Only The Paranoid Survive (1999) presents the experiences and invaluable advice of one of the most admired and successful CEOs of recent times: Andrew S. Grove. In this book, Grove suggests many strategies that companies can adopt to survive – and even exploit – what he terms Strategic Inflection Points: those sink-or-swim moments in a company’s existence. The book provides the reader with a deeper understanding of the ways in which strategic decisions are made, and, specifically, of what’s involved in directing a leading tech company.
There are critical moments during the life of any company when its entire strategy needs to be brought into question. These are known as strategic inflection points (SIPs).
But what’s behind these moments of crisis?
There are six forces at play in the “competitive well-being” of a company which can compel it to consider its strategic options. These forces are the strength of its competitors, suppliers, existing customers, potential customers and complementors, and, finally, the possibility that business can be done in a different way.
Any disturbance in the balance of these forces will transform the company’s business environment.
Consider, for example, the computer company IBM, which was greatly affected by a major shift in how its business could be done. Once it became possible for consumers to combine components (like microchips, hard drive and software) that were produced and sold by different companies in an individual PC, pre-built computers were no longer as popular. Customers simply preferred selecting their own parts and combining them to make a PC of their own design.
Although IBM tried to continue developing its pre-built PCs, their overall design failed to compete with the possibilities of the customizable PC.
The result? They sold fewer PCs than other companies sold components.
Although it’s clear that any change in these forces may alter the way that companies can succeed in a given market, it can sometimes be difficult for a company to spot even a major change.
For instance, while changes in technology are usually quite easy to detect, because inventions or improvements directly linked to the production process or the business itself are ordinarily fairly concrete and observable, a change in the strength of a competitor will be harder to notice.
Since some of these six forces are easier to spot than others, companies should be on the lookout for any changes which might affect them.