Recently, I finished reading Andrew Grove's (Intel's CEO) book 'Only the Paranoid survive'. It's a very good insight into the tough times and the ambiguity that prevails during paradigm shifts / strategic inflection points in industries. He talks about how it is very easy to be wrong during these crisis situations - because of inertia, lack of power to fight that inertia, and lack of the right answer. He explains the natural dynamics of leadership challenges, and personal conflicts almost as a science.
While the book has lot of examples to make the gyaan relatable, I have picked out my favorite pieces of knowledge and have shared here. Would definitely recommend reading the book
Prologue - Competition which strikes not at margins.. of the existing firms, but at their foundations and their lives, is the most dangerous
Something changed in the industry, but it's difficult to figure out what
- There is no flashing sign that heralds that something has changed. Technology has something to do with most of these changes, as it provides the power to change the existing order of things
- Leader is last to know. Signaling of change starts from sales to managers to leaders. The change just grips you. The management’s job is to defend the existing, and as a result they end up ignoring / debasing the criticisms
10X changes in competitor, customer, supplier, complementor, alternates can make all your previous strategies useless. Business responds differently to managerial actions than it did before. From this inflection point, which is difficult to pin point in present, as well as in future - you can either go up or down exponentially - it’s not easy to sustain yourself here.
As everyone realizes, they are entering a valley of death and that stakes are enormously high - there will be growing ferocity, and determination surrounding the views and opinions - pitting co workers against coworkers, long term friends against long terms friends. Defining direction, and setting strategies, become difficult. It’s the time to wake up and listen
Examples (Pg 77): Old vertically arranged computer industry to horizontal specialized industry. Walmart disrupting local stores. Next disrupted by Microsoft’s superior GUI system (Job went through cycle of denial and acceptance), Sound takes over silent movies (and artists who resisted declined except the genius Charlie chaplin who too did a sound movie later)
Since 10x changes are so prevalent, why not do it ourselves: In a management class Andy grove attended, the instructor played a scene from World war II movie Twelve o clock high. A new commander is called in to straighten out an unruly squadron of ofliers, who had become undisciplined to the point of self destruction. On his way to take charge the new commander stops his car, steps and smokes a cigarette while gazing off into distance. Then he draws one last puff, throws the cigarette down, grinds it which his heel, and turns to his driver and says “Okay, Sergeant let’s go”. Grove’s instructor played the scene over and over, to illustrate a superbly enacted instance of building the determination necessary to undertake the hard, unpleasant and treacherous task of leading a people through excruciating tough set of changes - the moment when leader decides to go forward - no matter what.
It takes objectivity, the willingness to act on your convictions and passion to mobilize people into supporting those convictions. That’s what Andy grove went through when they decided to pivot to microprocessors under fierce competition from far more superior Japanese technology and processes. From being determined to implement this, he went half way to split focus on memories and microprocessors, only to realize that focus is something which vanishes as soon as split. When they notified this to the customers, they got an unanticipated response of “It sure took you a long time to realize” - People who have no emotional stake in a decision can be more objective and hence can see what can be done sooner. For the same reason, may times senior management will replace a leader to get rid of emotional baggage. The new leader wouldn't be any smarter, but at least comes with no emotional baggage.
Signal or Noise: Are all changes SIPs? For e.g. IBM was once experimenting x ray technology to build semiconductors, which was huge investment. In news of such events, you will often see competent and serious minded folks coming to different conclusions. Intel decided to pass, but there was no secret formula. The only secret formula was that while they let it pass, they decided to still closely monitor the developments to avoid being caught off guard. Another similar perceived 10x example that Grove gives is of CISC vs RISC chips (for common man, it’s enough to understand that CISC was older approach and required lot more transistors than the newer RISC). The debate over their merits divided the computer industry. Intel had 2 processor designs - 486 (higher power version of already successful 386 based on CISC), and i860 based on RISC - and they had decide which one to push to market - more proactively (Yes, you always have to decide). Development projects have a tendency to want to grow like proverbial mustard seed. The fight for resources and for marketing attention (for example, when meeting the customer which processor should we highlight?) led to internal debates which were fierce enough to tear apart out microprocessor organization. Our customers and other industry partners were not of one mind either. On the one hand, Compaq’s CEO wanted us to invest in CISC, Microsoft’s key tech manager wanted us to invest heavily in RISC. Intel continued with CISC - with the mindset that there is no point walking away from such a strong momentum, and risked other companies building RISC. They treated this change as ‘Noise’, and luckily they were right. So all of this could be very fuzzy to decide, and hence there are some rule of thumbs / processes that a leader should embrace to keep themselves aware.
A) Silver bullet test - If you had just one bullet, who will you kill? If the answer to your question is becoming vague, that means you are amidst of 10x change. A similar question can be asked for your complementary (not the bullet), but are the companies that were most relevant and good partners changing now?
