Forwarding this article posted on the COMS thread:
---------------------------------------------------
"Inflections: Tech Titans Know Fear"
Date: 2/25/98
Author: Matt Krantz
Intel Corp.'s CEO Andrew Grove is afraid of them. Microsoft Corp.'s Bill
Gates says he is, too. But what exactly are these things the technology
industry calls ''strategic inflection points''?
For that matter, what's an inflection point? It's a mathematical term to
describe the place on a curve where a slope changes sign. For example, it
happens when a convex curve turns into a concave one, or vice versa.
But to technology executives, the strategic inflection point - as made
known by Grove in his recent book ''Only the Paranoid Survive'' - takes
on a much more threatening meaning.
A strategic inflection point is the moment an industry radically changes.
Companies rarely see a strategic inflection point coming. But it's obvious
after the fact. Slow reactions, or failures to react, destroy companies.
Hundreds of failed technology companies were victims of strategic
inflection points. PC maker Commodore Computer and high-speed-
modem maker Paradyne are two examples.
Strategic inflection points come in many forms. They occur when your
products are suddenly made obsolete by a rival's new technology, or when
another company invents a cheaper way to make a product of higher
quality.
Strategic inflection points are dangerous in technology. One reason is that
the industry has short product cycles. That means radical changes occur
faster than in other industries.
So technology executives must react faster, and more often. That increases
the chances of failure.
Another reason is that often a technology firm is facing a strategic inflection
point even as it's posting record financial results. It can be hard for
successful companies to acknowledge their faults.
Chip demand was far outstripping supply when Intel faced a strategic
inflection point in the early '80s, Grove wrote. That was when Japanese
chipmakers first became a major threat by developing advanced memory
chips and manufacturing processes. Intel's customers started saying that
Japanese chips were better.
Intel reacted by exiting the memory-chip business by mid-'86. They left
that business to Asian companies that had developed ways to mass
produce such products cheaply. Instead, Intel focused on a more complex
product: microprocessors. These are the brains of computers. Intel, of
course, has had wild success in this business.
It's hard to tell when you're facing a strategic inflection point.
Grove writes in his book: ''Picture yourself going on a hike with a group of
friends and getting lost. Some worrywart in the group will be the first one
to ask the leader, 'Are you sure you know where we're going?'
''But then the uneasiness over lack of trail markers or other familiar signs
will grow, and at some point the leader will . . . admit, not too happily,
'Hey, guys, I think we are lost.' ''
(C) Copyright 1998 Investors Business Daily, Inc. |
