Chewing on the "Intel story"

The last post noted the acidic review about Mike Malone's topic--Intel, the most important company of our age: perhaps the most profound unanswered question of the book and of Silicon Valley’s past half-century: How is it that even the most agile and powerful companies falter and lose the cadence of innovation that made them great? Malone doesn’t offer an answer. What he has produced is popular history, the tale of an epoch-defining industrial romp and the three men who led it.

We continue to be astonished that others are astonished to hear just how badly the large American companies have been performing for the past twenty-five years.  From Boeing to GE, Nike to Cisco, IBM to Proctor and Gamble, the tale is unremittingly dismal.  They all grew magnificently, then flattened.  As is STOPPED growing altogether.  Intel, HP, Oracle, Merck, Disney... the list is long. This leaves out Polaroid, Kodak, Motorola, Sun Microsystems, Digital Equipment, seventy major retailers (e.g. Circuit City, I Magnin, A.O. Swartz) and a host of other forgotten 'leaders' who totally derailed.  It omits Xerox, Westinghouse, Raytheon, Lockheed, and other 'worthies' who pirouetted into smaller, leaner slivers of their former selves.  It doesn't count the Mergers and Acquisitions fervor, the consolidations, the reverse splits, and the other machinations so common in this time.

I recently asked a group of a hundred senior Hewlett-Packard managers where their company stood on the corporate growth cycle (c.f. the chart shown here).  A handful voted for the first arrow (still growing), the vast majority for the middle, but twelve for "starting to keel over".  I couldn't help but ask: "Why are you still there?"

When President Reagan formed the Presidential Commission on Competitiveness in 1986, the purpose was to "promote American business competitiveness in order to preserve American jobs."
The five leaders of the past decade (2001-2010) were respectively the CEO or Board Chair of Merck, Xerox, Motorola, Bell South, and DuPont, each selected when their company was (still) considered the paragon of leadership in their field.  Here's the track record:

Thank gawd we have these stalwart leaders helping fashion American business policies to save the American worker.  LOSING 71% of their own workers--what if we had duds on the commission?  This is not just a singular case--this is endemic, and maddening, and guess what--IT IS TOTALLY UNREPORTED, UNCHALLENGED, and UNBELIEVABLY GRIEVOUS.  The American middle class has been gutted by such policies, somewhat and maybe significantly damaging the American dream.  Why, you might ask, is this so ignored?  

There are reasons, and there are answers.  But if our leaders, pundits, analysts, and policy makers don't agree that there is a problem, it is hard to address it.  And, so far, they don't agree.

Are you:

1. shocked, surprised, amazed--as in 'had no idea it was this bad'?

2. in agreement, but surprised by the extent claimed above

3. in agreement, and wondering why this is not obvious to 'everyone'

4. discouraged, enraged that this is not a topic of high concern, and being addressed

Wall Street Journal about Mike Malone's new book

I am not generally a fan of the Wall Street Journal's point of view--they all too often extol companies who lay off people and outsource functions in the name of greater shareholder value while demeaning the employees and their communities.  They lobby for more tax credits for already protected industries, for repatriating obscene hidden off shore profits, they decry the Silicon Valley creativity and innovation as fads--you get the picture.

And once in a while, they zing through with a trenchant arrow, to the heart.

Which the editor, Marcus Brauchli, did to our local Silicon Valley historian, Mike Malone, last week about his new, lively and colorful book about the three leaders of Intel--Gordon Moore, Robert Noyce and Andy Grove.  Mike has written twenty books by now, all fast-paced page-turners about the great companies and even better stories in this improbable Silicon Valley.  He is, by most counts, credible.

Yes, Mike is given to hyperbole; yes, he is untroubled by facts on occasion; okay, a little bombastic.  The title is grand: The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove built the world's most important company.  As Brauchli observed: "Malone is a technology enthusiast; indeed, his other book titles seem to leave little space for the importance he ascribes to Intel: “Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company” and “Infinite Loop: How Apple, the World’s Most Insanely Great Computer Company, Went Insane.” "

The piece I was not expecting, though, was Brauchli's conclusion, which is exactly our theme of Intrapreneuring Innovation:  "But most problematic for both Malone and Intel is the abbreviated denouement to this book: When Krzanich became chief executive in 2013, after 31 years at the company, Intel had less than 1 percent of the mobile market, the new business segment dominated by companies like Apple and Samsung.

