Only the Paranoid Survive

by Andrew S. Grove

  One more word about your own time: if you’re in a leadership position, how you spend your time has enormous symbolic value. It will communicate what’s important or what isn’t far more powerfully than all the speeches you can give.

  Strategic change doesn’t just start at the top. It starts with your calendar.

  Leading Via Strategic Actions

  Assigning or reassigning resources in order to pursue a strategic goal is an example of what I call strategic action. I’m convinced that corporate strategy is formulated by a series of such actions, far more so than through conventional top-down strategic planning. In my experience, the latter always turns into sterile statements, rarely gaining traction in the real work of the corporation. Strategic actions, on the other hand, always have real impact.

  What’s the difference? Strategic plans are statements of what we intend to do. Strategic actions are steps we have already taken or are taking which suggest our longer-term intent. Strategic plans sound like a political speech. Strategic actions are concrete steps. They vary: They can be the assignment of an up-and-coming player to a new area of responsibility; they can be the opening of sales offices in a portion of the world where we haven’t done business before; they can be a cutback in the development effort that deals with a long-pursued area of our business. All of these are real and suggest directional changes.

  While strategic plans are abstract and are usually couched in language that has no concrete meaning except to the company’s management, strategic actions matter because they immediately affect people’s lives. They change people’s work, as was the case when we shifted capacity from memory production to microprocessor production and our sales force had a different product mix. They cause consternation and raise eyebrows, as did the transfer of the Intel manager from the tried-and-true microprocessor business to an ambiguous new area.

  Strategic plans deal with events that are so far in the future that they have little relevance to what you actually have to do today. So they don’t command true attention.

  Strategic actions, however, take place in the present. Consequently, they command immediate attention. Their power comes from this very aspect. Even if any one strategic action changes the trajectory on which the corporation moves by only a few degrees, if those actions are consistent with the image of what the company should look like when it gets to the other side of the inflection point, every one of them will reinforce every other. That’s why I think the most effective way to transform a company is through a series of incremental changes that are consistent with a clearly articulated end result.

  Yet strategic inflection points are times that can also benefit from more drastic and higher-profile strategic actions. By higher profile, I mean that they are seen, heard and questioned by many people. Take the example I described earlier when the statement by the chief executive of the company we were trying to do business with was quoted in the newspaper. It caused a large number of raised eyebrows and scores of “Does this mean that …?” questions. It afforded a perfect opportunity to reinforce a new strategic direction on a broad scale. Unfortunately, the next day’s retraction laid waste to this opportunity.

  But while it is good for strategic actions during an inflection point to raise eyebrows, they must also be timed just right. Strategic actions, especially those involving redeployment, are like the actions of runners in a relay race. Runners need to pass the baton at precisely the right moment; being even a little bit early or a little bit late will slow down the team.

  The timing of the transfer of resources from the old to the new has to be done with this crucial balance in mind. If you move resources from the old business, the old task, the old product too early, you may leave a task only 80 percent finished. With a little bit more effort, you could have reaped the full benefit. On the other hand, if you hang on to the old business too long, the opportunity for grabbing a new business opportunity, to add momentum to a new product area, to get aligned with the new order of things, may be lost. There is a period in between that provides the best compromise, when you have invested enough in the old business that it has momentum to get you through the period of transition while you deploy your resources to the new target area. This timing dilemma is illustrated below.

  Resource Shift Dilemma

  RESOURCE SHIFT IS PREMATURE:

  previous task is not completed TIMING IS RIGHT:

  momentum of existing strategy is still positive; new threat or opportunity has been verified RESOURCE SHIFT IS LATE:

  opportunity for transformation is lost; decline may be irreversible

  When is the time right? When the momentum of your existing strategy is still positive, your business is still growing, your customers and complementors still think highly of you yet there’s enough evidence of blips on your radar screen to warrant, at a minimum, exploring their significance. If your exploration confirms that they are real and are gaining, shift more resources on to them.

  Your tendency will almost always be to wait too long. Yet the consequences of being early are less onerous than the consequences of being late. If you act too early, chances are the momentum of your previous business is still healthy. Therefore even if you’re wrong, you’re in a better position to course-correct. For instance, you can even pull back to their old jobs people whom you’ve reassigned to other areas. Since they come from those tasks, they can pick up the pieces again in no time and help out. But management’s tendency is to hang on to the old, so their strategic actions are more likely to happen later rather than earlier. The risk is that if you are late you may already be in an irreversible decline.

  Simply put, in times of change, managers almost always know which direction they should go in, but usually act too late and do too little. Correct for this tendency: Advance the pace of your actions and increase their magnitude. You’ll find that you’re more likely to be close to right.

