1997 Technology Leader of the Year: Andy Grove - Building An Information Age Legacy

The "Intel Inside" label is widely recognized as a sign that the computer you're looking at is driven by a very sophisticated microprocessor chip. And inside Intel Corp., Andrew S. Grove is known as a savvy leader who has painstakingly worked to guide the Santa Clara, Calif.-based company to the forefront of the digital information revolution.

President and CEO of Intel for 10 years before assuming the duties of chairman and CEO in May 1997, Grove has been Intel's "man for all seasons" for nearly 30 years. He has held a variety of key positions as the company blossomed from a high-tech start-up in 1968 -- it reported a mere $2,672 in revenues its first year -- to a $20.8-billion-a-year corporation that ranked 66th on IndustryWeek's 1997 list of the world's 1,000 largest publicly held manufacturing firms.

Unpretentious, and with a keen sense of humor, Andy Grove is certain to be remembered as one of the chief architects of the Information Age. And, no doubt, he's as surprised as anyone by the record of success he has compiled since 1956 when he emigrated to the U.S. from Hungary with little money and no understanding of the English language. Whatever he may have left behind in the old country in the wake of the unsuccessful Hungarian revolt, he brought with him certain intangibles that have served him -- and Intel -- well. Those intangibles include a passion for learning (he earned a chemical engineering degree from City College of New York in 1960) and a passion for creating and building things of lasting value.

In an interview with IW on his 61st birthday, Grove reflected for a moment on the challenges involved in growing and sustaining the chip-making giant. "In various bits and pieces," he says, "we have steered Intel from a start-up to one of the central companies of the information economy."

That's a nice legacy -- one that he hopes will endure. Indeed, he has worked diligently to ensure that it will. "Importantly," he points out, "the company now has its own momentum. . . . If all of this were to end when I step down, that would be a lousy record to look back at."

Within the computer and information-technology industry, Andy Grove is regarded as a visionary. The financial community and the financial press admire his business savvy. (His 1996 book, Only the Paranoid Survive [Doubleday], quickly shot to the top of the best-seller lists.) Through the years, he has been a scientist (he holds several patents involving semiconductor devices), an operations manager, and a trailblazer into new markets, as well as a forward-thinking business strategist. He currently teaches a course on strategic management at the Stanford University business school.

But most of all, Andy Grove is a builder. While the founders of Intel -- Gordon Moore and Robert Noyce -- were charting a course into an emerging industry, Grove made certain that the pathways were paved with solid brick and mortar. He saw to it that important details weren't left to chance. And as a business leader, he insists that his subordinates take a rigorous approach to their tasks and projects.

"Andy is very disciplined, precise, and detail-oriented," says Dennis Carter, Intel's marketing vice president who served as Grove's technical assistant during the 1980s. "His favorite saying in those days was, 'The devil is in the details.' But at the same time, he has an element of intuition and creativity that is fundamental to Intel's innovation."

Attention to Details

In the early years Grove realized that the brilliance that sparked the creation of Intel might come to nothing if somebody didn't pay attention to details. He recalls that Noyce -- co-inventor of the integrated circuit who died in 1990 -- was a great believer in technical solutions to just about every problem. "Bob was my counterpoint -- my opposite -- in many ways," Grove says. "He believed that whatever the problem was, there was a technical solution to it. But my approach was [to believe] that there was an organizational or process solution to any problem. So we went about things in different ways.

"Bob would jump into things -- and it would be up to somebody else to pick up the pieces or not pick up the pieces. At first, that wasn't so good. But later on, it turned out to be a strength because I figured out that part of my mission was to make sure that the bits and pieces that Bob scattered around -- minor things like the invention of the integrated circuit and a variety of key process patterns -- weren't left to chance for other people to follow up on. I figured that if I went behind Bob and picked up the pieces, the two of us -- our interaction -- would be much more productive."

He was, of course, right about that. And today, thousands of Intel shareholders are reaping the benefits. From 1991 through 1996 Intel's revenues grew by an impressive 335.9% -- to $20.8 billion last year, when the company posted a profit margin (24.7%) that most CEOs encounter only in their wildest dreams.

Of course, the bulk of those bottom-line revenues are plowed back into the company -- to fuel future growth -- rather than dispersed as shareholder dividends. In the fast-paced chip-manufacturing business, Intel and Grove have maintained a steady bead on the future -- investing heavily in R&D to develop new microprocessors and other products and building new facilities (wafer fabrication plants cost about $2 billion each) to produce those products.