That raises perhaps the most profound unanswered question of the book and of Silicon Valley’s past half-century: How is it that even the most agile and powerful companies falter and lose the cadence of innovation that made them great? Malone doesn’t offer an answer. What he has produced is popular history, the tale of an epoch-defining industrial romp and the three men who led it."

That is the question we've been posing now for some time.  That is what has happened all over America, aided and abetted I might point out, by the vaunted Wall Street Journal and the Harvard Buisiness School for fifty years now.  Silicon Valley companies were not raised on the "Core Competence" notions of the MBA schools or the accounting-driven nostrums of Wall Street.  They however, have handed over the reins to folk adept at those skills, just as surely killing the creative juices as Steve Jobs once said.  So kudos for WSJ for noticing!

tigers and leopards and stripes and spots

A big issue for companies seeking renewal is the ANTIBODY resistance factor.  "We tried that" or "that will never work" closely followed by "that is hurt our (profits, efficiency, shipping schedule..."

Invariably, when a company is successful with RENEWAL concepts, it has formed a separate group (think IBM Boca Raton Florida to escape the New York nexus) or division.  Cisco had its Emerging Advanced Technologies group, backed by CEO Chambers; HP had Hewlett spawning new P&L divisions far from Palo Alto headquarters.

But some backfire.  A story we heard recently was from the Admin for John Chambers at Cisco.  She has been in this role for 24 years--knows him well!

Says he constantly wants to "stay in touch, close touch" with his customers.  High availability, and all that.  Explains his love of Cisco Telepresence!

But here's the great story.  Cisco, with Chambers' full backing, decided to "go into consumer products" by buying Linksys routers for the home and FlipCam cameras for video recording.  Recall those?

And his Admin says, almost immediately her office (and Chambers') were besieged with calls about "I didn't get my $5 rebate coupon validated" and other such consumer unhappiness.  She said, by the third call that took twenty minutes for a $10 or $20 issue, she's saying, WHOA, how does HP's CEO handle this nonsense?  And she said John wanted to be available for those calls.  Crazy, but true.

May explain as much as the different profit margins, volumes, inventory tracking, etc. why it is so hard to get emotionally ready for an alien turf.

"Thinking Out of the Box"

I will skip for the moment over the other two INTERNAL CHASMS--the EXPERTISE CHASM and the CANNIBALISM CHASM--to describe first the INDIVIDUAL CHASM of "THINKING OUT OF THE BOX."  Why?

Well, this is the hard one for individuals, but more importantly, if someone is brave enough, good enough, and a little bit lucky, they'll succeed in THINKING OUT OF THE BOX and producing something potentially great.  That's when they'll stumble on the next two INTERNAL CHASMS.

So, let's first describe the INDIVIDUAL CHASM.  For starters, go see my TEDx talk at Livermore last summer, at http://www.youtube.com/watch?v=a2oeSFkV7eE&feature=youtu.be

What is relevant is the bloc from 9:45 to 13:50, a four minutes sequence.

What this small set of slides addresses is the question of how difficult it is for people to "forget what they know" in order to think about a new problem with fresh eyes/ears.  This is really a willingness and ability to suspend domain knowledge that comes to bear which dismisses new evidence too quickly, without considering it from a fresh vantage point or through a new lens.

I cannot emphasize how hard this is to do.  Paradigms, belief systems, points of view become so ingrained for us, especially in our specialties, that it is virtually impossible to step outside them.  Joel Barker did some remarkably effective video tapes on this topic some twenty years ago; they were quite popular for a time, but few people today recall them.