  The best moment to act varies from company to company. Some companies recognize that their key strengths are rapid response and fast execution. Such companies may profitably wait for others to test the limits of technological possibilities or market acceptance and then commit to following, catching up and passing them.

  I describe such a strategy as a “taillight” approach. When you drive in the fog, it is a lot easier to drive fast if you’re chasing the taillights of the car ahead of you. The danger with a “taillight” strategy is that, once you catch up and pass, you will find yourself without a set of taillights to follow—and without the confidence and competence in setting your own course in a new direction.

  Being an early mover involves different risks. The biggest danger facing an early-mover company is that it may have a hard time distinguishing a signal from a noise and start to respond to an inflection point that isn’t one. Moreover, even if it is right in its response, it is likely to be ahead of its market and will run a greater risk of getting caught up in the dangers of the “first instantiation,” as described in Chapter 6.

  But offsetting these dangers is the possibility of greater rewards: The early movers are the only companies that have the potential to affect the structure of the industry and to define how the game is played by others. Only by such a strategy can you hope to compete for the future and shape your destiny to your advantage.

  In recent years, we at Intel decided that we have a tremendous opportunity to exploit the personal computer as a universal information appliance. This wasn’t always possible; the traditional PC was largely used as a replacement for data entry terminals capable of displaying numbers and text appropriate only for commercial transactions. However, over the last several years, technology has brought appealing visual capabilities to the PC, endowing it with colorful graphics, sound and video, while retaining its important traditional characteristic: interactivity.

  But while we saw the possibility of exploiting these capabilities and envisioned the PC as being in the middle of the information and entertainment revolution that was taking place around us,
much of the rest of the world thought that all of these developments would take place around the more familiar television set. So we threw ourselves completely behind the concept that the PC would be the center of all these developments (the battle cry was “The PC Is It!”) and launched an industry-wide campaign to proselytize our view. At the same time, we aligned all of our technical developments inside the company to make the PC an even more compelling choice for this task. We were—and still are—trying to shape our future at a time when this idea doesn’t have broad currency. We were—and are—trying to be early movers.

  A question that often comes up at times of strategic transformation is, should you pursue a highly focused approach, betting everything on one strategic goal, or should you hedge? The question may come in the form of an employee asking me, “Andy, shouldn’t we be investing in areas other than microprocessors instead of putting all of our eggs in one basket?” or “Andy, shouldn’t we work on enhancing the television set in addition to betting on personal computers?” I tend to believe Mark Twain hit it on the head when he said, “Put all of your eggs in one basket and WATCH THAT BASKET.”

  It takes every erg of energy in your organization to do a good job pursuing one strategic aim, especially in the face of aggressive and competent competition.

  There are several reasons for this. First, it is very hard to lead an organization out of the valley of death without a clear and simple strategic direction. After all, getting there sapped the energy of your organization; it demoralized your employees and often set them against one another. Demoralized organizations are unlikely to be able to deal with multiple objectives in their actions. It will be hard enough to lead them out with a single one.

  If competition is chasing you (and they always are—this is why “only the paranoid survive”), you only get out of the valley of death by outrunning the people who are after you. And you can only outrun them if you commit yourself to a particular direction and go as fast as you can. You could argue that, since they are chasing you, you should give yourself all sorts of alternative directions—in other words, hedge. I say, “No.” Hedging is expensive and dilutes commitment. Without exquisite focus, the resources and energy of the organization will be spread a mile wide—and they will be an inch deep.

  Second, while you’re going through the valley of death, you may think you see the other side, but you can’t be sure whether it’s truly the other side or just a mirage. Yet you have to commit yourself to a certain course and a certain pace, otherwise you will run out of water and energy before long.

  If you’re wrong, you will die. But most companies don’t die because they are wrong; most die because they don’t commit themselves. They fritter away their momentum and their valuable resources while attempting to make a decision. The greatest danger is in standing still.

  The Clarity Imperative

  When a company is meandering, its management staff is demoralized. When the management staff is demoralized, nothing works: Every employee feels paralyzed. This is exactly when you need to have a strong leader setting a direction. And it doesn’t even have to be the best direction—just a strong, clear one.

  Organizations in the valley of death have a natural tendency to drift back into the morass of confusion. They are very sensitive to obscure or ambiguous signals from their management.

  Heads of companies often inadvertently contribute to this confusion. Some time ago a business reporter told me of an encounter with the head of a major Japanese corporation. The reporter was working on a profile of the company. When he asked questions that tried to clarify the strategy of the corporation, the other man angrily retorted, “Why would I tell you our strategy? So I could help our competitors?” I think this man wouldn’t talk about his strategy not because he was afraid of helping his competitors but because he didn’t have one: this company’s public statements have always struck me as extraordinarily ambiguous.

