Wednesday, October 3, 2018

Only the Paranoid Survive - Andrew Grove

Andrew s. Grove was President and CEO of Intel Corporation. Under his leadership, Intel became the world's largest chipmaker. He was also considered by many as the world's best manager.  'Only the Paranoid Survive' was Grove's pet line - he feels that in business, paranoia must be valued. The book is written in a simple manner and gets key points across. "Success breeds complacency. Complacency leads to failure. Only the paranoid survive."

Read it. Imbibe it. Use it. As clear as that. More so if you are the CEO, or in top management. The book is about 'How to exploit the crisis points that challenge every company and career'

"Something Changed" - New Rules Prevailed Now
Grove begins straightaway by what we should be paranoid about - Strategic Inflection Points that show up when least expected - the times when your fundamentals are about to change. These are moments when you feel 'something's changed'. If you are not aware of or do not give such moments due importance, it could well be the beginning of the end for your organisation and its leadership position. Or, if you react quickly, it could be an opportunity to rise to a leadership position. Grove cites his personal experience with the Pentium Processor and how a small bug that was exposed and exploited by the CNN caused Intel a USD 475 mn write off. All because Intel never realised that through their messaging and size, something had changed the dynamics of the market and though Intel was not selling directly to the end users, the end users felt let down by Intel because of the Pentium in their computer (which they bought from some third party). Intel found itself in a position where it had to hire teams to respond to irate end users directly (who felt let down by the whole 'Intel inside' campaign, in order to recover and regain lost reputation, share etc. Sometimes Grove says, these Strategic Inflection Points can happen so quietly that you do not know what changed until it blows up in your face. So could you be aware and paranoid about that change happening (especially when things seem to be under control)?

Grove says that the ability to recognise that the winds have shifted and that there is need to take appropriate action before the boat is wrecked is crucial to the future of the organisation. Unfortunately, Grove says, that the top management is normally the last to know that something has changed. It's the lower levels and middle managers who are more aware that something's changed. So if you want to have a finger on the button, you know where to look and ask questions.

A 10x Change - How Business Manages this Transition Determines it's Future
Grove says there are 6 forces that could affect the business. Anyone of them could hit the business and affect a 10x change in direction. These six forces are (power, vigor, and competence of) - 1) existing competition, 2) complementors (those from whom customers buy complementary products), 3) customers, 4) suppliers, 5) potential competitors and 6) what you are doing now that can be done in a different way. Any of these has the power to cause a strategic inflection point. Grove warns that in 10x change, only the beginning and the end are clear, and the transition is gradual and painful. The Strategic Inflection Curve is when the convex starts turning - from the top of the arc it can come down or go up. It's that point when the organisation seems to be on secure ground but someone asks "are we on track here?" No one is really sure until it is too late.

Recognition happens in stages. We know that something is different but not really sure what. Grove asks us to keep an eye on subtle changes in the following - 1) customers attitudes are different, 2) development groups are no longer able to get it right as  easily as they did earlier, 3) competitors are stealing business and 4) a growing dissonance between what the company thinks it is doing and what is actually happening in the bowels of the organisation.

Once the signs are visible, it becomes clear that it is no more a lost trail but the valley of death where for sure things will never be the same again. Heads will roll. Here Grove says, act. Don't wait for everything to be known. The Strategic Inflection Point is the time to wake up and listen. And if needed, act. This is what the manager needs to be paranoid about. Grove gives examples of the PC industry and how many missed the PC industry signs - until the cost advantage by performance fell by 90%. Also, how the industry which was earlier vertically aligned (everyone thought they should manufacture computer chips, computers, operating systems, application software and sales and distribution) to hold leadership positions. And how it split up and became horizontally aligned with newer players coming into leadership positions. Grove's experience - the more successful the players were in the earlier industry, the harder a time they had to change.

Every Strategic Inflection Point threw up winners and losers. 
He gives out a set of new rules for the Horizontal Industry.
1) Don't differentiate without a difference (i.e. don't introduce improvements if they are not giving your customer a substantial advantage - don't do it to get an advantage over the competition. All in all, don't try to fool the customer)
2) First movers and only the first movers have a true opportunity when the tech break happens
3) Price for what the market will bear, price for volume and then work to cut costs, to help achieve economies of scale

10x Changes are Everywhere
The 10x Strategic Inflection Points are everywhere - not just IT or the technology industry. It's in retail, shipping, movies etc. It's in our lives right now. He gives examples of Walmart (superstores in small communities - many stores perish), Next (PCs with Windows came in - Next moved into software), Talkies (silent movies died when talkies arrived - Garbo became a star, older stars faded away), Shipping (new tech came in the form of containerization - Singapore and Seattle adapted, were more efficient and grew, while New York and San Francisco died), travel agencies (they lost business when airlines capped commissions and the agencies tried to pass on the commission to the buyer) and PCs of course with the sharp price performance drop. Grove says that changing customer buying habits could be a subtle sign of a Strategic Inflection Point. Professor Tedlow of Harvard Business School concluded that businesses fail because they leave their customers (change a strategy that worked in the past arbitrarily) or because customers leave them. Simple as that.