Even if you can imagine outside your expertise realm, and come to grips with a new paradigm perspective (HARD to do), it gets worse if you decide to 'chase it'.  You lose your status as an expert; you really become a novice again, this time in the new area.  You risk losing (and often do lose) the credibility accorded you when you were "the expert" in the last paradigm.  Your team likely loses faith with you, as might your bosses.  It is a highly uncomfortable place to be.

This is when tenure int he university system, or a Fellow status in a company, is vital.  This at least assures that you continue to eat.  It does not, however, follow that you'll be able to attract new followers or supporters.

This, I believe, is the chief impediment to innovative leadership by previously innovative folk.

The FUNDING CHASM, the first of three INTERNAL Chasms

As described before, these are the FUNDING CHASM, the EXPERTISE CHASM, and the CANNIBALISM CHASM.

The FUNDING CHASM happens when 'all the money' is needed for operational things... such as PROFIT, fixing quality problems, growing the sales force, etc. The classic problem these days is the dreaded Quarterly Report to Wall Street.  For some reason, it is always 'up in the air' as the final days of the quarter approach, and it seems to be unthinkable to have a quarter 'miss forecasts'.  Not hard to figure this one out.  Discretionary spending stops, 'the future' is sold out for the present, the 'chickens will come home to roost' for the next CEO....

But it is more insidious than that.  If a product line is sold off (judged 'mature' or not performing), the proceeds are seldom funneled into new investment on risky research for breakthrough ideas.  If they go for development at all, they almost always go to 'speed up' current refinements.  Compare this to how Steve Jobs managed Apple, where he used the proceeds from 'the Microsoft deal' to venture into music (the iPods) rather than tune the MacIntosh further.  He used the iPod proceeds to fund the iPhone, hardly the kind of move that most company CEOs would endorse.

Smaller companies, where the same person or team handles the decisions to divest some things and the decision for new investments, are often able to fund 'the next new thing' but the FUNDING CHASM occurs when the skeptical majority--the beanies and the lawyers--are in charge of divesting old things and freeing up 'new money' and yet they are about the most risk-averse crowd imaginable for a corporation, which almost guarantees that they'll propose uses for the funds that are anything but bets on the future.

Do you see this in your company?  Have you seen it in other companies where you've worked before?

Crossing the Chasm

Geoffrey Moore hit a home run with his book, Crossing the Chasm, some years ago.  That book described the yawning gulf--a a chasm--between Early Adopters of a new idea/concept/product and the Skeptical Majority who have to be persuaded in order that any new thing be widely adopted.

It so perfectly described the problem for many Silicon Valley start-ups who sold their neat whiz bang to their friends but could not scale thereafter.  The book, and the concept, was widely endorsed.

In a more recent book, Dealing with Darwin, Moore describes what happens later--once the product scales, the company has trouble with the encore.  We've all seen this--companies become so wedded to their cool moneymaker that they overstay the situation, and when the profits erode, it's hard to climb back into innovation time.

Some--Gifford Pinchot notably-- argue for Intrapreneuring Innovation (THE PURPOSE OF THIS BLOG, right?)--as the way to overcome that unhappy circumstance.   And actually, that is my thesis as well.  But I lately have been doing this with some diagrams, built on top of Moore's later book.

I claim that their are FIVE CHASMS, not ONE.

ONE--the MARKETING CHASM--is what Moore describes.  It is an EXTERNAL Chasm, meaning that it is centered with the erstwhile customer base, which must be motivated to change behavior.

The next THREE are INTERNAL Chasms, structurally determined by "the company itself," amenable to change only from WITHIN the corporation.  I'll enumerate those in the next blog post

The last of the five, is a PERSONAL Chasm, which describes for AN INDIVIDUAL just why it is so hard to "THINK OUT OF THE BOX" once you've gotten good within a box.  It's related, I think, to why it is so hard to teach old dogs new tricks, but it is much more a function of the discomfort and difficulty to give up cherished beliefs and skills and embrace the unknown.

I will call these, respectively, the:

MARKETING CHASM

FUNDING CHASM

EXPERTISE CHASM

CANNIBALISM CHASM

"OUT OF THE BOX" CHASM

We'll outline those in subsequent posts