Only the Paranoid Survive Page 12
Ideally, the fear of a new environment sneaking up on us should keep us on our toes. Our sense of urgency should be aided by our judgment, instincts and observations that have been honed by decades spent in the business world. The fact is, because of our experience, very often we managers know that we need to do something. We even know what we should be doing. But we don’t trust our instincts or don’t act on them early enough to take advantage of the benign business bubble. We must discipline ourselves to overcome our tendency to do too little too late.
A New Industry Map
The too-little-too-late syndrome is particularly hazardous in a shifting industry environment. Implicit in doing business every day is a mental map of the structure of the industry. This map is composed of an unstated set of rules and relationships, ways and means of doing business, what’s “done” and how it is done and what’s “not done,” who matters and who doesn’t, whose opinion you can count on and whose opinion is usually wrong, and so on. If you’ve been in the industry for a long time, knowing these things has become second nature. You don’t even think about them; you just know that’s the way things are.
But when the structure of the industry changes, all of these elements change too. The mental map that you have been carrying with you all these years and relied upon in charting your company’s course of action suddenly loses its validity. However, you haven’t had a chance to replace it with a new mental map. You haven’t made the explicit substitutions about how things are done now versus how they were done before, or who matters now versus who mattered then.
All of us in the computing industry had to deal with the concept of a transition from the vertical to the horizontal industry model. The fundamental implication of this model was—and is—that the player with the largest share of a horizontal layer is the one who wins. As this realization sank in at Intel, it reinforced our belief in the significance of compatibility with all of the rest of the horizontal layers and provided further encouragement for our drive toward high volume and low cost in our microprocessor business: toward improving our scale and scope. Likewise, when Compaq executed a major restructuring and strategic change in 1991, their actions also represented a recognition of the importance of scale and scope implicit in the horizontal model.
During a strategic inflection point, management continually has to refine its conception of the strategic map of the industry. We all automatically do this in our heads. But mental maps are awfully forgiving of ambiguity. You must force yourself to commit your thoughts to paper.
Where do you begin? Every company has organizational charts, sometimes piles of them, that show the interrelationship of the organizational units. If those are needed to help employees figure out how to operate inside a company, wouldn’t an equivalent diagram of an industry be extremely helpful? So develop one. (In Chapter 9, I’ll show an example of one that helped me to sort out some things about the Internet.)
Much as your business needs to experiment with new technologies and methods of distribution, as a senior manager, you need to experiment with filling in the details of the new industry structure. Try out your evolving map on your close associates. You will need to discuss it in a friendly audience many times to clarify your own mind. But there is another benefit, too: These discussions will help get your organization ready for change.
In a modern organization, rapid response to market forces depends on the autonomous actions of middle managers. Their ranks include know-how managers, the technical and marketing experts whose command of the fundamentals of the business is vital to the company’s doing the right thing. If senior managers and know-how managers share a common view of the industry, the likelihood of their acknowledging changes in the environment and responding in an appropriate fashion will greatly increase. Sharing a common picture of the map of the industry and its dynamics is a key tool in making your organization an adaptive one.
Whether you are a senior manager, middle manager or know-how manager, as you improve your map, it will increasingly guide you toward better actions in your business and toward greater confidence that your actions are right.
Rein in Chaos
“Clarity of direction,
which includes
describing what we
are going after as
well as describing
what we will not be
going after, is
exceedingly important
at the late stage of
a strategic
Transformation.”
When I think about what it’s like to get through a strategic inflection point, I’m reminded of a classic scene in old western movies in which a bedraggled group of riders is traveling through a hostile landscape. They don’t know exactly where they are going; they only know that they can’t turn back and must trust that they will eventually reach a place where things are better.
Taking an organization through a strategic inflection point is a march through unknown territory. The rules of business are unfamiliar or have not yet been formed. Consequently, you and your associates lack a mental map of the new environment, and even the shape of your desired goal is not completely clear.
Things are tense. Often in the course of traversing a strategic inflection point your people lose confidence in you and in each other, and what’s worse, you lose confidence in yourself. Members of management are likely to blame one another for the tough times the company is experiencing. Infighting ensues, arguments as to what direction to take bubble up and proliferate.
Then, at some point, you, the leader, begin to sense a vague outline of the new direction. By this time, however, your company is dispirited, demoralized or just plain tired. Getting this far took a lot of energy from you; you must now reach into whatever reservoir of energy you have left to motivate yourself and, most importantly, the people who depend on you so you can become healthy again.
