The Business Book

197

The Intel Corporation in California,

US, became the world’s largest

computer-chip maker under Andy

Grove’s leadership. He encouraged

employees to bring him bad news.

such a moment a “strategic inflection
point.” This is not necessarily a
single point in time, but it is usually
accompanied by a noticeable period
of unrest within the organization. It
may be initiated by changes in the
external environment, or by new
competition, and senior managers
are often among the last to notice
what is happening.
Intel’s first strategic inflection
point came when Japanese
companies began to produce better-
quality, lower-cost memory chips
than US companies in the 1980s.
It took Grove three years and huge
losses to realize that only through
rethinking and repositioning could
Intel again become a market leader.

10X change
In the 1970s, US professor Michael
Porter summarized five competitive
forces that face companies:
competition, substitute products,
new entrants, suppliers, and buyers.
Grove added a sixth force:
complementary products. This
is the impact of other businesses
that sell a product or service that

complement a company’s own

product or service by adding value

to mutual customers; for example,

software products complement

those produced by computer

hardware manufacturers.

Grove describes all these forces

as “a steady wind,” but if one force

becomes ten times stronger it acts

more like a typhoon. Leaders have

to be alert to such major change—a

“10X” change—because it requires

a fundamental change in strategy.

Depending on the actions leaders

take at this point, the change can

either take the organization to new

heights or send it spiraling down

into oblivion. The important thing

for leaders is to discern between

expected change and profound

change, when the balance of forces

shifts from old to new.

In his book, Grove uses the

example of the growth of the

Internet. The Internet was a “10X”

change for every company, but

some failed to recognize its force

or were complacent and did not

take action to exploit it. Many

companies in the book industry

were guilty of these failures—even

those who had been extremely ❯❯

See also: Reinventing and adapting 52–57 ■ Changing the game 92–99 ■ Hubris and nemesis 100–03 ■ Learning from failure
164 – 65 ■ Porter’s five forces 212–15 ■ Coping with chaos 220–21 ■ Forecasting 278–79 ■ Feedback and innovation 312–13

WORKING WITH A VISION

A strategic inflection point is the point at which a

major change (such as the arrival of the Internet) takes

place in the competitive environment. If the company

recognizes it and adjusts, the company may soar; if it

ignores the change, the company will decline. Business goes on to new heights

Business declines

The arrival of new

technology, new

industry regulations, or

a change in customer

values or preferences

Inflection point