Andrew Grove:

The Innovator Whose Methods Supercharged the Silicon Revolution

Business Masterminds Series
By Robert Heller

Chapter One – Raising Management Output

• Goading, challenging, bullying and shouting he never relaxes the preassure
for results
• There must be a clear understanding of the trade-offs between the various
factors – manpower, capacity and inventory
• Without unremitting vigilance and strenuous action, success will corrode
into failure
• The output of managers is the output of the organizational units under their
supervision or influence
• A team will perform well only if peak performance is obtained from its
individual members
• Business is a team activity. And it always takes a team to win – people
contributing to a common output, not people working together in groups
• Information can be obtained in many ways:
o Internal reports
o Talking with people inside and outside the company
o Customer complaints
• Shift your energy and attention to whatever will most increase the output
of the organization.
• For every activity performed by a manager, the output of the organization
should increase to some extent – the greater the increase, the higher the
leverage.
• Productivity can be raised by:
o Increasing the speed by which managers perform
o Increasing the leverage associated with the various managerial
activities
o Shifting the mix of a managers activities from those with lower
leverage to those with higher leverage
• High leverage can be achieved by:
o Many people being affected by one manager
o When one person’s work or behavior over a long period of time are
affected by a manger’s brief and well-focused set of words or
actions
o When the work of a large group is affected by an individual who
supplies a unique key piece of knowledge or information
• A manager can also exert high leverage by an activity that takes only a
short time but that affects another person’s performance over a long time
(eg: a properly prepared performance review)
• There is an “art” of management which lies in the capacity to select from
the many activities of seemingly comparable significance the one or two or
three that provide leverage well beyond the others
• When delegating, the delegator and the delegate must share a common
information base and a common set of operational ideas or notions on how
to go about soling problems
• Sometimes we prefer not to delegate because we enjoy doing a particular
task so we don’t “let go” – this is okay as long as it is a conscious choice
• Monitoring delegated tasks includes:
o Monitoring at the stage where least value has been added (eg:
review rough drafts – don’t wait for the final version)
o Vary the frequency of monitoring based on the delegate’s
experience with a specific task and their previous performance
o Go into details only at random
o Monitor delegated decisions by concentrating on the process the
delegate has used in thinking them through
• Batch tasks together to be more efficient eg: set aside time to read all the
reports
• Fill the time between time-crucial events with necessary activities that are
not time-crucial
• Say no at the outset to any work beyond your capacity
• Don’t load your schedule beyond the optimum level – one phone call can
throw out your entire schedule for the rest of the day and beyond
• A manager should carry an inventory of tasks that he needs to do but not
right away. If not, the manager will find himself using his spare time to
meddle in his subordinates’ work
• Six to eight subordinates per manager is optimal with half a day each week
allocated to each subordinate
• Handling interruptions:
o Don’t hide away
o Develop standard responses for standard interruptions
o Schedule an open hour when anybody can come in
o Batch interruptions
o Handle the issues at staff meetings and “one-on-ones”
• The purpose of meetings are for managers to supply information and know
how, guide the groups under their control and influence and make and help
to make decisions
• One-on-ones are a tool to find things out, learning and managing
individuals
• Staff meetings allow peer interaction including decision-making and the
supervisor can also learn from the exchange of views.
• A supervisor should ever use staff meetings to pontificate but use them to
observe, question and make decisions
• “Operation Reviews” are meetings where managers describe their work to
other managers who are not their immediate supervisors and to peers in
other parts of the company
• Mission-oriented meetings are usually ad-hoc and are designed to produce
a specific output, usually a decision
• Only call a meeting if you:
o Know what you want to achieve
o Are sure that the meeting is necessary
 o Are sure that the meeting is desireable
o Are sure that the meeting is justifiable
• There should be three stages to a meeting:
o Free discussion with no withholding of opinions
o Clear decision and clarity of expression
o Full commitment – everyone must give the decision reached by the
group full support
• Status symbols do not promote the flow of ideas, facts and points of view
• Equals need the leadership of a more senior manager, otherwise the peers
will drift towards group think
• The quality of the decision will be better if the following six questions are
taken into account:
o What decision needs to be made?
o When does it have to be made?
o Who will decide?
o Who will need to be consulted before making the decision?
o Who will need to ratify or veto the decision?
o Who will need to be informed of the decision?
• Planning:
o What will the environment demand from you?
o Establish your present status: where will you be if you do nothing
different from the way you are doing things now?
o What more or less do you need to do to satisfy the demands of the
environment?
• A key question for managers is: what do I have to do today to solve (or
avoid) tomorrow’s problem?
• Planners cannot be those who are distant from the task ie: operation
managers must come up with the plan because they are the ones who are
going to carry it out

