Chapter 9 08. Andy Grove: Decide on the Future at a Strategic Inflection Point

Any century-old enterprise must have experienced many vicissitudes.Any enterprise that yearns for a century must also learn to get along with crises.In many cases, there is often a blue ocean hidden on the other side of the danger. Wise entrepreneurs always carry out centuries-old schemes in crises. Andy Grove, former chairman and CEO of Intel Corporation.Although it was the achievements of his Intel Corporation that pushed Grove's personal reputation to the top, the reason why Grove can become the cover of 77 magazines and become an American pop icon is more because he is almost Morbid crisis awareness, and the ability to deal with crises and turning points.

Success has never been predestined, and so is Intel under the leadership of Grove. In fact, when we count the past, we can find that many times, Intel has stood on the verge of death—Intel may be killed by brutal global competition. , This competition has killed countless clothing companies, tire companies, and television companies.Intel may also be killed by that terrible and never-ending Moore's Law, because according to this law, Intel must invest tens of billions of dollars to build expensive factories and production lines that never know whether they will make money, because these products The customer base is in the future.Intel may also be replaced by latecomers, because it became the "elephant" that everyone aimed at very early... But none of the above happened in the end. The reason is that-before the crisis broke out, his leader Grove They all tried their best to save them.

Grove was born in a Jewish family in Budapest, Hungary in 1936, and experienced the brutal Nazi rule at an early age. In 1956, after the Soviet Union invaded Hungary, Grove and a group of refugees fled to the United States by boat.But when he arrived in New York Harbor, he had only $20 in his pocket and didn't speak a word of English.But in only 3 years, Grove not only taught himself English, but also earned tuition by working part-time. Later, he graduated from the State University of New York with the first grade and obtained a degree in chemical engineering.Three years later, he received a Ph.D. from the University of California, Berkeley.

After graduating from Ph.D., Grove joined the famous Fairchild company. In 1968, Noyce and Moore, the legendary giants of the semiconductor industry, decided to start their own business and founded Intel Corporation.Grove was strongly recommended by Moore and became Intel's first batch of employees.By 1976, Grove had become Intel's chief operating officer. He took over as president of Intel Corporation in 1987 and became chairman of Intel Corporation in 1997.During the 10 years from 1987 to 1997 when Grove was the leader, Grove led Intel to return an average rate of return to investors of more than 44% per year. In 1996, Intel achieved sales of 20.8 billion U.S. dollars and net profit of 5.2 billion U.S. dollars .

There is still a long list of honors left on Grove's file: in 1997, the American "Time Magazine" gave him the "Person of the Year"; in 1998, the American Academy of Management awarded him the title of "Outstanding Manager of the Year"; The Management Association "Lifetime Achievement Award", in 2004 Wharton Business School nominated Grove as the most influential CEO in the past 25 years... Grove easily won these honors that ordinary people can't match.But for him, these may not compare to a lecture at Wharton Business School, or his famous autobiography: "Only the Paranoid Can Survive".

Viewpoint: Broadly speaking, a company succeeds or fails based on its ability to adapt to change. Today's success depends on past successful experience, but can tomorrow rely on yesterday's experience?What happened to Intel in the 1980s answered this question.Enterprises and individuals will rely on experience and inertia to develop, but when some drastic changes come, experience will become an obstacle. At that time, both enterprises and individuals need to surpass themselves.Just like Grove asked Moore: Since changing someone else would give up the current business, why not make this decision by us?

background of the crisis Grove once commented on Jobs in this way: Steve Jobs is a controversial genius founder of the personal computer industry. At the age of 20, he foresaw a globalized industry that would create an output value of 100 billion U.S. dollars in 10 years.But a decade later, at age 30, Jobs was stuck in his past.He won the market because of the phrase "surprisingly powerful computer", but when the situation changed, it was difficult for him to give up his belief in being a pioneer full of passion and efficiency. Persevere in the belief. Grove's comments paint a clear picture of Jobs, but Grove himself had the same experience.

