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A very important strategic question to ask yourself

Jul 16, 2012 Business Daily, Strategy

“I remember a time in the middle of 1985…I was in my office with Intel’s chairman and CEO, Gordon Moore, and we were discussing our quandary. Our mood was downbeat. I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned to back to Gordon and I asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.” I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?””

ANDREW S GROVE Only the Paranoid Survive (1996)

Andy Grove is one of America’s totemic CEOs, and the story of Intel in the 1980s and 1990s is one of the most recounted success stories of business lore. The excerpt, from Grove’s bestselling memoir, contains one of the great questions of all time.

There comes a time when a strategy, a product, a project has failed. Objectively, that time is pretty apparent, and that is when a leader should pull the plug and admit defeat. The problem is with objectivity. Those with most invested in that project – time, resources, emotional commitment – will always be the least likely to be able to call a halt.

If all you’re doing is digging yourself into a hole, it’s time to stop digging. But the person digging will, in all likelihood, carry on.

Intel’s early success in the 1970s was as a memory-device company. It pioneered the use of semiconductor memory chips for computers. But huge Japanese conglomerates soon entered the fray, and had formidable advantages such as cheap capital, manufacturing efficiencies and process control. Soon, the Japanese developed unbeatable production yield advantage.

That was the position Grove and his boss Gordon Moore found themselves in during the 1980s. Intel had started losing money on memories, but it had a new business: microprocessors, also invented by the company. The writing was on the wall for the memory-chip business, but many in Intel refused to countenance it. They kept hoping for a new cutting-edge chip that would reclaim market share and lost profitability, and kept pushing for renewed investment.

The question Grove asked should be asked by all business leaders in a similar quandary. “If I were replaced today, what is the first thing an objective successor with no emotional attachment to our past would do?” If the answer to that question is clear, the next one is: “So what stops me from walking out, walking back in and pretending to be my own successor?”

Merely posing that question to yourself will reveal a great deal. There is no sense in staying on board a sinking ship. We only do so because we think we can stop the sinking, or because we have too much emotion invested in the ship continuing to sail.

In Intel’s case, its whole identity was wrapped up in its success as a memory company. Grove ultimately made the momentous decision to quit memories and plunge wholeheartedly into microprocessors. That set off decades of success. But it was one of the hardest decisions Intel made in its history.

Intel’s peer IBM has made many such decisions, reinventing its product line for every new era. Many others have not been so bold. These past few years have seen a succession of major firms humbled by new technologies – and unable to shake off their irrational attachment to the successes of the past.

Save yourself from this trap. Posing the question to yourself and answering it honestly will expose your own biases to yourself. Is this how you would do things if you were fresh into the job? If the answer is no, you are busy protecting a past that’s already gone.

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