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Three Deadly Traps of Success!

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Three Deadly Traps Of Success!

Recently when I saw the announcement that Paul Otelllini, the current CEO of Intel, was retiring, I immediately thought of Andy Grove, a former CEO of Intel who is generally viewed as one of the greatest CEO’s of our times.

Andy Grove, former CEO of Intel Andy made enormous contributions to Intel.  He was the driving force behind the decision to transform Intel from being a manufacturer of memory chips to instead, take the risk that the personal computer business was going to be big and that Intel should be able to manufacture a microprocessor good enough to power IBM’s first personal computer.

  • After much work, Grove got IBM to use Intel microprocessors when they launched the IBM Personal Computer.  The IBM PC was a huge success, spawned many hardware clones that also relied on Intel microprocessors, and Intel quickly became a giant business.
  • Grove served as CEO of the company from 1987 until 1998, and during that period the stock price increased by +2400%.

A simple business philosophy

Grove is famous for his simple business philosophy. According to Grove; “Business success contains the seeds of its own destruction.  Success breeds complacency.  Complacency breeds failure.  Only the paranoid survive.”

Grove explains his reasoning:  “A corporation is a living organism; it has to continue to shed its skin.  Methods have to change.  Focus has to change.  Values have to change.  The sum total of those changes is transformation.”

Another reason why I bring up Andy Grove is that his record is so drastically different from that of Intel’s retiring CEO, Paul Otelllini.  While during his 8 year tenure as CEO, Otellini did a fine job preserving Intel’s 80+% share of the PC microprocessor market and that is a major accomplishment.  On the other hand, the company’s stock price is actually off -4% versus the price when Otellini took over as CEO 8 years ago.

Why the lackluster stock price performance?

The personal computer business is starting to decline, for the first time in history, and the big growth areas for microprocessors are the tablets and smartphones, both of which are the absolute rage these days.

Unfortunately for Intel, it is struggling with both tablets and smartphones.  The big players are ARM and Qualcomm.  In fact, it was a real surprise to see recently that Qualcomm has eclipsed Intel’s market capitalization to become the most valuable semiconductor company.  Even in servers, Intel could soon face strong competition from rival ARM-based chips.

The real shocker here is that if there was going to be one company who would religiously live by the philosophy of Andy Grove, you would expect it to be Intel!

Three deally traps

So what is the learning here?  Success leads to complacency which leads to the following three traps that are deadly:

  1. Neglect: Sticking with Yesterday’s Business Model –  Intel’s ongoing,  laser-like focus on personal computers caused them to not really get aggressive early regarding smartphones and tablets. Now they are a minor player trying to catch up in those two emerging components of the microprocessor market.
  2. Pride: Allowing Your Products to Become Outdated – Kodak was very proud and protective of its film business and failed to realize it was actually in the photography business.  Photography went digital and left the now-bankrupt Kodak with a fast declining film franchise that disappeared right before their eyes.
  3. Lethergy: A Culture of Comfort, Casualness, and Confidence – In the early 1980’s, IBM management was so comfortable with the fat profit margins of the mainframe that it very reluctantly allowed a bunch of renegade employees to launch a personal computer.  They cared so little they outsourced to microprocessor to Intel and the operating system to Microsoft without exclusivity clauses, allowing any clone manufacturer to also use the same Intel chip and Microsoft operating system.

It is very clear that Any Grove was dead right: Only the paranoid survive!

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Bob is an author, public speaker and retired executive vice president and chief operating officer (COO) of Microsoft Corporation. Before joining Microsoft, he spent twenty six years at Procter & Gamble, the last five of those years as senior vice president of advertising and information services. Since retirement, Bob has divided his time between working as a consultant for his own Herbold Group LLC and as writer and public speaker focusing on leadership. Bob has written three books. His latest, "What's Holding You Back? 10 Bold Steps That Define Gutsy Leaders" was released February 2011 by Wiley/Jossey-Bass.

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  • Hi Bob, I believe your first trap “Neglect: Sticking with Yesterday’s Business Model” has never been as big a trap as it is right now. The surest way to kill your business nowadays is to stand still. Thanks for another great leadership article.

  • Elish Bul

    Thanks for the Reminders Bob – Great Case Studies! what a Fragile tightrope , true Vision can be – expansive enough to adapt to new realities whilst focused enough to identify one’s true core competence without restricting future product development.

  • Hi Bob,
    It’s often failure to identify ‘big picture items’ that destroy a business -items like “who are our customers?” and “what business are we in?”. At the outset many founders think these are crazy questions and that the answer is obvious, and it is interesting to see that these are the questions that confound big, established companies too ~ “Kodak failed to realize it was actually in the photography business”.
    Great case studies Bob, and a lesson for us all!
    ~ Helen

  • Elish Bul-Godley

    wondering how we can as tyb gang develop our instagram personality as a new account

  • Hey Niall,

    Thanks for the excellent roundup. What I love most? The April’s Fool viral write up. Haha!

    Thanks for making me smile on a Saturday (working day) 🙂

  • I had heard of some of these resources about Content Management System
    but have some new ones to check out now too. Thank you for sharing look forward to your next post.

  • Steven Scheck

    Terry, what Tesla invented in 1893 was primarily wireless power. However, we have discussed about wireless internet and its history here. Nevertheless, thanks for the info, mate.

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