Chapter 2 – Motivating the Team Into Action

• The game of management is a team game
• Management is a game where you have to fashion a team of teams and each
team supports the other
• Organisations can either be totally mission oriented or totally functional – the
two extremes tend to be mixed
• It is important to recognize expertise in an area and centralize that function.
But on the other hand, giving the individual branch manager the power to
respond to local conditions can be highly beneficial.
• The real-world solution is to seek a compromise between centralized and
decentralized organizational structures.
• Intel is a hybrid organization with a mix of business divisions which are
mission oriented and functional groups that can be viewed as if they were
“subcontractors” – this gives Intel the ability to shift resources to respond to
changes in corporate wide priorities
• Knowledge workers can be shifted across the board to provide assistance in
many areas – this gives them considerable leverage
• The downside of this model is that there is a constant battle for resources
• The benefit is that individual units can stay in touch with the needs of their
business or product areas and initiate changes rapidly when those needs
change
• Grove’s Law: all large organizations with a common business purpose end up
in a hybrid organizational form
• Dual reporting: an employee has two bosses: one in the line role, say, and
another in a functional capacity
• The two-plane concept: while most people work on an operating task, they
also plan while the organization’s overall planning body lies on a separate
plane all together.
• It sometimes can occur that a boss can find himself on a level below one of his
subordinates (eg: the CEO can sit on a committee that is chaired by, say, the
head of a department)
• It is crucial to make transitory teams effective ie: teams created for the purpose
of solving a particular problem and, once solve, the team is dissolved.
• Behavior inside teams can be controlled by three means:
o Free market forces
o Cultural values
o Contractual obligations
• Management’s cultural role is to develop and nurture the common set of
values, objectives and methods essential for the existence of trust by
articulation and example
• Decrease CUS – complexity, uncertainty and ambiguity
• The team will only perform as well as the individuals in it
• If a person is not giving his best, you have to ask whether he is not motivated
or is incompetent
• Maslow’s theory: Motivation is closely tied to needs and the highest need is
“self actualization” – the need to achieve full potential
• Fear of failure can be both positive and negative in terms of motivation – it
can spur a person on or, if the person dwells too much on the fear then they
will become overly conservative
• A manager should not take any personal credit for the team’s performance
(but according to Grove, the only way to measure the output of a manager is
by the output of his team!)
• A good manager was likely a good subordinate at one time (a good coach is
often one that was a good player at some stage)
• Task Relevant Maturity (TRM): a variable that determines the style to adopt in
a particular situation:
o when the TRM is low, the effective management style is structured and
task oriented (tell the subordinate what, when and how)
o with medium TRM the appropriate style is oriented to the inducudual
with an emphasis on two-way support
o with high TRM the manager’s involvement should be limited to
establishing objectives and monitoring

• The responsibility for teaching the subordinate must be assumed by his

supervisor and not paid for by the customers of the organization: internal and
external ie; don’t deliberately let a subordinate learn from his own mistakes
 • Performance reviews are the single most important form of task-relevant
feedback that supervisors can provide
• The review will influence output for a long time which makes it one of the
manger’s highest-leverage activities
• The fundamental purpose of a performance review is to improve the
employee’s performance – use it to determine what skills are lacking and how
to remedy it as well as to intensify the employee’s motivation
• The biggest problem is that subordinates are often not clear as to what their
main roles or activities are. Therefore it is impossible to determine if they are
actually doing what they are paid to do
• Assess performance, not potential
• There are 3 Ls in performance reviews:
o Level: level with the subordinate ie: be totally frank
o Listen: listen to what the subordinate has to say
o Leave: leave yourself out – it is important that you recognize that the
performance review is about the subordinate, not the manager
• Star performers are those who contribute to the bulk of the work.
Concentrating on your stars is a high leverage activity – if they get better, the
impact on the group is very great indeed
• Money is a measure, not a necessity ie: the amount of money that you are
paying someone is not as important as the amount you are paying them
compared to their coworkers
• Team training is one of the highest leverage activities a manager can perform.
• Training must be a continuous process rather than a one-time event
• Training must be done by someone who represents a suitable role model – an
authority on the subject being taught
• Much deeper knowledge is required to teach the task than to actually do it (and
the teacher will learn the most)

