Only the Paranoid survive – Andy Grove – 1996 - Book Summary

This book has an entire section, about 15 pages, out of a total of 194 pages explaining how the internet works. This book is that old. And yet, this is Andy, the same guy who wrote High output management in 1983 and which stands the test of time and features among the top ‘management’ books.

It helps that Andy talks his walk. His vast experience at Intel including the ups and downs has been shared through these 2 books. Every page, including his prophetic explanation of the internet, is absolutely impactful.

That said, should I REALLY be paranoid? It sounds negative and stressful. If you thought this way after looking at the book’s title, then it makes two of us. Still, I was motivated to read this one, because it featured in one of the emails that the Mphasis CEO sent to us. Here are a couple of excerpts from the email.

Handsome bloke isn't he? Regardless, at the time, the terms such as “inflection points”, 10x Force, ‘Rein in Chaos’ all seemed corporate mumbo-jumbo to me.

Fortunately, after reading the book I get a better context. And I hope that you will too after reading this summary. Especially, read the end where I try to summarize a chapter dedicated entirely to you and me, the average Joes (or employees) of an enterprise.

Without further ado, here are the 5 steps that I gathered from the book, for identifying, managing and redefining the paradigm for your organization/self.

Step # 1. Strategic Inflection Point – Take a look at the picture below; Understand and apply this to your industry and organization.

The inflection points are the part of the curve on a time scale, which needs the focus and the attention of management for the business to achieve newer heights. Try to wing it, and the business will spell its doom, as has been illustrated. It is common for a business and its leaders to not know that they are going through an inflection point. Andy suggests erring on the side of paranoia; to believe that a business is always going through an inflection point.

The inflection might come from mega-competition, a change in regulations, or a seemingly modest change in technology, more of this in Step #2. 

Step # 2. The Six Forces affecting business. These influence/inform the Strategic Inflection Point (Andy’s twist of Michael Porter's 5 Forces)

Michael Porter describes five forces that determine the competitive well-being of a business. In Andy’s paraphrasing, they are (F was Andy's addition):

A.     The power, vigor, and competence of a company’s existing competitors.

B.     The power, vigor, and competence of a company’s suppliers.

C.     The power, vigor, and competence of a company’s customers.

D.     The power, vigor, and competence of a company’s potential competitors.

E.      The possibility that your product or service can be built or delivered differently. 

F.      The force of complementors. Complementors are other businesses from whom customers buy complementary products. Andy’s adds this to Porter's 5 and calls them ‘fellow-travelers’. Example - Cars need gasoline; gasoline needs cars. Computers need software; software needs computers.

 How do we know whether a change among the above signals a strategic inflection point? 

• Is your key competitor about to change?
• In an analogous fashion, you should ask, is your key complementor about to change?
• 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?

Step # 3. The 10x Force – In Andy’s words -

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 super-competitive forces.

Refer bullet point ‘E’ from above where the 10x Force can come from.

Intel faced its own strategic inflection point (It was easier to see this in hindsight) when they were out-competed by Japanese memory chip makers. Andy asked Moore (then CEO and the guy behind the famous Moore’s law)-

“If we got kicked out and the board brought in a new CEO, what do you think he would do?”

Gordon answered without hesitation, “He would get Intel out of memories.” Andy stared at him, numb, then said,

“Why shouldn’t you and I walk out the door, come back and do it ourselves?”

Thus began Intel’s 10x Force Pivot and went on to become the most successful company in microprocessors.

Step # 4 - The transformation or as Andy puts it the Road to survival - I gather that the most difficult task for Andy and co. was to get all their senior managers and teams on board. They were emotionally invested in the ‘memory’ business and most confronted at the idea of changing course. Andy, the old dog, went and learned new tricks. He started to seek out anyone who can teach him the software side of things, thus setting a great example to his teams to also invest in learning. 

The transformation also needed in house Debates, knowing when to argue with data and when not to. And most important of all being paranoid. As Andy explains -

Fear plays a major role in creating and maintaining passion. Fear of competition, fear of bankruptcy, fear of being wrong and fear of losing can all be powerful motivators.

Step # 5- This one is a part of #4 but deserves its separate section because it deals with communication through a huge organization during the Road to Survival. Mainly, this was to also manage emotional side effects in the organization. In the case of a strategic inflection point, the sequence goes as follows: denial, escape or diversion, and, finally, acceptance and pertinent action. Good leaders are also subject to the same emotional wriggling. They, however, eventually emerge to the acceptance and action phases.

Overcoming ‘The Inertia of Success’ and ‘Strategic Dissonance’ where actions do not align with strategy, is also critical. Experiment copiously to overcome strategic dissonance.

There is something in the book I think Andy didn’t get quite right. He says “I have seen a videotape of John Sculley, CEO of Apple Computer from 1983 to 1993, telling a Harvard Business School gathering that two of the biggest mistakes of his career were not adopting Apple’s software to Intel’s microprocessors and not modifying Apple’s then-revolutionary laser printer so that it would work with PCs other than those made by Apple. I was stunned when I heard this. Listening to Sculley gave me the impression that he understood the implications of the horizontal industry structure.”

In a gist, here is the difference, as explained in the book, between a vertical and horizontal company.

The part that, I thought, Andy got wrong was that he thought Apple was unsuccessful because of it didn't adopt the horizontal structure. As you must have noted from the header of the above diagram, horizontal structure worked for most computer industries, including Intel, but not for Apple. We can forgive Andy, he didn't know Steve Jobs was about to come back. Only he could have proved him wrong.

Step # 6- Let’s Reign in Chaos – Andy says your calendar becomes your most important strategic tool. The ‘old ways’ will need to make way for the new in the Calendar. The team will understand this new normal sooner and this helps them get the grasp of the priorities quicker. Here is a quote from Mark Twain that Andy mentions as the answer to the question of whether one should hedge.

“Put all of your eggs in one basket and WATCH THAT BASKET.”

Hedging is expensive and dilutes commitment.

You might ask, but Amith, I am just an employee down the chain and with no influence. How will this affect me? To this, my friend, I respond, that an entire chapter is dedicated for you/us. The gist of it is that you view strategic inflection point in the context of your career. And then there this truth bomb from Andy that should drive the message home;

Your Career Is Your Business. I have long held that each person, whether he is an employee or self-employed, is like an individual business. Your career is literally your business, and you are its CEO. Just like the CEO of a large corporation, you must respond to market forces, head off competitors, take advantage of complementors and be alert to the possibility that what you are doing can be done in a different way. It is your responsibility to protect your career from harm and to position yourself to benefit from changes in the operating environment.

As environmental conditions change, as they inevitably will, the trajectory of this business of one undergoes a familiar curve, reaching a defining point where the action of the CEO, i.e., you, determines whether your career path bounces upward or accelerates into a decline. In other words, you face a career inflection point.

Navigating through a strategic inflection point is one of the most difficult things that any leader can undertake. Many fail. In hindsight though, I want to think Nitin (Mphasis CEO), equipped with his paranoia has done a darn good job so far.

Intel's story, in its former CEO's words was a fascinating read. Remember, Paranoia is the opposite of complacency. And the paranoid will survive!