved. 4
    • FORWARD: with Malcolm Netburn February 20133. The Six Forces Affecting BusinessAndrew Grove is a known advocate for classical competitive strategy analysis. Grove leans on HarvardUniversity professor Michael Porter’s identification of forces that affect the competitiveness of acompany. Here, Grove expands Porter’s five points to include his own. I. Competitors: The power, vigor and competence of a company’s existing competitors: Are there a lot of them? Are they well funded? Do they clearly focus on your business? II. Suppliers: The power, vigor and competence of a company’s suppliers: Are there a lot of them, so that the business has plenty of choices, or are there few of them, so that they have the business by the throat? Are they aggressive and greedy or are they conservative and guided by the long view toward their customers? III. Customers: The power, vigor and competence of a company’s customers: Are there a lot of them, or is the business dependent on just one or two major customers? Are the customers very demanding, perhaps because their business operates under cutthroat competition, or is their business more “gentlemanly”? IV. Potential Competitors: The power, vigor and competence of a company’s potential competitors: These players are not in the business today but circumstances could change and they might decide to come in; if so, they may be bigger, more competent, better funded and more aggressive than the existing competitors. V. Substitution: The possibility that your product or service can be built or delivered in a different way. This is often called “substitution,” and I’ve found that this last factor is the most deadly of all. New techniques, new approaches, new technologies can upset the old order, mandate a new set of rules and create an entirely new climate in which to do business. VI. Complementors: Recent modifications of competitive theory call attention to a sixth force: the force of complementors. Complementors are other businesses from whom customers buy complementary products. The Six Forces Affecting Business Power, vigor and Power, vigor and Power, vigor and competence of competence of competence of complementors existing competitors customers THE THE BUSINESS BUSINESS Power, vigor and Possibility that what Power, vigor and competence of your business is competence of suppliers doing can be done potential competitors in a different way – Only the Paranoid Survive by Andrew Grove© 2013 CDS Global. All rights reserved. 5
    • FORWARD: with Malcolm Netburn February 20134. The 10X ChangeYour company will see numerous significant changes throughout its lifespan. Of course, not all aresignificant enough to trigger a real strategic inflection point. Below are Grove’s how-to insightsfor determining when a change is just a change and when a change implies something much moreprofound – what Grove calls a 10X change. When a change in how some element of one’s business is conducted becomes an order of magnitude larger than what that business is accustomed to, then all bets are off. There’s wind and then there’s a typhoon, there are waves and then there’s a tsunami. There are competitive forces and then there are supercompetitive forces. I’ll call such a very large change in one of these six forces a “10X” change, suggesting that the force has become ten times what it was just recently.Grove advises companies to ask themselves these key questions to determine the level of change itis facing: I. Competitors: Is your key competitor about to change? Grove suggests the silver bullet test for identifying this. If your company had a single bullet to kill off its worst competitor, what competitor would that be? Under normal circumstances, identifying this competitor is practically automatic and easy to point out. If you find yourself debating who the most important competitor to eliminate would be, there’s a good chance you may be facing significant 10X change. II. Complementors: Is your key complementor about to change? Does the company that in the past years mattered the most to you and your business seem less important today? III. Change in resolve among colleagues: Do people seem to be “losing it” around you? Does it seem that people who for years had been very competent have suddenly gotten decoupled from what really matters? … If key aspects of the business shift around you, the very process of genetic selection that got you and your associates where you are might retard your ability to recognize the new trends. A sign of this might be that all of a sudden some people “don’t seem to get it.”© 2013 CDS Global. All rights reserved. 6