In the 1980s, Japanese memory companies took on American companies.Previously, Intel positioned itself as a memory company, and it was the discoverer and leader of this industry, but after 30 years of development, the Japanese appeared.At one point, Grove got a memo from a Japanese company that said, "Win with the rule of always pricing 10% less than everyone else...find AMD and Intel interfaces...at 10% less than theirs Asking price... If they re-raise the price, you will deduct another 10%... Perseverance to the end is victory..." The price war of Japanese companies has dragged the memory industry into an era of meager profits, but what scares Intel more than meager profits is quality.At that time, Japanese memory companies often had a large number of developers, usually occupying a building, and each floor in the building was developing a new generation of memory, and all the work was going on at the same time: the upper floor of the 16k was researched, and the 64k was researched. , and further up is the person who studies 256k... This is a terrible situation, because it means that the Japanese occupy the future as well as the reality.

As a result, in a short period of time, American companies represented by Intel were beaten to pieces. By 1984, Grove carried such a burden: "Everything has changed, the business has declined, and it seems that no one is there anymore. Willing to buy chips, our orders disappeared like spring snow, so we had to reduce production. At that time, after such a long period of expansion, our speed of reducing production could no longer keep up with the market downturn. When business was depressed and cold , The goods in the warehouse are still piling up." Grove later said: "The seeds of destruction are bred in the prosperity of the enterprise. The more successful you are, the more people will salivate. And one mistake may bring Intel into disaster." At that time, Grove needed to do A decision, right or wrong only God knows.

So one day in 1985, Intel had been wandering aimlessly for a year, when Grove was in the office despondently talking to Chairman and CEO Moore about the company's plight.Grove asked Moore: "If we step down and choose a new president, what do you think he will do?" Moore hesitated, then replied: "He will give up the memory business." Grove couldn't take his eyes off Looking at Moore anxiously, he said, "Why don't you and I walk out of this door and do it ourselves?" This determination is difficult, because in everyone's mind, Intel is equal to memory, and giving up memory is equal to giving up yourself.In the end, after nearly a year of long and painful choices, Intel put the company's focus on microprocessors, and this blue ocean was like a "delicate chess game" that Intel could not find.By 1992, the huge success of the microprocessor had made Intel the largest semiconductor company in the world, even surpassing the Japanese company that had beaten it in the memory business that year.