Page 46 – Article: The Loss of Intel’s Memory

• The first reaction to new but superior competition is often denial
• Intel’s denial that the Japanese products were superior and cheaper lead to
soaring stocks and dried up orders
• Grove asked the question: If we were to get kicked out and a new CEO
brought in, what would he do? The answer was: Get out of memory and into
something else – so that is what they did.
• It took Intel a year and lots of opposition to exit the memory market and push
its microprocessor products (until now a secondary product) to an eventual
sales figure of $29 billion

Chapter 3 – Management by Confrontation

• Andrew Grove’s style is confrontational
• Only the paranoid survive: those that are not constantly alert to threats become
instantly vulnerable
• Tight control is one of Grove’s management methods
• Combine immense delegation with intense control
• Grove prefers to have only a few people reporting directly to him so he
delegated substantial authority to four senior vice presidents who headed the
 key activities: microcomponents, microcomponent operation systems and
manufacturing.
• Managers at Intel are obligated to take initiative with minimal upward
“passing of the buck” but there is a strict budgeting regime which embraces all
levels – every deviation must be explained
• Everybody has an annual and demanding objective called an IMBOS – Intel
Management by Objective System
• Grove is relentless in pursuing better results, finding fault and demanding
improvements – and above all, demanding excellent performance from all
people and all systems
• Intel has always maintained a system of ranking and rating employees:
outstanding, successful and improvement needed – improvement needed
results in 60 or 90 days of corrective action (CA). If CA fails to deliver the
specified improvements, dismissal follows
• The ranking is based on an employee’s degree of improvement and is only
revealed to individuals in general terms. The managers see the specific results
(According to current HR theory, this method of performance management is
counterproductive)
• You are only as good as your last performance.
• Dismissal is not the only sanction. There is also demotion (which is supposed
to give the employee the motivation to succeed – but current HR theory
suggests otherwise. See my article summary ‘Inverse Promotions’)
• Intel had a system of getting latecomers to sign their names before the security
guards would let them enter the building. This practice lasted for 17 years
• Grove was like a Shepard, herding his flocks in a particular direction but with
ferocious dogs to bite the ankles of those who dared stray
• However tightly everything is controlled, innovation runs remarkably free –
important advances can be born anywhere in the company
• Microprocessors saved Intel from extinction
• Nippon contracted Intel to design several logic chips for a calculator. Ted
Hoff, an engineer, proposed a design whereby all the circuitry could be placed
on one chip and it could be programmed like a computer. Hoff was taken off
the project to work on other matters but the ball was picked up by Fredrico
Faggin who produced a working model in three months. The Japanese were
none the wiser and Intel had no idea how important an innovation Ted Hoff’s
idea was.
• The calculator market was slumping and Nikkon wanted a reduction in the
price. Bob Noyce, who had since joined the team, gave Nikkon a $60,000
refund on the basis that Nikkon surrender all rights to the chip with the only
proviso being that they not sell it to other calculator manufacturers. The
microprocessor was Intel’s for all time.
• The microprocessor market was seen to be “low-end” and unimportant and
Grove was only spurred on to action after two of his employees left to start
“Zilog” – a company which manufactured microprocessors. Zilog was
outgunned and faded away into oblivion.
• Grove can be very aggressive in his behavior at meetings and has been known
to insult staff in front of their peers.
 • Grove also uses “Grovegrams” or “Andygrams” which are memos regarding
specific tasks. The important ones are marked with AR (Action Required) and
must be followed up immediately at all costs
• On one hand Grove is easily angered, but on the other hand he is highly
cerebral
• Grove has a fetish for cleanliness and order and instituted unpopular office
inspections
• ‘Constructive confrontation’ is the idea Intel uses to bring problems out into
the open and to debate and resole the issues pragmatically without arousing
personal animosities
• The frankness and openness of discussions at meetings lead Intel to consider
many varied options when they were faced with the memory crisis – there
were many agonized discussions – no alternatives are left unexplored
• Intel is highly confrontational with its competitors as well (eg: three years of
litigation with AMD)
• Keeping competitors out of the market is Grove’s key strategy
• Grove kept Motorola out of the market with his 1978 “Operation Crush”,
which was successful, despite that he was selling an inferior product
• “My hope and vision is that our technology is going to be the heart, spine and
framework of the entire computer industry”
• Grove uses paranoia as a tool to keep managers and engineers responsive to
change
• Grove’s use of the concept of “threat” is the driving force behind Intel’s
success, invulnerability, the acceleration in technology that has made
microprocessors and personal computers more powerful and vastly cheaper.
• A business model mainly hinges on sales volume, realized prices, offset by
higher and higher volumes
• 1989-99 saw investors pocket the rewards of a 44% annual growth in total
return
• Despite massive R&D, its net margins were the eighth highest among the
giants while its growth in earnings per share hit 32.2% per annum – ie:
doubling every 2 years.
• A key ingredient in Grove’s practice of management is enriching staff
• Stock options are very important in the organization’s scheme of things. One
share in 1971 was worth $23.50. In June 1993, that same share was worth
$4,385. The three year gap between grant and ownership of an option serves as
a golden handcuff - you leave Intel, you relinquish your options and the
higher the shares rise, the tighter the cuffs
• The phenomenal rise in the value of shares made many millionaires within
Intel – it also cemented key talented personnel in the company

