Managers should re-invent fading product or perish

“I remember a time in the middle of 1985... I was in my office with Intel’s chairman and CEO, Gordon Moore, and we were discussing our quandary.

Our mood was downbeat.

I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?”

Gordon answered without hesitation, “He would get us out of memories.”

I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?”

ANDREW S GROVE, Only the Paranoid Survive (1996

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Andy Grove is one of America’s totemic CEOs, and the story of Intel in the 1980s and 1990s is one of the most recounted success stories of business lore. The excerpt, from Grove’s bestselling memoir, contains one of the great questions of all time.

There comes a time when a strategy, a product, a project has failed. Objectively, that time is pretty apparent, and that is when a leader should pull the plug and admit defeat. The problem is with objectivity.

Those who have most invested in the project — time, resources, emotional commitment — will always be the least likely to be able to call a halt.

If all you’re doing is digging yourself into a hole, it’s time to stop digging. But the person digging will, in all likelihood, carry on. Intel’s early success in the 1970s was as a memory-device company.

It pioneered the use of semiconductor memory chips for computers. But huge Japanese conglomerates soon entered the fray, and had formidable advantages such as cheap capital, manufacturing efficiencies and process control. Soon, the Japanese developed unbeatable production yield advantage.

Losing money

That was the position Grove and his boss Gordon Moore found themselves in during the 1980s. Intel had started losing money on memories, but it had a new business: microprocessors, also invented by the company.
The writing was on the wall for the memory-chip business, but many in Intel refused to countenance it.

They kept hoping for a new cutting-edge chip that would reclaim market share and lost profitability, and kept pushing for renewed investment.