Good Strategy Bad Strategy: The Difference and Why It Matters

by Richard P. Rumelt

Intel made processors, other firms made memory, others made hard drives, Microsoft made systems software, and so on. Computers were assembled by mixing and matching parts from competing manufacturers. Grove was dead-on in understanding that “not only had the basis of computing changed, the basis of competition had changed too.”2 Still, as a strategist, I wanted to know more. Why had the computer industry deconstructed itself and become horizontal? Andy Grove wrote, “Even in retrospect, I can’t put my finger on exactly where the inflection point took place in the computer industry. Was it in the early eighties, when PCs started to emerge? Was it in the second half of the decade, when networks based on PC technology started to grow in number? It’s hard to say.”3 I was puzzled over the cause of the computer industry’s deconstruction. Then, about a year later, the reason snapped into focus. I was interviewing technical managers at a client firm and one said that he had formerly been a systems engineer at IBM. He then explained that he had lost that job because modern computers didn’t need much systems engineering. “Why not?” I asked without thinking. “Because now the individual components are all smart,” he answered. Then I saw it.