MEMO TO ANDY GROVE: BIG COMPANIES AREN’T DISRUPTORS

1/25/08Follow @practicallyrad

Intel’s Andy Grove is a Silicon Valley legend, Time‘s Man of the Year (1997), and the subject of a magisterial biography by Harvard Business School historian Richard Tedlow. He’s also one of the world’s toughest-minded thinkers about competition and innovation, the kind of boss who writes books with titles like Only the Paranoid Survive.

Which is why it’s so surprising that Grove’s recent essay in Portfolio magazine (the slick new business monthly from Condé Nast) is so thoroughly unpersuasive. In the article, titled, “Think Disruptive,” he urges the CEOs of two of America’s biggest corporate juggernauts to take on two of the country’s biggest challenges. He thinks Jeff Immelt, CEO of General Electric, should be “building an electric car and taking on the energy industry.” And he wants Lee Scott, CEO of Wal-Mart, to use his company’s market clout and more than 4,000 stores to deliver medical services and transform the health-care industry. (Wal-Mart has begun experimenting with in-store clinics for services such as vaccinations and cholesterol screening.)

Grove’s message: Why leave disruptive innovation to startups? Why don’t big, successful companies, with vast technological and financial resources, “shake up the status quo and reap big profits” by entering new fields—what he calls “cross-boundary disruption.”

It’s a nice idea, but it strikes me as wishful thinking at best. Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars?

Do any of us think that Wal-Mart, which has had such a tin ear for customer service (not to mention employee relations) in selling mundane products such as laundry detergent and lawn mowers, is poised to make the U.S. health-care system more patient-friendly? “Wal-Mart is in an excellent position to assume the role of the disrupter,” Grove argues. Really? Speaking for myself, the only thing less attractive than a visit to the doctor’s office is a trip to Wal-Mart.

Grove’s one piece of evidence for “cross-boundary disruption” is Apple’s move into digital music, with the iPod, iTunes, and other Steve Jobs innovations. To me, though, the iPod is actually a counter-argument to Grove’s core theme. Apple didn’t develop the iPod just because it sensed a big opportunity in a new field. It developed the iPod because it worried about its creeping irrelevance (bordering on insolvency) in its original field of personal computers. Apple developed the iPod because it had to, or risk going out of business altogether.

As I read Grove’s essay, I thought back to a conference I attended a few months ago featuring a session with Irving Wladawsky-Berger, the recently retired vice president of technical strategy and innovation at IBM, who has been behind so much of what’s gone right at the company over the last 10 years—its enthusiastic embrace of the Internet, open-source software, and innovation on so many fronts. (Irving, who spent 37 years with Big Blue, is now a visiting professor at MIT, among his many activities.)

What made Irving’s session so memorable was the fact that he was so candid. Yes, IBM had engaged in deep-seated transformation and far-reaching innovation, he explained. But to this day he wonders whether Big Blue would have made such big changes had the company not walked to the edge of the abyss. “Can a company reinvent itself,” this legend of corporate transformation asked, “without going through a near-death experience?”

To me, the obvious answer is no. How many examples of truly deep-seated transformation can you cite that did not involve what Wladawsky-Berger calls a near-death experience? These days, there’s Procter & Gamble under A.G. Lafley, who may be the most underappreciated big-company CEO on the planet. Then there’s. . . There’s . . .In the immortal words of the high-school economics teacher in Ferris Bueller’s Day Off, “Anyone? Anyone?”

I understand where Andy Grove is coming from. He looks out at the American landscape and sees huge problems that demand breakthrough innovations if they are to be solved. He looks at his fellow titans of industry and sees leaders with infinitely deep pockets and world-class labs. And he asks the obvious question: Why can’t the latter be deployed to address the former?

The answer is, well, because that’s just not the way innovation in established companies works. They have a hard enough time fixing themselves, let alone fixing society—especially when what ails society is not remotely core to their existing businesses.

Indeed, that’s why we have Silicon Valley, Kendall Square, and other hotbeds of grassroots innovation. Not because big companies can’t do what startups do, but because they won’t do what startups do. Andy Grove, better than anyone, should understand that.

William C. Taylor, a member of Xconomy's board of directors, is an agenda-setting thinker, writer, and entrepreneur. He's the cofounder and founding editor of Fast Company; his new book is Mavericks at Work. Follow @practicallyrad

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  • http://www.flxpt.com Chris Noble

    Bill Taylor may be a self-described “agenda-setting thinker”, but his thinking is rather myopic on this topic. Why would small companies have a monopoly on creativity? Why would ALL big companies be destined to be fat dumb and happy? And his statement that “what ails society is not remotely core to their existing businesses”. Hello? The world running out of oil won’t affect energy and automobile companies? I see a lot of Priuses on the road, and none of them were made by startups. And check the manufacturer’s label on the next wind-farm turbine you see.

    Every segment of the economic spectrum will be profoundly affected by the macro trends of the 21st century, and every segment will need to respond in the ways that it is best equiped to. And Bill… stop lecturing Andy Grove on the untapped capability of big companies. He has earned his stripes.

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  • http://mark-nano.blogspot.com/ Mark Wendman

    your quote

    “It’s a nice idea, but it strikes me as wishful thinking at best. Why would GE, with so much opportunity in its businesses around the world, and so many headaches from Wall Street (GE shares are barely unchanged from when Immelt took over six years ago), take on a high-profile gamble such as electric cars?”

    answers itself.

    Intel succeeds on the scale it does because its pace of innovation is world leading. When I was there at Intel Livermore Fab3 in the beginning of the 32bit 80386 in 1984, it was well known among Intel management that its secret sauce for success was world class rate of learning. Challenging itself continually.

    Is it possible that GE’s stock problems are at root cause – from a kind of internal complacency? Supporting strongly a counter to your thesis of why they and other industrial behemoths SHOULD and MUST Innovate in substantive and significant ways, to thrive and succeed, not merely exist. One leads by doing good.

    Self defeating attitudes, satisfaction with the status quo are self fulfilling recipes for mediocrity.

    Realize this – Grove has it right, and he is a far bigger success than you care to acknowledge in your weak criticism of his brilliance, and amazing track record at Intel.

    Easy to poke holes in your weak thesis, a recipe for complacent mediocrity.

    American engineering at its best, is amazing, and has lead the world in this recent new industrial age of microtechnology (and other areas), and why not we go forth and lead in a cleantech revolution?

    Laggards (irrespective of size) hardly profit without a change in vision and actualization of a positive and profitable future.

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