How's my Luck now?

Reflections, views and descriptions during my stay at IIM Lucknow from July 2004 to March 2006

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Location: India

Saturday, September 17, 2005

'Only the Paranoid Survive'

I just completed this book written by former Intel Chairman Andrew Grove (HarperCollins, 1996). The sub-title of the book says: 'How to exploit the crisis points that challenge every company and career'. Accordingly, this book is about change and its management by companies and individuals. But this is not the everyday change that businesses encounter that Grove is talking about. This, in his words, is '10X' change - some force(s) governing the business has intensified by an order of magnitude. How an adaptive organization can be built to navigate through such fundamental changes is the subject of the book.

The book is written in conversational language, with very little jargon. Grove uses Porter's Five Forces framework and adds a sixth force to it - the bargaining power of 'complementors', i.e. businesses complementary to your own and which have interests similar to your own. The 10X change can occur in one or more of these forces and this brings the organization to a strategic inflection point - a term coined by Grove which has since gained currency. This inflection point is a period of time when a business is in the midst of a heavy transition, and at the end of it, the business may decline never to rise again, or reach an entirely new level of growth, depending on how it manages the transition.

Having introduced this concept, Grove goes on to give numerous examples of industries which have experienced such inflection points. The recurring examples are those of Intel itself - the 10X intensification of competition from Japanese firms in the memory business, which transformed Intel from a memory chip vendor to a microprocessor firm; and the flaw in the Pentium processor's floating-point unit which made Intel take a fundamental relook at who its real customers are.

Grove then tries to explain how a business can realize when it is going through a strategic inflection point, and when it is experiencing non-fundamental change. When there is a fundamental change in your perception of who your key competitors are; or when the skills of your people suddenly seem inadequate or obsolete, it may indicate the presence of an inflection point. Realization of such change generally reaches top management last of all, and even then only if the lower-level managers and field personnel are allowed to speak their mind in the organization. Thus, many organizations find such change overwhelming.

From Intel's experience, Grove suggests that the first step for senior management to take after the realization of fundamental change dawns on them is to loosen control - 'let chaos reign'. Experimentation, trying out of alternative strategies, etc. should be encouraged. A stage will then be reached, when senior management will have to call a halt to unbridled experimentation - 'rein in chaos'. Now is the time for management to form a clear picture of what lies at the other end of the inflection point for the organization, and communicate this new strategic direction to the organization. Thus, a fine balance of top-down and bottom-up strategy formulation is required for businesses to successfully survive such major changes.

This is a slim book, easy to read, but with a compelling message. Its message goes out not just to companies and their management, but also to individuals, because individual careers often get a new turn in the face of such major changes in the organization.

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