Only the Paranoid Survive
By Andrew S Grove Publishers: Harper Collins, 1997 Introduction
New techniques, new approaches, new technologies and upset the old order and change the rules of the game. This is what trucking and air transportation did to railroads, what container shipping did to traditional ports, what superstores did to small shops, what microprocessors continue to do to computingand what digital media might do to entertainment. Andrew Grove calls a very large change in one of the competitive forces in an industry, a “10X” change, suggesting that the force has become ten times what it was just recently. In the face of such “10X” forces, a company can lose control of its destiny. Things happen to the business that did not before. The business no longer responds to thecompany’s actions as it used to in the past. What such a transition does to a business is profound, and how the business manages this transition determines its future. Grove describes this phenomenon as a strategic inflection point. Put another way, a strategic inflection point is when the balance of forces shifts from the old structure, from the old ways of doing business and the old ways of competing,to the new. Before the strategic inflection point, the industry simply was more like the old. After it, it is more like the new. It is a point where the curve has subtly but profoundly changed. These are the important points made by Andrew Grove in his fascinating book, “Only the Paranoid Survive.” When an industry goes through a strategic inflection point, the established players may havetrouble. On the other hand, a 10X change provides an opportunity for outsiders to join and become part of the action. Grove offers some useful insights to cope with the situation. When a technology break or other fundamental change comes their way, companies must grab it. The first mover and only the first mover, has a true opportunity to gain time over its competitors. Getting ahead of the others isthe surest way to gain market share. Companies must also show discipline by pricing for what the market will bear, then work hard to cut costs so that they can make money at that price.
Identifying inflection points
When is a change really a strategic inflection point? Changes take place in business all the time. Some are minor, some are major. Some are transitory, some represent the beginningof a new era. They all need to be dealt with but they do not all represent strategic inflection points. Most strategic inflection points, instead of coming in with a bang, appear slowly. They are often not clear until we can look at the events in retrospect. Later, when we ask ourselves when we first had an inkling that we were facing a strategic inflection point, our recollections are about atrivial sign hinting that the competitive dynamics has changed. So how do we know whether a change signals a strategic inflection point? Grove offers useful guidelines. First, we must figure out who our key competitor is. When the answer to this question is not as clear as it used to be, it’s time to sit up and pay special attention. Does the company that in past years mattered the most to us and ourbusiness seem less important today? Does it look like another company is about to eclipse them? If so, it may be a sign of shifting industry
dynamics. 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? The Cassandras in the organization are a consistently helpful element inrecognizing strategic inflection points. Although they can come from anywhere in the company, Cassandras are usually in middle management. Often they work in the sales organization. They usually know more about upcoming change than the senior management because they spend so much time “outdoors” where the winds of the real world below in their faces. The most important tool in identifying a...
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