Helpful Cassandras : Cassandras are often form middle management, mostly from sales. Their genes have not been selected to achieve perfection in an old way. Since they are closest to winds of change, they will give you news about the changes. You don’t have to seek Cassandras. They will ‘sell’ their concern to you with passion. Don’t argue with them, just listen them out. They are in no position to suggest a course of action, so don’t ask them for an action. Natural tendency of the senior management is to shrug off the news, and here is the need of change. Listen and wait to listen more data points - till you have made an opinion.
Debate: The more complex the issues are, the more levels of management should be involved because people from different levels of management bring completely different points of view. When faced with This kind of debate is daunting because it takes a lot of time and a lot of intellectual ergs. It also takes a lot of guts; it takes courage to enter into a debate you may lose, in which weakness in your knowledge may be exposed and in which you may draw the disapproval of your co workers for taking an un popular viewpoint. Don’t justify holding back by saying that you don’t know the answers; at times like this nobody does. Give your most considered opinion and give it clearly and forcefully; your criteria for involvement should be that you are heard and understood. Clearly, all sides cannot prevail in the debate but all opinions have value in shaping the right answer. Gradually, in a debate all parties can cut through the murkiness that surrounds their arguments.
If the prospect of vigorous debate scares you. Inaction might lead to a bad result for your business and that should frighten you more than anything else.
Arguing with data: You have to know when to hold your data, and when to fold them.
Fear: Constructively debating through issues and getting somewhere is only possible when people can speak their minds without fear of punishment. And it takes only an incident to introduce this kind of a fear (the news spreads very fast). You shouldn’t shoot the messenger, nor should you allow any manager to do so. This doesn’t mean that teams should not have a fear of competition and losing. This just means there shouldn’t be fear in expressing the thoughts.
Chaos: Getting through a SIP involves confusion, uncertainty and disorder, both on a personal level if you are in a management and on a strategic level for the enterprise as a whole. These 2 levels are more intimately connected than one might think. The early stages of inflection point are fraught with loss - loss of your company’s preeminence, of its identity, of a sense of control of your company’s destiny, of job security, and perhaps the most wrenching, the loss of being affiliated with a winner.
In such situations. Leaders look for escape or diversion like unrelated acquisitions and mergers. Lot of these activities are motivated by need of senior management to occupy themselves respectably with something that clearly and legitimately requires their attention.
Good leaders are also subject to the same emotional wriggling. They, however, eventually emerge to the acceptance and action phases. Lesser leaders are not capable of that and they are often removed. Then they are replaced by individuals who are not necessarily more capable but who do not have the emotional investment in the previous strategy. Replacement of corporate heads is far more motivated by need of bringing someone who is not invested in past.
The inertia of success kicks in. Then there is strategic dissonance of translating the ambiguous picture in senior management’s head to the team. Resolution of strategic dissonance comes in form of experimentation. Let people try different techniques, different sales channels, different customers etc. Let chaos reign. Loosen up the level of control. Not that chaos is good in general. It’s awfully inefficient. But old order won’t give way to new without a phase of experimentation. Timing is important - experimentation and bets should be taken in the phase when the old model still has the momentum. That’s the timing with minimum long term risk. In such times of confusions, it’s important to create and keep sharing the new industry map.
Let Chaos reign: When you think what its like to get through an inflection point - it feels like they don’t know exactly where they are going; they only know that they can’t run back and must trust that they will eventually reach a place where things are better.
Rein in Chaos:
Traversing the valley of death: First task is to create a mental image of what the company is like to look in future. You need to answer people’s questions in a single phrase that everybody can remember. You need to define what would you not be - Doing this should be a little easier at this point, because you are coming out of a very bad period and you are likely to have very strong feelings about what you don’t want to be. There are dangers of oversimplifying the company’s vision, and raising brows of multiple managers (are we still doing important work), but it pales in comparison to yielding to each manager’s wish and making the vision as forty and broad that it becomes meaningless. Take a case of a company floundering to define itself. In absence of a clear definition the company will change it’s decisions often. How can one motivate oneself to continue to follow a leader when he appears to be going around in circles. Leader’s life is tough. 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 unequivocal course whose rightness or wrongness will not be known for years. Demoralized organizations are unlikely to be able to deal with multiple objective in their actions. The directive doesn’t even have to be the best direction, just a clear, strong one.
Redeploying resources: Your tendency will almost always be to wait too long. Following ‘taillight’ approach is not going to work. You have to move ahead and learn how to drive in the fog w/o anyone else showing you the path anymore.
An organization that has a culture that can deal with these two phases - debate (chaos reign) and a determined march (rein the chaos) - is a powerful adaptive organization
- It tolerates and even encourages debate. These debates are vigorous, devoted to exploring issues, indifferent to ranks.
- It is capable of making and accepting clear decisions, with the entire organization then supporting the decision.