Page 62 - Risking it all on RISC

• Intel’s huge success was based on CISC technology (Complex Instruction Set
Computing) which needed many more transistors than the newer RISC
(Reduced Instruction Set Computing)
• Intel new that the RISC technology would need new software and would be
incompatible with the older CISC chips (eg: 486)
 • Grove decided to back the RISC i860 chip but the company was torn apart by
controversy as to which chip to back
• Grove was not an engineer or computer scientist and the advice that he
solicited from his staff was heavily biased – there were two warring camps
each arguing for either CISC or RISC technology
• Competitors were also divided: Compaq opted for the 486 while Microsoft
opted for the i860
• In 1989, Grove showcased the 486 in front of the entire computer world at a
conference in Chicago. The overwhelming support was for the 486 ahead of
the i860 and the decision was made then and there, despite the millions of
R&D poured into RISC development
• Six years down the track Grove thanks his lucky stars that he reverted to CISC
technology. The 486 still had plenty of headroom and momentum and has
been highly successful (now taking the shape of 1ghz+ Pentium 4 processors)
• The whole marketing platform would have been eroded with the dumping of
Intel’s traditional technology – competitors would have competed on an even
field and Intel’s advantage would have been eroded
• Grove also says now that the advantages of RISC technology are much smaller
now than they appeared then – the sacrifice would have been in vain, and
costly.
• It was one of the most expensive false alarms in history

