I was preparing to speak at the DCKAP Summit in Los Angeles, CA, and Selvan D, our Director of Marketing, recommended that I read Only the Paranoid Survive, written by the former legendary CEO of Intel.
Andy Grove, in his book, speaks about the strategic inflection point. It is a time in the life of a business when the fundamentals are about to change. The leader (read CEO) may be the last one to notice this change. This change could mean an opportunity to rise to new heights. It could also mean you may go out of business or have a slow death.
This not only applies to companies, but it also applies to each one of us as individuals. Andy refers to each one of us as sole proprietors of our own businesses. We are not just competing with our co-workers; we are competing with millions of people out there and also with other businesses. Our job could be taken away because of this strategic inflection point.
There could be a 10X change happening in your business. This could also be called the strategic inflection point. A recent example of this could be what Uber did to the taxi companies. (or) what Amazon has been doing for the last 20 years. Little by little, they keep making progress, changing the way businesses operate. This is a 10X force, and we need to up our game.
Andy talked about the Old Vertical Computer Industry (IBM making chips, computers, operating systems, application software, sales, and distribution) and how it transitioned to the horizontal computer industry (chips-Intel, computer, Compaq, Dell, operating systems (windows, mac), application software (word), sales and distribution (retail stores, dealers), where you have a vendor taking care of each piece of the market. This was a strategic inflection point. However, if you look at it today (Apple weathered the storm pretty well – by still following the vertical approach).
If you base your business on the volume leader, you will be going after a larger business yourself. Andy also talks about delivering computers via mail (Michael Dell) – who would have thought computers could have been delivered via mail?
The Jazz Singer debuted on Oct 6 – 1927 – the first movie with sound- Until then, movies did not have sound. This was a game-changer. People even questioned it- Why would anyone want to talk in movies? Even Charlie Chaplin questioned it. He resisted change and was able to make successful silent films through the 1930s. However, in 1940 he finally surrendered to spoken dialogue with the Great Dictator in 1940- which was the future. Strategic inflection point. (Talkies).
Travel industry – Airlines were paying a 10% commission to the travel agents. One of their highest costs. Regulatory authorities could also play a key role in strategic inflection points. (Telecommunications – split up of AT&T).
You need to change your game, and as you know, it is healthy to change the game when your business is still healthy.
Andy also talked about how they almost missed the strategic inflection at Intel. They were hit hard by Japanese competition by price. Intel transitioned from being a memory company to a microcomputer company. Had they not, they would no longer exist as a company.
Fear (being paranoid), unhappy customers– It is good to be on the lookout for such things. It will help identify the strategic inflection points. Very rarely are strategic inflection points obvious. Also, the middle managers are good at finding them out (Andy calls them Cassandras). The first version of the product is usually not great. Andy recommends not being deceived by the first version of a product and ignoring strategic inflection points. It is important to differentiate between Signal and Noise. Andy also quotes Peter Drucker’s definition of an entrepreneur- One who moves resources from areas of lower productivity and yield to areas of higher productivity and yield.
Let Chaos Reign– Andy talks about the Inertia of Success, and it is not a good thing. Employees may be very successful when they start work and build the organization up; however, we can’t live on past glory. Everyone needs to adapt to changing times. Andy talks about the culture of experimentation, and when running experiments, chaos is bound to happen. We need to learn to live with it. Also – it is easier and more effective to run experiments when the business is healthy. How could we take our best people who generate revenue and who help pay our salaries and put them on speculative new projects? We just have to do it. Intel did put some of its best people in the i860 RISC processor. They did not continue. However, they still had to experiment (you can’t do these things at the last minute).
Rein in Chaos– When you are at a strategic inflection point or even otherwise, it is very important to communicate. Also, there need to be intense debates, and teams need to work with each other. Companies that are top-down and bottom-up need to work in a synergistic manner to win and ride the strategic inflection point. Reskilling the team is also important. The same job will not be available in 5 years for companies at strategic inflection points. People need to change roles, and they need to keep learning and be ready to take on new roles and challenges. Resource priority is shifted during this time period, and they need to adapt to change. Strategic inflection points are periods of confusion, experimentation, and chaos.
Andy ends the book with a chapter on the Internet. What is very interesting is that a lot of his predictions turned out to be true. He talks about software being sold on CDs will no longer be the case, and the software could be transferred over the Internet. This is exactly what happened. He also talked about media and advertising. He mentions that with the advent of the Internet, all this could change with a new media industry being created. He also talked about the threat to the Intel business (their product could be commoditized). Andy writes that as a CEO, he spends a lot of time studying to keep up with the pace and prepare/execute for the strategic inflection points.
In Only the Paranoid Survive Andy Grove quotes:
The most effective way to transform a company is through a series of incremental changes that are consistent with a clearly articulated end result.
Thanks Andy for this great book. It is very relevant in today’s world…