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Paranoia and navigating strategic inflection points

Monday, May 9, 2005 at 11:03AM
Posted by Registered CommenterPolitical Mammal in Entrepreneurship

I might be a little behind, but I just read with interest a book that came out in 1996, by Intel Corporation CEO Andrew Grove, called Only the Paranoid Survive.

Even though my business is microscopic in comparison, many of Grove’s points made sense to me. He says that when it comes to business, he believes in the value of paranoia. To quote from his preface:

The things I tend to be paranoid about vary. I worry about products getting screwed up, and I worry about products getting introduced prematurely. I worry about factories not performing well, and I worry about having too many factories. I worry about hiring the right people, and I worry about morale slacking off. And, of course, I worry about competitors. I worry about other people figuring out how to do what we do better or cheaper, and displacing us with our customers.

I suppose most people running businesses have similar worries, but I was happy to hear that someone who runs a multi-billion dollar enterprise feels the same way I do.

Grove talks also about “strategic inflection points,” which he defines as follows:

a strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end.

Strategic inflection points can be caused by technological change but they are more than technological change. They can be caused by competitors but they are more than just competition. 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. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has. Let's not mince words: A strategic inflection point can be deadly when unattended to. Companies that begin a decline as a result of its changes rarely recover their previous greatness.

I believe that my company in the midst of just such a strategic inflection point. Technology is changing the way politics is conducted and bringing a lot more interested parties to what has been a tiny market. Adoption of Internet-based tools is the central factor driving the change, but it has been gathering for quite a while (it was obvious to me long before most of the new players joined the fray.). What Grove calls “10x” change was apparent in the late 1990s, but most of our clients were not ready to pay for web-based campaign tools. As Grove suggests, timing is everything in these matters.

Grove offers some advice that makes sense to me. He says that you should think about what someone else taking over your company would do, and then use that outsider’s perspective and take the actions yourself. He says that fear can be good, because it is the opposite of complacency. If the company must go through a radical change of direction, he says you must pass through the “valley of the shadow of death.” You must “claw through, inch by excruciating inch.” Change is difficult because all parts of the current company are shaped by the past. Finally, Grove warns against “hedging” by trying multiple directions and suggests rather that you put all your eggs in one basket, and then “watch the basket.”

All in all, a worthwhile quick read.

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