If a company stays around long enough, it will inevitably face an existential threat. The good news is that this threat can also signal great opportunity.
“The person who is the star of a previous era is often the last one to adapt to change, the last one to yield to logic of a strategic inflection point and tends to fall harder than most.” – Andy Grove, Only the Paranoid Survive.
Andy Grove was a founder and CEO of Intel Corporation (he passed away on 21 March 2016). When it came to management, he was a genius, and he was widely regarded as one of the main reasons behind the success of Intel.
Strategic inflection points
In 1996, he wrote a book called Only the Paranoid Survive, which has become something of a bible for many managers. And one of the key things Grove mentions in the book is the concept of strategic inflection points.
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“A strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end,” says Grove in the book. “In short, strategic inflection points are about fundamental change in any business, technological or not.”
It’s easiest to understand a strategic inflection point by imagining a bell curve. The inflection point would sit right at the top of the curve. And, if the company does not deal adequately with the threat, its performance will quickly start sliding downwards, completing the bell curve. However, the opportunity often exists to show massive growth after this point – to skyrocket upwards instead of slipping downwards.
Flipping the curve
But how do you flip the curve, and keep moving upwards?
“The strategic inflection point is the time to wake up and listen,” says Grove. “If existing management want to keep their jobs when the basics of the business are undergoing profound change, they must adopt an outsider’s intellectual objectivity. They must do what they need to do to get through the strategic inflection point unfettered by any emotional attachment to the past.”
The key lies in acknowledging (and first noticing) change, and then having the maturity to embrace that change. Too many companies refuse to let go of the past, and then quickly find themselves becoming obsolete.
A great example of a company that embraced change and turned it into opportunity is Netflix. Not that long ago, Netflix was a company that provided a DVD-by-mail service. As it realised that DVDs were disappearing, it started streaming content online.
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Had it not noticed the trend towards online streaming, or simply refused to accept the reality of the situation, it would have gone out of business. Instead, it was one of the first-movers in online streaming, and now many old and established media companies are scrambling to catch up with it.
Consider all the things that might threaten the existence of your company. How can these threats be turned into opportunities? How can you get ahead of the competition now?