As Intel grew, so did the demands on the enterprise -- all the tasks involved in creating each new generation of microprocessors, developing manufacturing processes to produce ever-more-intricate chips, designing and constructing plants to serve markets around the world, and doing the spadework to ensure that the marketplace would be ready for more powerful chips when Intel was ready to deliver them.

To contend with all the challenges, Grove has tried to infuse a blend of discipline and creativity throughout the company. He insists that the people who report to him pay close attention to details of all kinds. "He's a stickler for grammar," says Carter. "I remember some of the memos I wrote to him back in the '80s. He'd correct my grammar -- and circle my misspellings -- and send them back to me. . . . When he came to this country from Hungary in 1956, he didn't speak English. Yet I learned spelling from him. Not only does he have the instincts of a teacher, but he also has a great deal of patience."

"Andy has always been a teacher -- often by example," says Ron Whittier, senior vice president in charge of content development. "He has been very effective in painting a vision of what this industry could be. Yet I don't think he wants to be remembered as a great visionary -- but as someone who made things happen and created a great company."

During program reviews -- whether they focus on new-product designs, market analyses, or planned advertising campaigns -- Grove often probes deeply into the issues involved. "He asks incredibly insightful questions," says Carter. "If there is a weak two-by-four, he will find it. When you walk into that meeting room, you walk in as prepared as you can be."

"Andy will test his staff endlessly," concurs Whittier. "If someone makes a suggestion, he'll ask, 'How would you do that?' Andy wants answers that are well thought out. Gut feel doesn't cut it with him. His test is: 'How would you implement it?' . . . And he challenges his staff to convince him that a particular direction is the right way to go."

In some organizations, taking such a rigorous approach and insisting that people be prepared to thoroughly defend their ideas might discourage timid subordinates from offering suggestions -- and thus stifle creative thinking. But Grove insists that isn't really an issue.

"If it discourages you," he says, "then you probably had a poor idea that you didn't have much confidence in -- or you are the kind of person who wouldn't execute the idea anyway. If you can't be expected to fill out the details of your concept, how can you be expected to execute it? It is almost a test: Do you really believe in your idea well enough to defend it? And, if you are given a go-ahead, will you have enough devotion to it -- a serious enough commitment to it -- to make it happen?"

Make Things Happen

Clearly, Andy Grove understands how to make things happen, which helps to explain why Intel has played such a major role in shaping the digital world of the future.

Although many U.S. companies have been good technological innovators, they've often stumbled at the execution and commercialization stage -- creating openings for more persistent and nimble competitors, including the Japanese. This is obviously a lesson that Grove has learned well. "Andy understands very clearly what it takes to make something happen in this industry," says Whittier, who has known Grove for 37 years. "He's a technical guy, but he was always interested in making things happen. That is why he was promoted to assistant director of R&D at Fairchild Semiconductor after being there just a couple of years."

It was at Fairchild that Grove hooked up with Moore and Noyce. When they left to launch Intel, he joined them -- initially as director of engineering -- and was instrumental in getting Intel's early manufacturing operations off the ground. "As director of operations, manufacturing was his central focus," Whittier recalls. And when Grove wrote his first management book -- High Output Management, published by Random House in 1983 -- he articulated a managerial mind-set that drew heavily on such manufacturing concepts as process analysis, continuous flow, identifying the "limiting step" in any process, and solving problems at the "lowest-value stage possible."

Manufacturing experience, he points out, "shapes your concept of how things flow -- the events and activities in an imaginary pipeline. When you do this for so many years, you have the feeling that life is one big PERT [project evaluation and review technique] chart. You think in terms of time offsets -- and 'If this is what I want [to occur] someplace, then something else has to happen sometime earlier.'"

That perspective served the Intel chairman well as he became more and more involved in strategic decision-making. "I suppose," he muses, "that I approach strategy in a more concrete way than some other people might. I think in terms of output, measurables, and flow. Flow is very important. How does one get a market established for a new product? How long before certain ingredients are needed?"

Under Grove's leadership, Intel has launched various initiatives to cultivate future markets. One example: partnering with small software companies to demonstrate the potential of new applications that take advantage of more powerful chips. Another: the creation of the Intel Architecture Laboratory (IAL) in Hillsboro, Oreg., where hundreds of Intel programmers have been developing advanced software. (One of the objectives of the IAL, Whittier explains, is to ensure that software development keeps up with advances in microprocessors -- "to keep everything aligned so that, when we introduce a new processor, everything else is ready simultaneously. It takes a lot of coordination and investment.")

