“Only the paranoid survive.”
-Andy Grove, Founder and CEO of Intel
In 2020, AMD—a company that was on the verge of bankruptcy in 2014—felled industry giant Intel in a corporate “David and Goliath” showdown. How did this stunning reversal of fortune happen, and what can we learn from it as we try to prepare our companies for unforeseen events that await us in the future?
It’s important to remember that even for the largest companies, perpetual success isn’t guaranteed. Consumer demands are fickle, and technological advances have the power to disrupt entire industries almost overnight.
In some ways, this story starts with Intel’s unique strengths: it’s the sole major US chipmaker and it’s also one of the few companies that design and manufacture its own hardware. (Most companies, including AMD, outsource chip fabrication to other companies.) This vertical integration and control over their product once gave Intel their competitive edge, but things change.
At its 2020 developer conference, Apple announced that it would be switching away from Intel processors to its own in-house chips. This proclamation sent a clear message to the tech world: Intel isn’t cutting it anymore. While Apple’s announcement was initially met with some skepticism, its M1 chips went out to outperform Intel’s by nearly every metric.
As if things couldn’t get worse, Intel faced delays in the production of its 7nm chip. (I am not an expert, but 7nm is smaller. And, when it comes to chips, smaller is better.) Originally set to be released in late 2021, the product was delayed until early 2023. AMD, however, has been using a 7nm production since 2019. The only thing that kept AMD from crushing Intel entirely was its manufacturing capacity constraints.
Outspoken former Intel principal engineer, Francois Piednoel, who worked with the company for over twenty years, blamed the challenge promotion of MBAs over those with technical prowess, which resulted in “no innovation.” Instead of leveraging the expertise of their engineers, Intel’s CPU roadmaps were laid out by planners with MBAs who “weren’t able to adjust.” As a result, Intel fell so far behind in chip design and manufacturing it was outflanked by a new industry structure that allowed more nimble competitors to dance circles around them.
I think that this take probably oversimplifies the story—after all, engineers can struggle to adapt just as much as MBAs—but helping people change is a theme in all of my work, and the cost of Intel’s inability to change shines through.
The setbacks at Intel damaged company morale and caused an exodus of executives and employees, but truthfully, Intel has struggled for years. Intel’s new CEO, Pat Gelsinger, has ambitious new goals, and a new plan for competing. He’s vowed that Intel will reclaim processor leadership by 2025, but for that to happen, the company must avoid the complacency that led to their disastrous and embarrassing summer of 2020.
By deploying a strategy that relied on competitive moats (like its deals with Microsoft and Apple), Intel failed to stay on the cutting edge.
As the world gets more complex and the pace of change increases, expertise and technical ability are table stakes, while the value of agility only increases. A comparative advantage in one moment can become a liability in another; a strategy that doesn’t place change front and center isn’t much of a strategy at all.
Does that resonate with you? I spend my time guiding leaders and teams to create meaningful change for their companies. If that might be helpful to you, click here to set up a call.
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