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English, Gestión del conocimiento, Gestión e innovación

Intel, Adobe, and the right amount of paranoia

I mean “paranoia” as in Grove’s “Only the paranoids survive”, no as another tech company. Just in case you wondered.

I just finished Andy Grove’s classic little book on the idea and management of strategic inflection points, or those uncomfortable moments when your industry is radically disrupted in any of several ways. Something that is bound to happen to everyone and gets very little thought.

It is interesting to note that toward the end of the book (still in the nineties) Grove evaluates the potential of the internet to cause one such upheaval in the market for processors, where Intel was paramount. His conclusion was that, facts on hand, it didn’t look so, but he had a nagging worry that it would.

He was right on both counts. The internet didn’t cause a major shift in Intel’s market for years, it just hugely fueled the growth. And then out of the blue came the iPhone, and the iPad, and the tablet computing revolution (which is a direct consequence of the internet, in ways he did forecast).

Both gadgets and most of their competitors are powered by processors designed using ARM technology and built to order by companies that didn’t use to be on Intel’s map of major competitors. PC sales are stalling, tablet sales are rocketing, and analysts are already predicting a long-term shift in the way we all access and generate information and media. In short, Intel is in a pickle because its growth prospects have become less secure.

This didn’t catch Intel sleeping, but ineffective: the Atom range of processors has been out there for years. But it hadn’t ever been up to scratch on the issues that mattered, mainly power consumption, so it got bypassed even though it did attempt to woo Apple. Intel’s first mobile customers didn’t arrive until 2012. Its new Lexington chipset is at last gaining some traction but is mostly used for low-cost, Asia-only models.

The reason? Who knows. Maybe Intel didn’t quite believe Grove’s mantra and didn’t give this kind of processors resources enough. Maybe it just wasn’t paranoid enough about the ‘net after all these years.

Adobe’s story is quite the other side of the coin. While Intel seems to have decided on a strategy too early and cultivated options too little, the software company is so fluid it hurts the eyes.

In the last very few years, Adobe’s decided to go cloud (as a reaction to the same forces). This means that it’s poured a whole lot of resources into building the infrastructure to provide content-related services on the web, and now boasts a services arm that is roughly 50% of the company… besides excelling in many big-data and commerce fields. It’s also just turned its software business model head over heels, going subscription with its Creative Suite. The numbers it handles are scary: it’s expecting less revenue in the short term. But it’s not hedging its bets, and it seems to be winning.

This didn’t come out of the blue either; Adobe’s been dabbling in paid online services for years, less and less timidly. Just like Apple’s switch to online software delivery, Adobe’s move is solidly based.

Adobe’s becoming an expert at gradual strategy shifts and tryouts. It held on to Flash on mobile until it was clear nobody wanted it… but at the same time worked on HTML5-producing alternatives. It’s building an empire in tablet magazine publishing (and bleeding editors for a very debatable product) onto a proprietary, dead-end format that ties in with its traditional layout tools… but at the same time it’s developing one of the few HTML5-producing visual editors that look like succeeding the old generation, thus enabling the complete disruption of its current offering. In short, it is giving every competing option (well, at least several) a good enough opportunity to prove its worth in the market. In the end, it’s allowing the market to decide, and ultimately cannibalising itself.

The difference with Intel? It seems Adobe has really embraced paranoia. It’s accepted that its products will be dethroned, so it keeps a continuous fire (Adobe Labs) of ideas and products and business models that attempt to do just that. And it allows them leeway enough to grow, whatever the potential damage to existing business. Then, when it is sure, it bets the house. Intel was feeling too confident on the PC-based model of IT to seriously invest in the “convergence” or mobile-based generation.

In short, panta rei. So keep your options open (and not just on the drawing board) even if they involve distasteful changes. Hats off to Andy Grove for so many lessons.

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