Chapter 4 – Mastering Strategic Crisis

• The manager’s prime responsibility is to protect the chunks of business that
others want to take away from you once you are highly successful
• “Strategic Inflection Point” is the time in the life of a company where its
fundamentals are about to change – full scale changes in the way business is
conducted
• We can’t stop changes and we can’t avoid them – we can only get ready for
them
• The strategic inflection point is comprised of major forces called “10X” ie: a
tenfold increase in one of the six forces that impact on competitive strategy:
1. Power, vigor and competence of existing competitors
2. Power, vigor and competence of other firms in the same business
system (complementors)
3. Power, vigor and competence of customers
4. Power, vigor and competence of suppliers
5. The possibility that what your business is doing can be done in a
different way
6. Power, vigor and competence of potential competitors
• The strategic inflection point is where the curve stops curving in one direction
and starts curving in another
• There are two signs that you are going through a strategic inflection point:
1. You are aware of a troubling sense that something is different – things
don’t work the way they used to
2. There is growing dissonance between what your company thinks it is
doing and what is actually happening inside the bowels of the
organization
• The division of opinion with the company about what to do will be held
equally strongly, almost like religious tenets
• Planning, strategizing and motivating employees will become harder and
almost impossible
• Once you have identified a strategic inflection point, act quickly while the
company is still healthy
• Grove, the ultimate scientific manager concedes that instinct and personal
judgment are the chief guides through the strategic turbulence
• The exact timing of the inflection point is uncertain, even in hindsight
• It is impossible to determine that a strategic inflection point is occurring if you
are conditioned by the past
• If you are successful you are less willing to change and are thus more
susceptible to the impact of a 10X force and strategic inflection points
• The cost of entering into a market where there are already competitors can be
costly. But if you are entering into that market as a result of identifying a
strategic inflection point, the cost over the long term will be practically
irrelevant compared to the losses you could have incurred had you not made
the change.
• Grove’s three rules for brute competing:
1. Do not differentiate without a difference: do not introduce
improvements that provide an advantage over the competition but give
no advantage to the consumer
2. Act first when a technology break or other fundamental change occurs
3. Price for what the traffic will bear then work like the devil on your
costs to make money at that level
• The practice of fixing prices above your costs often leads to a nice position
which is not generally lucrative
• But as industry becomes more competitive, it is natural for companies to
differentiate themselves by specialization in order to make them world class
• Horizontal companies have to be the best in only one field and should also be
more cost effective
• Sometimes, as with Intel and the memory chip crisis, the most effective
method of solving a problem is to look at it from an outsider’s objective and
unemotional point of view
• New managers come unencumbered by emotional involvement and therefore
are capable of applying an impersonal logic – existing managers who are able
to do that will survive, those with emotional attachments to systems, processes
etc that they helped to create will go down with the company
• Basic crisis management principles:
o The strategic inflection point is not necessarily one point but can be a
series of points spread out over a period of time ( a long tortuous
struggle)
o The points provide an opportunity to break out of a plateau and
catapult the company to higher levels of achievement
o Indecision magnifies the threat
o What is happening lower down the corporate chain without the
direction of management can be crucial (eg: allocation of resources to
microprocessor manufacture rather than memory chip manufacture
 without the specific knowledge or direction of upper management but
as a result of daily decisions by middle managers)
• Devolved responsibility: salespeople are aware of shifts in customer needs
much before management; financial analysts see the impact of fundamental
change before management
• Listen to frontline information at all times and involve middle management in
strategizing
• Separate the signal that there is about to be an inflection point from the noise:
o Is your key competitor about to change strategy?
o Is your key complementor about to change?
o Do people around you (including yourself) seem to have suddenly
become decoupled from what really matters
• Take notice of all warnings, even if your initial reaction is that it is only hot air
or rumor.
• These warnings will find you and it is a good idea to treat them seriously so as
to be able to minimize negative impacts early
• While you should limit your time spent on listening to random inputs, you
should be open to them
• Broad, complex and comprehensive debate should be held to solve complex
problems. The more complex the problem, the more staff need to attend
• Data are about the past, strategic inflection points are about the future
• You have to know when to argue against the data and how to turn your
experience and judgment in dealing with emerging trends
• The most important role of managers is to create an environment in which
people are passionately dedicated to winning in the marketplace. Fear plays a
major role in creating and maintaining such passion.
• There are four kinds of fear that can assist market victory:
o Fear of competition
o Fear of bankruptcy
o Fear of being wrong
o Fear of losing
• Fear is the opposite of complacency – listen to warnings – because nothing
fails like success and a good dose of fear may helop to sharpen a company’s
survival instincts
• Fear that keeps you from voicing good thoughts is poison
• Whatever success Intel has held in maintaining its culture has been
instrumental in its success in surviving strategic inflection points

Page 86 – The Crash of the Pentium Processor

• CNN came to cover a story regarding a floating point flaw in Intel’s Pentium
chip. The flaw meant that an average spreadsheet user would run into a
rounding error problem once every 27,000 years of spreadsheet use
• The CNN story was hostile and soon major newspapers joined in
• Users started demanding replacement chips. Intel obliged for those whose
computing involved statistical analysis or mathematics. But when IBM
stopped all shipments of Pentium powered systems Grove felt like Intel was
under siege
 • During the course of one horrific week, Grove finally made the decision to
offer anybody new chips regardless of whether they were doing statistical
analysis or playing computer games.
• Intel lost $475 million
• With its Intel Inside advertising campaign, the company had identified itself to
PC customers as the prime supplier of computing. Intel was also perceived as
a high-tech giant and had to transform itself into a consumer company. They
then embarked on a whole new way of doing business