  Another way to fuel confusion is to give conflicting messages. At times of transition, pronouncements from the heads of organizations are painstakingly scrutinized and greatly amplified, especially by employees. Earlier I described an executive who retracted a statement about his company’s strategic direction that had already appeared in the newspapers. After that retraction, his credibility had to have been damaged. He will have to work that much harder to impart direction and have people believe it. In other words, screw up once and it will take a lot more work later to communicate the right message to correct your mistake.

  The point is this: how can you hope to mobilize a large team of employees to pull together, accept new and different job assignments, work in an uncertain environment and work hard despite the uncertainty of their future, if the leader of the company can’t or won’t articulate the shape of the other side of the valley?

  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. Much as in the middle of the strategic inflection process you needed to let chaos reign in order to explore your alternatives, to lead your organization out of the resulting ambiguity and to energize your staff toward a new direction, you must rein in chaos.

  The time for listening to the Cassandras is over. The time for experimentation is also over. The time to issue marching orders—exquisitely clear marching orders—to the organization is here. And the time to commit the resources of the corporation as well as your own resources—your own time, visibility, speeches, statements in external forums (which are always given more credibility inside the company than what you say directly to your employees)—is upon you. Most of all, you must be a role model of the new strategy. That is the best way to prove that you are committed to it.

  How do you role-model a strategy? By showing your interest in the elements that lead to the strategic direction, by getting involved in the details that are appropriate to the new direction and by withdrawing attention, energy and involvement from those things that don’t fit. Overcorrect your actions, recognizing that the symbolic nature of your actions will amplify their impact within the organization.

  You can overcorrect by neglecting or overdelegating details in areas that, while still important, do not fit your immediate strategic needs. There’s a danger in deemphasizing some important things but that’s a risk you have to take. If, as a result of your overcorrection and neglect, some of the nuts and bolts of your daily work get dropped, you can always go back and pick them up later. What you can’t correct is failing to make the appropriate high-profile strategic shift: at the right moment.

  At times like this, your calendar becomes your most important strategic tool. Most executives’ schedules are shaped by the inertia of prior actions. You are likely to accept appointments, attend meetings and schedule activities that are similar to what you had been doing in the past. Break the mold now. Resist the tacit temptation to accept invitations or make appointments because you have done so in the past. Ask yourself the questions, “Will going to this meeting teach me about the new technology or the new market that I think is very important now? Will it introduce me to people who can help me in the new direction? Will it send a message about the importance of the new direction?” If so, go to it. If not, resist it.

  The point is this: you can’t hedge in a choice of direction and you can’t hedge in your commitment to it. If you do, your people will be confused and after a while they will throw up their hands in resignation. Not only will you lose direction, but you will continue to sap the energy of your organization as well.

  A difficulty in role-modeling a new strategic action is that leaders of large organizations, by the nature of their jobs, are often distanced from direct contact with many managers and employees. You can’t talk to everybody; you can’t look all of them in the eye and argue your point. So you need to find a way to project your determination, will and vision over a distance, much as the forces of a strong magnet affect iron filings.
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br />   When you have to reach large numbers of people, you can’t possibly overcommunicate and overclarify. Give a lot of speeches to your employees, go to their workplaces, get them together and explain over and over what you’re trying to achieve. (Take particular care to answer questions of the “Does it mean that …” variety. Those are the ones that offer the best chance of bringing your message home.) Your new thoughts and new arguments will take awhile to sink in. But you will find that repetition sharpens your articulation of the new direction and makes it increasingly clear to your employees. So speak and answer questions as often as possible; while it may seem like you’re repeating yourself, in reality you will be reinforcing a strategic message.

  Middle management has a special role to play here. More than anyone, middle management can help you project your message over a distance. By including them in your thinking and doing a particularly good job of enlisting them as sources of amplification of your new direction, you can multiply your presence many times. Take extra time with them because otherwise you risk losing their wholehearted commitment.

  The best aspect of this type of exposure is that you will test whether you can pass the gauntlet of your employees’ questions, assuming you have the kind of corporate culture in which they feel comfortable questioning you. Your employees’ questions are usually shrewd, and in a free environment they can question you in a way that no one else can. If there is strategic illogic in your thinking, they will sniff it out and poke at it.

  This is not fun. You may want to hide from exposing the holes in your strategic thinking—after all, having them on display in front of a group of your own employees would be embarrassing, wouldn’t it? Yet I think it would be far better to let your employees find them when there’s still time to make corrections than to allow the marketplace to find them later.