Intel successfully walked out of the trough of that era, and more importantly, they found confidence and methods.In Grove's later published autobiography "Only the Paranoid Can Survive", he called the moment when they made up their minds to change as a strategic turning point.He said: "Crossing the valley of death set for us by the strategic turning point is the greatest tribulation that an enterprise organization must go through. At the turning point, the old strategic map is replaced by a new one, enabling the enterprise to rise to new heights. But , if you don't go through the turning point, your business will first rise to a peak and then slide to undervaluation. When the turning point occurs, the managers observe in bewilderment: the situation is different, something has changed. But no one It will sound the alarm for you in advance, reminding you that you are on the verge of transformation. This is a gradual process. The power of various factors is quietly accumulating and begins to change the characteristics of the enterprise. Only the beginning and the end are clear Recognizable, the transformation process in the middle is subtle and confusing." It is also for this reason that the brilliant superstars of the previous era are often the last to adapt to change. But Intel has found a way to identify the direction from such changes. Grove said: Sales staff are like soldiers in the trenches, and they will always be the first to know that the battle situation is about to change.Salespeople will see changes in customer needs faster than managers, and financial analysts are the first to see fundamental shifts in the business. In the objective world, production planners and financial analysts face strict resource systems and a large number of figures, while senior leaders of enterprises are blinded by past victories and know nothing about changes in the world.Only after recurrent economic crises and unrelenting fiscal deficits can senior leaders find the courage to say goodbye to the past and start the future. Therefore, in Grove's book on dealing with change: Open communication with salespeople and financial personnel has always been one of the most important principles he wrote. Opinion: We are dealing with the consequences of our enormous size and special identity, one that is both unpleasant and intractable.Intel already had a big image in the eyes of computing customers, and unfortunately we didn't realize it until a big bankruptcy. "With great power comes great responsibility." This philosophic statement from Spider-Man's mouth is to some extent a wake-up call to Intel's brand strategy.When Intel decided to go beyond mainframe computers and become an independent brand, he was no longer the boy behind the umbrella.The establishment of a company brand is a rite of passage, which means that when you enjoy the freedom of adulthood, you must also take responsibility. background of the crisis In 1994, Grove's Intel experienced a product quality crisis called the "Pentium Processor Floating Point Incident", which almost ruined Intel. The cause of the incident was that in this year, Intel launched a new generation of Pentium processors. We all know today that the appearance of "Pentium" is a huge leap compared with the previous "386" and "586".However, while new products bring huge profits, their hidden flaws are enough to overturn the giant wheel. As the saying goes, the sharper the sword, the easier it is to break. The Pentium processor is such a sharp weapon. Shortly after Intel launched the Pentium processor, a mathematics professor told them that the Pentium chip had problems in mathematical operations, because when the professor was studying some complex mathematics problems, the machine had an algorithm error.In fact, Intel has long known that this problem-they have encountered it themselves-is caused by a tiny design error on the chip, but the result of their calculations is that this error will reduce the number of times in 9 billion division operations. It occurs once, which means that an ordinary user will encounter it once every 7,000 years. Intel believes that the probability of this time is far less than the time when other problems occur in the semiconductor of the chip. Therefore, if the error is not resolved, the Pentium chip widely put into the market. The seeds of danger are planted here. In the era of industrialized production of commodities, any small problem may be infinitely magnified. Intel first encountered constant reports from the media. The headlines on the front page of "Business Weekly", the producer of CNN, and many business newspapers and periodicals all focused on Intel. Their headlines were: Pentium Incident: Buy it or not?The implication is that Intel is still worthy of your trust! In the media spotlight, consumers began demanding chip replacements, but that wasn't the worst of it, Grove said: On the morning of December 12, 1994, when he walked into his office, he saw a wire report that said Note: IBM stops shipping all Pentium-based computers.This is a symbolic event, because 13 years ago, it was the originator of the PC, IBM, which chose Intel technology to make the Intel microprocessor famous, but now IBM stops using Intel processors, and history has repeated itself. Only this time it's negative. Under the superposition and magnification of so many events, Intel came to the edge of the cliff. Grove later said that when he was walking on the road during that time, he seemed to hear people constantly asking: What are you all doing?Your company is greedy, bossy and arrogant... So, after just a few days of long suffering, Grove and his Intel made a painful decision: replace the chip for all users, whether his computer is doing math Question, still playing video games.When they made this decision, they were also frightened by the decision. The happy sales that were in short supply before have now become a painful backlash, because the more they sell, the greater their loss.However, any company that aspires to go global and into the future must have the mind to take on all responsibilities, and Intel has done just that. In the end, Intel spent a whopping $475 million to replace a minor problem caused by their negligence and arrogance, which was equivalent to half a year's R&D budget, or 5 years of advertising costs for Pentium processors. However, the crisis also allowed Grove to see another side of Intel that they hadn't realized before: The first was a few years ago when Grove started a special "Intel Inside" sales campaign -- the idea of ​​telling computer users that the microprocessor inside their computer was an Intel processor.This event was a great success. He taught all consumers to answer a question, that is, when someone asks: what kind of computer do you have, you will first say: I have a "386" - which refers to It's the microprocessor chip inside the computer -- and then the brand of the computer, what software it comes with, and so on.The identity level of a computer depends on the microprocessor inside, and this special identification is a huge benefit to Intel.However, the other side of this benefit is that when there is a problem with the chip, all the contradictions point directly to Intel. The second reason is Intel's size.In the years of growth, Intel has become the largest semiconductor manufacturer in the world. Those American companies and manufacturers that Intel regarded as behemoths in the past few years have been surpassed by Intel in terms of scale.Its scale even exceeds the Japanese manufacturers that threatened Intel 10 years ago.And they're growing fast, faster than most big companies.Not only that, but they are bigger than most of their user companies.On this path of growth, Intel's size has been reversed, just like a grown-up child who suddenly looks down at his father. All this has changed in just 10 years, and Grove later figured it out when he said: We are dealing with the consequences of our enormous size and our special identities, a consequence that is both unpleasant and intractable .Intel already had a big image in the eyes of computing customers, and unfortunately we didn't realize it until a big bankruptcy. In fact, all crises have two sides. While killing people, they will also allow enterprises to see themselves most clearly. Those who survive will become stronger. What the 25,000-mile Long March has created is a The iron-clad Red Army, a century-old enterprise was also born after the previous financial crisis.Grove also said that the Pentium processor floating-point incident is an isolated incident, a bump in the development road, a noise, or a signal.However, for those who are on the road of brand building today, the question that needs to be considered clearly before making a bigger and stronger brand is: Can I bear the weight of the brand?Am I better suited to a global brand, or a hidden champion that only a few know?