Only the Paranoid Survive

by Andrew S. Grove

this book. For now, let me just say that a strategic inflection point is a time in the life of a business when its fundamentals are about to change.

In short, strategic inflection points are about fundamental change in any business, technological or not.

You need to plan the way a fire department plans: It cannot anticipate where the next fire will be, so it has to shape an energetic and efficient team that is capable of responding to the unanticipated as well as to any ordinary event.

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: Are there a lot of them? Are they well funded? Do they clearly focus on your business? • The power, vigor and competence of a company’s suppliers: Are there a lot of them, so that the business has plenty of choices, or are there few of them, so that

they have the business by the throat? Are they aggressive and greedy or are they conservative and guided by the long view toward their customers? • The power, vigor and competence of a company’s customers: Are there a lot of them or is the business dependent on just one or two major customers? Are the customers very demanding, perhaps because their business operates under cutthroat competition, or is their business more “gentlemanly”? • 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; if so, they may be bigger, more competent, better funded and more aggressive than the existing competitors. • 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. New techniques, new approaches, new technologies can upset the old order, mandate a new set of rules and create an entirely new climate in

which to do business. This is what trucking and air transportation have done to railroads, what container shipping has done to traditional ports, what superstores have done to small shops, what microprocessors continue to do t...

An inflection point occurs where the old strategic picture dissolves and gives way to the new, allowing the business to ascend to new heights.

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

Peter Drucker quotes a definition of an entrepreneur as someone who moves resources from areas of lower productivity and yield to areas of higher productivity and yield.

My point is that you can’t judge the significance of strategic inflection points by the quality of the first version. You need to draw on your experience.

It is important to realize what the purpose of these debates is and what it isn’t. Don’t think for a moment that at the end of such debates all participants will arrive at a unanimous point of view. That’s naive. However, through the process of presenting their own opinions, the participants will refine their own arguments and facts so that they are in much clearer focus. Gradually all parties can cut through the murkiness that surrounds their arguments, clearly understand the issues and each other’s point of view. Debates are like the process through which a photographer sharpens the contrast when developing a print. The clearer images that result permit management to make a more informed—and more likely correct—call.

An organization that has a culture that can deal with these two phases—debate (chaos reigns) and a determined march (chaos reined in)—is a powerful, adaptive organization. Such an organization has two attributes: 1. It tolerates and even encourages debate. These debates are vigorous, devoted to exploring issues, indifferent to rank and include individuals of varied backgrounds. 2. It is capable of making and accepting clear decisions, with the entire organization then supporting the decision. Organizations that have these characteristics are far more strategic-inflection-point-ready than others.