Fear and Go Far, Intel’s Chief Executive Advises

In the hype-driven world of high technology, even an engineer as deliberate as Andy Grove can give in to overstatement.

The new book by the high-profile CEO of Intel Corp. might have been called “Only the Fearful Succeed.” But some time during his 35 years in the computer chip industry, someone apparently heard Grove say, “only the paranoid survive,” and the phrase has become widely attributed to him, rightfully or not.

So Grove has taken advantage of the maxim’s notoriety, using it as the title of his book on business strategy and leadership.

“Paranoid” doesn’t appear after the first page, but Grove strongly believes that fear has a role in the workplace, and that is a key premise of the book. Grove believes that fear is one reason why Intel, the company he helped start in 1968 and has led since 1987, has become the world’s largest maker of computer chips.

Intel, now one of Wall Street’s top performers, limped through painful recessions in the early 1970s and mid-1980s. It turned a corner in 1985 by getting out of its first business, production of memory chips.

Grove believes he’s in a good position to challenge the pat formulas of most business books, especially the ones that talk about fear.

“There’s a lot of cliches taken to the extreme: There should be no fear in an organization. Employees shouldn’t be afraid of losing, only CEOs should,” he said in a recent interview, summing up such aphorisms as “bunk.”

*

Employees should be afraid of their competitors and watchful of the uncontrollable forces that shape their work, he said. But too often, fear within an organization and fear of outside forces are confused.

“Only academically are they the same thing,” he said. “If you treat your employees as members of the same team that has to fight these other forces, they will share the emotion that you have about these competitors or additional technological forces or whatever.”

Fear inside a company is harmful. Grove believes a leader must be sure that no one in an organization is afraid to express an opinion. Otherwise, he said, employees might be afraid to take bad news to the boss, delaying a response and and maybe exacerbating the problem.

Grove is not just another CEO with a point of view on management. He has become one of the few semiconductor executives who is well known outside the industry because of he speaks out often on many issues, including immigration.

Grove, 60, himself emigrated from Hungary in 1956 and graduated first in his class at City College in New York with a degree in chemical engineering. He got a Ph.D. at UC Berkeley in 1963 and went to work for Fairchild Semiconductor, then led by the two men would later start Intel.

This spring, he lent support to millions of men stricken by prostate cancer with a first-person story for Fortune magazine of his own diagnosis and treatment of the disease. Thousands of men called and wrote him with their own stories, he said.

Like many authors on business strategy, Grove has come up with new ways to frame the big issues that face a company. Most grow out of his engineering background and have been refined from six years of co-teaching a business course at Stanford University.

For instance, he describes the process of separating important news from clutter--what many people would call the wheat from the chaff--in the engineering parlance of deciding what’s a “signal” and what is “noise.”

The book’s most important concept is the “strategic inflection point,” which Grove derives from the mathematics term for the place on a curve where its direction changes. He uses the term to discuss what happens when a huge change caused by outside forces sweeps over a company.

“The real interesting action takes place when the industry itself is in a state of flux because some of the forces involved on the competitive scene are so strong as to distort the framework in which the company operates,” Grove said.

“How to navigate a company whose relative position is changing in an industry structure that’s changing at the same time is a doubly complex and difficult task.”

Intel went through such a strategic inflection point more than a decade ago, when the efficiency and huge investments of Japanese manufacturers squeezed most U.S. companies out of the memory chip business. Though the trouble was clear in 1984, it took Grove and other Intel leaders more than a year to realize the company should also get out.

To a lesser degree, the flaw found in early versions of the Pentium chip in late 1994 was also a strategic inflection point for Intel. The company was forced to replace the chip and modify marketing and customer support practices.

Grove said the pain of the memory chip crisis came back as Intel coped with the negative attention generated by the flawed microprocessor.

But, “what took years to do with the memory situation took weeks in this case. The marshaling of the resources and the drive toward change was far more effective,” he said.

Unfortunately, neither experience provided a formula to help Grove and other Intel executives know when the next crisis will come along.

“It’s a little bit like weather forecasting. A storm is coming. Is it going to be a big storm or not? There are a number of factors that enter into that and you may not know what those factors are, let alone which way they are going to go,” Grove said.

But, he said, there are signs that tell executives when their company has reached a strategic inflection point. One is when the stated goals and priorities of top management are different from the daily decisions and output of the firm.

During Intel’s memory chip struggles, production managers, without realizing the broader impact of their work, had through routine decisions been shifting the company away from memory chip manufacturing.

They had found that microprocessor production both increased the productivity of their factory lines and satisfied customers. Their decisions made it easier when company leaders finally decided to quit the memory business.

“The people who are immune to the inertia of business or less entrapped with the tradition of the business respond to the new reality,” he said. “The people who are tradition-bound do not. So they move apart.”

The outcome seems ironic.

“Leaders, at times like this, turn out to be followers,” Grove said. “Which is OK if they recognize it after a while and they become leaders again.”