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Preface

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Andy Grove's Web Site

Chapters

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Chapter 6

Chapter 7

Chapter 8

Chapter 9


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Chapter 2: A "10X" Change

"What such a transition does to a business is profound, and how the business manages this transition determines its future."

A "10X" Force

When a change in how some element of one's business is conducted becomes an order of magnitude larger than what that business is accustomed to, then all bets are off. There's wind and then there's a typhoon, there are waves and then there's a tsunami. There are competitive forces and then there are supercompetitive forces. I'll call such a very large change in one of these six forces a "10X" change, suggesting that the force has become ten times what it was just recently. This is illustrated in the following diagram.

When a business goes from the condition shown in the first figure to the second, the changes it faces are enormous. In the face of such "10X" forces, you can lose control of your destiny. Things happen to your business that didn't before, your business no longer responds to your actions as it used to. It is at times like this that the telling phrase "Something has changed" is apt to come up.

To manage a business in the face of a "10X" change is very, very difficult. The business responds differently to managerial actions than it did before. We have lost control and don't know how to regain it. Eventually, a new equilibrium in the industry will be reached. Some businesses will be stronger, others will be weaker. However, the period of transition depicted in the diagram below is particularly confusing and treacherous.

Now, nobody will ring a bell to call your attention to the fact that you are entering into such a transition. It's a gradual process; the forces start to grow and, as they do, the characteristics of the business begin to change. Only the beginning and the end are clear; the transition in between is gradual and puzzling.

What such a transition does to a business is profound, and how the business manages this transition determines its future. I like to describe this phenomenon as an inflection point.

The Strategic Inflection Point

What is an inflection point? Mathematically, we encounter an inflection point when the rate of change of the slope of the curve (referred to as its "second derivative") changes sign, for instance, going from negative to positive. In physical terms, it's where a curve changes from convex to concave, or vice versa. As shown in the diagram, it's the point at which a curve stops curving one way and starts curving the other way.

So it is with strategic business matters, too. An inflection point occurs where the old strategic picture dissolves and gives way to the new, allowing the business to ascend to new heights. However, if you don't navigate your way through an inflection point, you go through a peak and after the peak the business declines. It is around such inflection points that managers puzzle and observe, "Things are different. Something has changed." Put another way, a strategic inflection point is when the balance of forces shifts from the old structure, from the old ways of doing business and the old ways of competing, to the new. Before the strategic inflection point, the industry simply was more like the old. After it, it is more like the new. It is a point where the curve has subtly but profoundly changed, never to change back again.

Copyright © 1996 by Andrew S. Grove. All rights reserved.

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