"It is partly anticipation," says Grove, "and partly turning that anticipation into a reality. When you have a three-to-four-year development cycle and factories that take three to four years to build and ramp up -- and you add a year or two where you are making decisions about what the information technology world will want five years into the future, part of it is learned guesswork. You do your own guesswork -- and then you work like hell to make your guesswork become reality. . . . And you obviously need a whole industry to support some of this, so you turn to evangelism. And to make sure your evangelism carries weight, you invest in some [small start-up] companies to make sure you are taken seriously.

"It is not something where you have a crystal ball to start with and you guess right," he emphasizes. "You constantly have to guide your efforts and add more ingredients -- effort, money, people, undertakings, and alliances."

And, as he underscored in Only the Paranoid Survive, it is important to constantly second-guess yourself and be on the alert for "strategic inflection points" -- those times in the life of a business when the strategic fundamentals are about to change and where making the wrong decision or waiting too long to change can usher in a period of decline. Such transitional periods, he observes, may signal "the beginning of the end" -- or they can present an opportunity to ascend to new heights.

"Strategic inflection points can be caused by technological change, but they are more than just technological change," Grove says in the book. "They can be caused by competitors, but they are more than just competition. They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has. . . . A strategic inflection point can be deadly when unattended to."

Paranoia in Business

In the opening chapter of the book, Grove makes a strong case for the value of paranoia in business: "Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people's attacks and to inculcate this guardian attitude in the people under his or her management."

He's not referring just to top execs, but to middle managers as well. In the revised edition of High Output Management, he stresses: "Middle managers are the muscle and bone of every sizable organization, no matter how loose or 'flattened' the hierarchy, but they are largely ignored despite their immense importance to our society and economy." He urges middle managers to think like CEOs and not wait for the principles and practices they find appealing to be imposed from the top.

Grove also acknowledges the importance of another group -- professionals who may not hold supervisory positions but "who, even without strict organizational authority, affect and influence the work of others. These know-how managers are sources of knowledge, skills, and understanding to people around them in an organization." And they, too, play key roles in guarding against competitive assaults.

Creating a culture in which innovation flourishes is also an important challenge for managers at all levels. As CEO, one way that Grove does this is by encouraging experimentation -- and doing it before a strategic inflection point arrives, so that much of the spadework has been done to develop alternative products and strategies. (In fact, Intel researchers and operations managers had made significant strides in the microprocessor field well before the company made the critical strategic decision in the mid-1980s to shift its emphasis from producing memory chips to producing microprocessors.)

But when he talks about encouraging experimentation, Grove quickly points out that he means more than technological experimentation. "I am sufficiently removed from the real-life technology and technological innovation today that I don't think I have much influence on that anymore," he tells IW. "I think the experimentation that I am in a position to influence is business innovation -- trying to introduce certain products for which there is no market [yet], or trying to determine the market's reaction to a product."

One chapter of Only the Paranoid Survive is entitled, "Let Chaos Reign." In it, Grove urges senior executives to loosen up their control of the organization and allow people to experiment with new techniques, new products, new sales channels, and new customers. "The old order," he stresses, "won't give way to the new without a phase of experimentation and chaos in between. . . . The dilemma is that you can't suddenly start experimenting when you realize you're in trouble unless you've been experimenting all along. It's too late to do it once things have changed in your core business."

In his interview with IW, he stressed that his comments about permitting "chaos" were primarily directed to the difficult transition periods associated with major strategic change. "At times of uncertainty -- during times of change -- the managerial tendency will be to pull in the reins tighter, to take control. But at times like that, the manager will know less about what he needs to know than at other times, because things are changing too fast. . . . You have to overcome the tendency to think, 'Things are changing too fast; let me pull everything in.' In reality, when things start moving too fast, you should let go of things -- but carefully watch what the hell is going on."

During more normal times, some chaos and experimentation are necessary -- to allow room for "accidental discovery," he notes. But once a company has traversed a major transitional period -- Grove refers to it as the "valley of death" -- the level of chaos must be reduced in order to provide "clarity of direction."

"You only get out of the valley of death," he says in his book, "by outrunning the people who are after you. And you can only outrun them if you commit yourself to a particular direction and go as fast as you can. . . . Hedging is expensive and dilutes commitment. Without exquisite focus, the resources and energy of the organization will be spread a mile wide -- and they will be an inch deep."