The man who made it in a worried sort of way

Andrew Grove of Intel fame believes in fear and is spreading the word on how to use it to survive. Roger Trapp listens in

In the world of computing, few companies - Microsoft, IBM and Apple, for instance - are better known than Intel. And few of the industry's many highly successful managers are better known than its president and chief executive, Andrew S Grove. Much of this has to do with the personality of Dr Grove, who is almost invariably known as "Andy". Though an engineer by training and a computer industry executive by circumstance, he has an incisive wit and easy way with words that belie his origins as a Hungarian immigrant to 1950s America.

But there is much more to him than an accomplished stand-up performer. Such is the respect accorded his views on trends in business and ways of managing them that when he gets up on his feet people tend to listen. Earlier this year, when he attended the World Economic Forum at Davos to warn of the dangers of Europe lagging behind in technology, his remarks were widely reported. And when at about the same time he gave a lecture at the London Business School, the place was packed.

Even allowing for the fact that he has effectively joined the business school milieu by teaching at Stanford, his introduction as "a modern-day alchemist" who is turning sand into gold is some indication of his stature.

But if Dr Grove is complacent, he is not showing it. Certainly, the tide of his latest book suggests the very opposite. And in the opening pages of Only The Paranoid Survive (just published in Britain by HarperCollins, pounds 20), he sketches in the background to a motto with which he is often associated. "When it comes to business, I believe in the value of paranoia," he writes. "Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another and then another until there is nothing left."

After pointing out that the things he worries about vary somewhat, he introduces the concept of the "strategic inflection point". He even told his rapt LBS audience that his original plan had been to call the book Navigating Strategic Inflection Points - but the publisher, for some reason, had not liked it.

The term - as any mathematician or economist knows - stems from the inflection point that occurs when the rate of change of the slope of a curve changes sign - from negative to positive or from concave to convex, or vice versa. In other words, it is where a curve stops curving one way and starts going the other way.

"So it is with business matters, too," he adds. "An inflection point occurs where the old strategic picture dissolves and gives way to the new, allowing the business to ascend new heights. However, if you don't navigate your way through an inflection point, you go through a peak and after the peak the business declines."

Though Dr Grove points out that such points are usually characterised by managers noticing that something has changed but not really realising what, distinguishing such a point from what he terms the background noise is difficult.

And lest it appear that he is opining on this from some higher ground, he opens the book with a description of the lead-up to a strategic inflection point at Intel.

The company is up there - in terms of name recognition - with the Microsofts, IBMs, Apples and the rest largely because of a massive marketing effort that slapped the slogan "Intel Inside" on the side of every computer powered by an Intel microprocessor.

But, as Dr Grove explains, that turned out to work to the company's disadvantage. Far from being a nameless supplier of an albeit critical component, Intel was portrayed as being responsible for the real essence of the computer with the result that when reports circulated in late 1994 that there was a problem with the Pentium chip, everybody knew just who to blame. Dealing with the problem cost the company a lot of time and heartache - and a write-off of $475m. More importantly, the company "embarked on a new way of doing business".

What the episode taught the company, says Dr Grove, was that it was not what it thought it was. While it still regarded itself as an agile start- up, consumers saw it as a huge enterprise dominating its market and behaving much like all the other large corporations.

So, how do companies avoid following suit? Dr Grove has a few questions that should help executives tell whether a change amounts to a strategic inflection point or is just noise.

First, is your key competitor about to change? He recommends identifying the key competitors in your market by using the "silver bullet" test - if you had just one bullet to fire, whom among your competitors would you save it for? "When the answer to this question stops being as crystal clear as it used to be and some of your people direct the silver bullet to competitors who didn't merit this kind of attention previously, it's time to sit up and pay special attention."

Second, is your key competitor about to change? Does the company that in past years mattered the most to you and your business seem less potent today? If it looks like another company is about to eclipse it, it may be a sign of shifting industry dynamics.

Third, do people seem to be "losing it" around you? The very fact that you and your colleagues were right for the original business may make it more difficult for you to recognise the new trends. People not "getting it" may be a sign of this. Equally, you may be the problem. "When they don't get it or you don't get it, it may not be because of encroaching age; it may be because the 'it' has changed around you."

But recognising the problem is only the start. Dr Grove sees two stages to the strategic inflection process. The first - which he terms "Let Chaos Reign" - refers to the time when the management does not know enough to take charge. The second - "Rein In Chaos" - comes when "you think you know enough, you've seen the other side of the Valley of Death".

Once this point has been reached, it is up to the management to set a clear direction for the organisation, and that means more than coming up with grandiose rhetoric about lofty aims. "The most visible way you can symbolise the new direction is by what you spend your time doing," he saysn