Chapter 5 – Coping With Change

• Managers loath change, especially when it involves them directly
• Managers tend to go through three stages when strategic inflection points
occur:
o Denial eg: they can’t possibly make a product that cheap
o Escape or diversion: companies tend to start focusing on completely
unrelated acquisitions and mergers when faced with major changes to
their core business
o Acceptance and pertinent action
• Handling change requires brutal realism and concentration on front line
priorities
• The replacement of corporate heads is far more motivated by the need to bring
in someone who has not invested in the past than to get somebody who is a
better manager or a better leader in other ways.
• “Inertia of success” is the term used to describe the executive that is reluctant
to abandon the methods and the strengths that have brought them to a high
executive position – this is dangerous and can reinforce denial
• The divergence between actions and statements is created by:
o Adapting to change with employees who, through their daily work,
adjust to the new outside forces
o Frontline employees and middle managers are therefore implementing
and executing actions that say one thing
o High level pronouncements continue to say the opposite
• This dissonance between what is said and what is done confuses people. This
can be overcome by:
o Loosening up the organization
o Allow different techniques, products, sales channels and customers to
be tried
o Tolerate the new and different
o Adopt a new maxim: “Let chaos reign!”
• A conservative management will find it nearly impossible to go through a
phase of experimentation and chaos
• You can’t suddenly start experimenting when you find you have a problem
unless you have been experimenting all along
• Under a strong company, the strengths make good protection under which you
can make changes far more easily than when the vital signs of your business
have all turned south
• It is easier to see the need for tough change in somebody else’s business than
in your own
• The strong manager trusts his instincts
• “The valley of death” is Grove’s phrase for the hostile landscape through
which the business and its managers must struggle or die.
• You can only emerge from the valley of death if you are able to visualize what
the company should look like when it exits the valley on the other side
• The vision should come in a single phrase which everybody can remember and
over time can understand to mean exactly what you intended
• This mental image is the essence of the company and the focus of its business
• The definition will hinge on what the company will not be
• How can you motivate yourself to follow a leader who seems to be going
around in circles
• If you want to change the direction of your company, you will have to change
the people – either train them up to be experts in the new business, or replace
them
• Managers tend to decline the offer of new training because they feel that they
have no need to retrain because, quite simply, they are managers who are
automatically accorded a certain amount of respect because of their position,
not because of their knowledge
• Mangers have to learn to admit their ignorance in new areas
• Mastering change requires the willingness to learn
• Strategic actions and strategic plans:
o Strategic plans are statements of intention
o Strategic actions are already taken or are being taken
o Strategic plans sound like political speeches
o Strategic actions are concrete steps
o Strategic plans are abstract and usually have no concrete meaning
except to management
o Strategic actions immediately affect people’s lives
o Strategic plans deal with events far in the future and are thus of little
relevance today
o Strategic actions take place in the present and thus command
immediate attention
• Concrete changes in behavior always change culture; proposed changes in
culture by no means always change behavior
• The most effective way to transform a company is through a series of
incremental changes that are consistent with a clearly articulated end result
• Resources should not be moved from the old task until full benefit has been
obtained – but hang on too long and you can lose a new business opportunity,
momentum or a new product idea
• If you try to change too early it is not nearly as bad as being late (in almost
irreversible decline).
• Grove recommends to advance the pace of change and increase the magnitude
of the reward
• The early movers are the only ones that have the ability to shape the industry
and determine how the game is played by the others
• Grove will not avoid or redirect the focus because it dilutes commitment
• When managers are demoralized and nothing seems to be working, is worse
than losing focus in many ways because it breeds confusion, uncertainty and
conflicting messages
• The need for clarity of direction increases as the change process develops
• You must reign in chaos in order to motivate your staff and lead your
organization out of ambiguity and into an energized state which requires five
steps:
o Stop ecperimenting
o Issue totally clear “marching orders”
o Commit the organization’s resources
o Commit your personal resources
o Be a role model for change
• The ideal is to have an organization that happily supports debate and
determined to improved. This is a powerful adaptive organization with two
key attributes:
o It tolerates and encourages debate devoted to exploring issues,
indifferent to rank and including individuals of varying background
o It can make and except clear decisions