We Can Do It Ourselves
Grove takes us through Intel's own 10x problems and how they adapted from a semi conductor company to being memory experts. Then the Japanese came and there was a fear that perhaps this was a 10x Strategic Inflection point moment because the Japanese called up really fast, had fabulous quality and low price. Under pressure, when Grove asks his Chairman Gordon Moore what a new set of top executives would do if they were fired now, Moore says, 'Get out of the memory business'. Grove says - 'why don't you and me walk out that door, turn back. come in and do it ourselves?' Against all their training and belief (two big ones - that their memory business was their technology drivers and they needed to present a full product line to their customers), Grove and Moore decided to make the changes themselves. Microprocessors were an obvious choice but guess what - a lot of their own people and the customers said ' we wondered why you took so long.  One good indicator that Grove says was what the middle management had been doing (he is a big fan of keeping an eye on the middle management who he feels has a better pulse of things) - the low down management kept reallocating resources to more profitable sections like microprocessors already and the decision only validated what the company was already doing intuitively.

Differentiating Between Signal Or Noise
An example he gives on how to know whether the change we perceive is a signal or a noise is how they dealt with the change of technology of chips from CISC to RISC. Intel had no clear idea about what the future was. It allocated a lot of resources to build RISC technology which was faster, but it did not mean that the CISC, which was quite popular with its clients, was dead. So Grove kept watching because the Strategic Inflection Point, in this case, was not very clear. His advise - to distinguish between the two, answer these questions.
1) Is your key competitor about to change (take the silver bullet test - if you had one and only one bullet to shoot at one competitor, who would it be?). If this changes, something is about to change.
2) Is the company complementor about to change
3) Are people around you seeming to lose it

Let Chaos Reign - Debate Until Clarity Emerges
Typically, Grove says, there will be Cassandras keep hinting that 'something is happening' so be aware and be wary (paranoid!). The middle management is a great source. Listen to them. 'Learn what happens at the periphery of your business,' he says. A clear distinction from 'learn about what happens in your business'. It's what's happening at the outer periphery that matters and gives pointers. Check and ask questions. When in doubt Grove says, don't try and figure it out all at once, or go by 1st version. Avoid the trap of the first version he says.
He recommends, that the only way out is to
1) have a broad and intensive debate
2) base your arguments on data but not everything is data - keep balance (he does that beautifully with his book which is more 'feely' than data driven)
3) Allow space for discussion and debate by facilitating an environment that is safe to speak out (reduce fear) - ideally each will respect the other and will not be intimidated by the others knowledge or position.
Chaos will reign. But stay with it. "Resolution comes through experimentation. Only keeping out of the old ruts will bring new insights."

Rein in Chaos - At Some Clarity, Act Purposefully and Clearly
Grove says that through the transition period, let chaos reign. While things are muddy, managers are likely to go through a process of 1) Denial, 2) of trying to avoid the issue or distracting themselves and 3) finally, accept and take pertinent action. Be wary. Don't be complacent because if your action is too late, you missed the opportunity. Get rid of the inertia of success.
Grove suggests that the CEO or top man actually draw an industry map just as you have an organisation map. Says it's worth making one.

As you are getting closer to some amount of clarity you will be clear about two things - what you are going after and what you will not be going after. A word of caution here - Grove says, be realistic. If you're describing a purpose that deep down you know you can't achieve, you're doomed.

Lead Through Actions, Through Culture
One of the best lines I got from the book - Strategic change does not just start at the top. It starts with your calendar. Grove actually gives out his calendar in the middle of a drastic change and he is critical about it. Why am I attending these meetings like nothing is going wrong? A clear case of getting used to old habits and patterns of thinking, or even of denial and distraction.

He differentiates between strategic plans and strategic actions. Strategic plans are what we intend to do. Strategic actions

The greatest danger is in standing still. Keep an ear and an eye out for what the middle management is doing and saying. No change can be completely bottom up or top down, an ideal balance makes sense. Grove urges managers to have a dynamic dialectic and to encourage debate.

An organisation that has a culture that can deal with these two phases of debate (chaos) and a determined march (chaos reined in) is a powerful adaptive organisation. Such organisations have two attributes -
1) It tolerates and encourages debates (vigorous exploring of issues, indifferent to rank and including individuals of varied backgrounds).
2) Capable of making and accepting clear decisions, with the entire organisation supporting the decisions.
Such organisations are more strategic-inflection-point ready than others.

In the last chapter Grove speculates abut the Internet and the likely 10x changes it would cause.

The clarity of thought and the simplicity with which he puts across the sum of his immense experience, learning and wisdom, makes the concepts clear to even a school child. Keep a lookout for Strategic Infection Points that could disrupt your ride, spot them early, debate, learn, and when there is enough clairity, act decisively. There is enough to talk about inclusivity, transparency, listening to signs and having the conviction to change oneself, one's calendar, one's patterns and thereby dealing with the outside change. He accepts feeling helpless, vulnerable, and how he would listen to everyone - juniors, experts - anyone who could teach him about the changes in the industry like a student, paper and pen in hand, taking notes. Many of his actions, described very honestly and humbly, are major theries today - of a learning mindset, of inclusivity, of being vulnerable to be a powerful leader. Not for nothing is he considered by many as the greatest manager ever.

The book is not limited to running business organisations -it could be an individual's life, an organisation, a team, a society, a country or all of humanity. 10x threats can be seen by humanity but are our leaders capable of having a debate, of including all points of view, of making clear decisions? All heads of states must read it, all CEOs must read. All responsible people for that matter. 

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