I think of this hostile landscape through which you and your company must struggle—or else perish—as the valley of death. It is an inevitable part of every strategic inflection point. You can’t avoid it, nor can you make it less perilous, but you can do a better job of dealing with it.
Traversing the Valley of Death
To make it through the valley of death successfully, your first task is to form a mental image of what the company should look like when you get to the other side. This image not only needs to be clear enough for you to visualize but it also has to be crisp enough so you can communicate it simply to your tired, demoralized and confused staff. Will Intel be a broad-based semiconductor company, a memory company or a microprocessor company? Will Next be a computer company or a software company? What exactly is your bookstore going to be about—will it be a pleasant place to drink coffee and read or a place where you go to buy books at a discount?
You need to answer these questions in a single phrase that everybody can remember and, over time, can understand to mean exactly what you intended. In 1986, when we came up with the slogan “Intel, the microcomputer company,” that was exactly what we were trying to achieve. The phrase didn’t say anything about semiconductors, it didn’t say anything about memories. It was meant to project our mental image of the company as we would emerge from the valley of death that the 1985–86 memory debacle/strategic inflection point represented for us.
Management writers use the word “vision” for this. That’s too lofty for my taste. What you’re trying to do is capture the essence of the company and the focus of its business. You are trying to define what the company will be, yet that can only be done if you also undertake to define what the company will not be.
Doing this should actually be a little easier at this point because, as you’re coming out of a very bad period, you’re likely to have extremely strong feelings about what you don’t want to be. By 1986 we knew we did not want to be in the memory business any longer. We knew it with a passion that only comes after struggling with a business and finding that we were no better off for those struggle
s.
There are dangers in this approach: the danger of oversimplifying the identity of the company, of narrowing its strategic focus too much, so that some people will say, “But what about my part of the business … does this mean that we are no longer interested in that?” After all, Intel continued to do things other than microprocessors. We even continued to maintain a substantial business in a different type of semiconductor memories.
But the danger of oversimplification pales in comparison with the danger of catering to the desire of every manager to be included in the simple description of the refocused business, therefore making that description so lofty and so inclusive as to be meaningless.
Consider the following example that shows the value of a strong strategic focus. Lotus’s identity for its first ten years was as a supplier of personal computer software, specifically spreadsheets. Owing to some missteps of their own but, most importantly, because of a “10X” increase in the forces of competition (what the Japanese memory producers were to us, Microsoft’s presence in applications software was to them), Lotus’s core business weakened over time. But while this was happening, Lotus had developed a new generation of software, embodied in their product Notes, that promised to bring the same kind of productivity gains to groups that spreadsheets had brought to individuals. Even as Lotus was struggling with spreadsheets and its related software business, its management committed itself to group computing to the extent of deemphasizing their spreadsheet business. It continued to invest in developing Notes throughout these difficult years and it mounted a major marketing and development program that suffused all the corporate statements.
To be sure, the story is still evolving. But from the standpoint of giving the company an unequivocal future, Lotus’s management did exactly the right thing. It was Lotus’s strength in Notes that ultimately motivated IBM to purchase the company for $3.5 billion.
Now consider an opposite example—of a company floundering to define itself. Recently, I met with a senior manager of a company with whom we were trying to collaborate to ensure that their product and our product worked together. To make this deal click, they needed to make some clear decisions about which technologies they were devoted to and which they weren’t. I was dealing with a man at the second-highest level of his company, yet I found him torn and indecisive. On the one hand, he seemed convinced that we should work together; on the other hand, he seemed almost paralyzed when he needed to commit to the necessary actions to make this collaboration happen.
A couple of days later his boss, the chief executive officer, was quoted making statements about the company’s intentions that unequivocally supported the direction I thought my visitor was leaning toward. I tore the article out of the newspaper, waved it in the face of my associates and announced, “I think we are in business.” My euphoria lasted twenty-four hours. The next day’s newspaper brought a retraction, described as a “clarification.” It was all a big misunderstanding.
Now think for a moment of what it must be like to be a marketing or sales manager being buffeted by such ambiguities coming from your boss. Not only that, imagine what it would feel like to read about his direction du jour when it appears in the newspaper. How can you motivate yourself to continue to follow a leader when he appears to be going around in circles?
