Only the Paranoid Survive

by Andrew S. Grove

But these worries pale in comparison to how I feel about what I call strategic inflection points.

a strategic inflection point is a time in the life of a business when its fundamentals are about to change.

They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient.

A strategic inflection point can be deadly when unattended to.

This can apply to newcomers or to incumbents, for whom a strategic inflection point may mean an opportunity for a new period of growth.

strategic inflection points are about fundamental change in any business,

I see two big long-term forces doing their work on us,

The first involved our attempting to change how our products were perceived.

So when problems developed with our flagship Pentium chip, our merchandising pointed the users directly back to us.

The second fundamental factor in creating the conditions for the maelstrom was our sheer size.

We had become gigantic in the eyes of computer buyers.

Given the gradual nature of these changes, which over time added up to a very large change, the old rules of business no longer worked.

New rules prevaile...

what was worse, we didn’t know what rules we now had to abide by.

All businesses operate by some set of unstated rules and sometimes these rules change—often in very significant ways.

Middle managers—especially those who deal with the outside world, like people in sales—are often the first to realize that what worked before doesn’t quite work anymore; that the rules are changing.

we needed to adapt to the new environment.

We could change our ways and embrace the fact that we had become a household name and a consumer giant, or we could keep our old ways and not only miss an opportunity to nurture new customer relationships but also suffer damage to our corporate reputation and well-being.

We need to expose ourselves to lower-level employees, who, when encouraged, will tell us a lot that we need to know.

Turn the tables and ask them some questions: about competitors, trends in the industry and what they think we should be most concerned with.

Porter describes five forces that determine the competitive well-being of a business. In my paraphrasing, they are:

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

Do they clearly focus on you...

The power, vigor and competence of a compa...

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

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

These players are not in the business today but circumstances could change and they might decide to come in;

The possibility that your product or service can be built or delivered in a different way.

This is often called “substitution,” and I’ve found that this last factor is the most deadly of all.

Recent modifications of competitive theory call attention to a sixth force:

the force of complementors.

Complementors are other businesses from whom customers buy com...

I’ll call such a very large change in one of these six forces a “10X” change, suggesting that the force has become ten times what it was just recently.

It’s a gradual process; the forces start to grow and, as they do, the characteristics of the business begin to change.

if you don’t navigate your way through an inflection point, you go through a peak and after the peak the business declines.

So how do we know that a set of circumstances is a strategic inflection point?

First, there is a troubling sense that something is different.

Then there is a growing dissonance between what your company thinks it is doing and what is actually happening inside the bowels of the organization.

Eventually, a new framework, a new set of understandings, a new set of actions emerges.

Or not, and you're doomed...fight or flight, here meaning resist and perish or fly into the storm

the valley of death, the perilous transition between the old and the new ways of doing business.

But you can’t wait until you do know: Timing is everything. If you undertake these changes while your company is still healthy, while your ongoing business forms a protective bubble in which you can experiment with the new ways of doing business, you can save much more of your company’s strength, your employees and your strategic position.

instinct and judgment are all you’ve got to guide you through.

the most difficult one to deal with is when one of the forces becomes so strong that it transforms the very essence of how business is conducted in an industry.

the cost adjusted by performance decreased by 90 percent, an unprecedented rate of decline.

The computer industry used to be vertically aligned.

Old industry

Then the microprocessor appeared, followed by the “10X” force of the personal computer built on it.

Power of the microprocessor to disrupt computer industry? It was a platform technology with mutable computing capabilities all packaged together.

the microprocessor became the basic building block of the industry,

Over time, this changed the entire structure of the industry and a new horizontal industry emerged.

Over time, this changed the entire structure of the computer industry, and a new horizontal industry, depicted below, emerged.

In this diagram, we have horizontal bars representing fields of both competence and competition.