I can’t help but wonder why leaders are so often hesitant to lead. I guess it takes a lot of conviction and trusting your gut to get ahead of your peers, your staff and your employees while they are still squabbling about which path to take, and set an unhesitating, unequivocal course whose rightness or wrongness will not be known for years. Such a decision really tests the mettle of the leader. By contrast, it doesn’t take much self-confidence to downsize a company—after all, how can you go wrong by shuttering factories and laying people off if the benefits of such actions are going to show up in tomorrow’s bottom line and will be applauded by the financial community?
Getting through strategic inflection points represents a fundamental transformation of your company from what you were to what you will be. The reason such a transformation is so hard is that all parts of the company were shaped by what you had been in the past. If you and your staff got your experience managing a computer company, how can you even imagine managing a software company? If you got your experience managing a broad-based semiconductor company, how can you even imagine what a microcomputer company might be like? Not surprisingly, the transformation implicit in surviving a strategic inflection point involves changing members of management one way or another.
I remember a meeting of our executive staff in which we were discussing Intel’s new direction as a “microcomputer company.” Our chairman, Gordon Moore, said, “You know, if we’re really serious about this, half of our executive staff had better become software types in five years’ time.” The implication was that either the people in the room needed to change their areas of knowledge and expertise or the people themselves needed to be changed. I remember looking around the room, wondering who might remain and who might not. As it turned out, Gordon Moore was right. In our case, about half the management transformed themselves and were able to move in the new direction. Others ended up leaving the company.
Seeing, imagining and sensing the new shape of things is the first step. Be clear in this but be realistic also. Don’t compromise and don’t kid yourself. If you are describing a purpose that deep down you know you can’t achieve, you are dooming your chances of climbing out of the valley of death.
Redeploying Resources
As Drucker suggests, the key activity that’s required in the course of transforming an organization is a wholesale shifting of resources from what was appropriate for the old idea of the business to what is appropriate for the new. Over the three years that the production planners at Intel gradually cut the allotment of wafer production for memories and moved it to microprocessors, they were shifting rare and valuable resources from an area of lower value to an area of higher value. But raw materials are not your only resource.
Your best people—their knowledge, skills and expertise—are an equally important resource. When we recently assigned a key manager from overseeing our next generation of microprocessors to a brand-new communications product line which is not likely to make us money for several years, we were shifting an extremely valuable resource. While he was very productive in his former area, there were others equally good to take his place there, while the new area badly needed the turbocharging his presence would give it.
A person’s time is an extremely valuable yet manifestly finite resource. When Intel was making its transformation from a “semiconductor company” to a “microcomputer company,” I realized that I needed to learn more about the software world. After all, how we would do our job depended on the plans, thoughts, desires and visions of the software industry. So I deliberately started to spend a significant amount of time getting acquainted with software people. I set out to visit heads of software companies. I called them up one at a time, made appointments, met with them and asked them to talk to me about their business—as it were, to teach me.
This entailed some personal risk. It required swallowing my pride and admitting how little I knew about their business. I had to walk into conversations with important people whom I had never met, not having a clue how they would respond. It also required a measure of diligence; as I sat talking with these people, I took copious notes, some of which I understood and some of which I didn’t. I then took the stuff that I didn’t understand back to our internal experts and asked them to explain what this individual might have meant by it. Basically, I went back to school. (I was aided by the fact that Intel is a schoolish company, where it’s perfectly respectable for a senior person with twenty years of experience to take some time, buckle down and learn a whole new set of skills.)
Admitting that you need to learn something new is always difficult. It is even harder if you are a senior manager who is accustomed to the automatic deference which peopl
e accord you owing to your position. But if you don’t fight it, that very deference may become a wall that isolates you from learning new things. It all takes self-discipline.
The discipline of redeployment is needed in spades when it comes to your personal time. When I started on this software study, I had to take the time I spent on it away from other things. In other words, I had to be the “production planner” of my own time and had to reallocate the way I spent time at work. This brought with it its own difficulties because people who were accustomed to seeing me periodically no longer saw me as often as they used to. They started asking questions like, “Does this mean you no longer care about what we do?” I placated them as best I could, I reassigned tasks among other managers and, after a while, people accepted this as well as many other changes as being part of Intel’s new direction. But it wasn’t easy for them or me.
The point is that redeploying resources sounds like such an innocuous term: it implies that you’re putting more attention and energy into something, which is wonderful, positive and encouraging. But the inevitable counterpart is that you’re subtracting from someplace else. You’re taking something away: production resources, managerial resources or your own time. A strategic transformation requires discipline and redeployment of all resources; without them, it turns out to be nothing more than an empty cliché.