According to an old Greek legend, thunder was the sound of giants falling in battles in the sky. There’s been plenty of thunder in the tech world lately. Dell Computer, not even a decade ago considered one of the most admired American companies, has seen its market value decline by more than 40% since last summer. Over the same period, Intel has fallen by almost the same amount.
Both of these companies have the same problem – they focused on optimizing their strategies too long, and they have missed important market shifts. They let their Lock-in to an old Success Formula keep them from installing White Space to keep them evergreen.
Dell has long said it has the best supply chain in its industry. It prided itself that it could take an order, make the machine, ship it and get the cash before it had to pay its vendors. Companies globally marveled at this optimized machine, and sought insight to copy it. But, now competitors have learned to copy Dell – and Dell has not developed any new markets that will allow it to continue its growth in revenues and profits. Earnings are down, and there’s no obvious plan for a turnaround. The company CEO has said that he plans to invest more in the same old business model, hoping results will turn around.
Meanwhile, "Intel Inside" – the famous tag line, isn’t on as many boxes as it used to be. Long suffering, and much smaller rival AMD has been winning over customers from Intel. Although this is largely in high-end multiprocessor servers (rather than desktop or laptop PCs), and AMD still only has about 20% of this market, people are legitimately concerned that Intel may really suffer, as once predicted by its famous CEO Andy Grove when he said that "Only the Paranoid Survive." Even stalwart Dell, long a 100% Intel user, has switched to AMD of late.
Both companies point to just how easy it is for even very successful companies to succomb to Lock-in on their old Success Formula. How easy it is to overlook market Challenges as they focus internally on optimization. And, how they can begin Defending & Extending the old Success Formula rather than seeking Disruptions to it and maintaining aggressive use of White Space to spur innovation and maintain growth.
Just like Wal-Mart, any company can become too focused on its Success Formula – even those in high-tech. History has shown that when this happens, the future risk is incredible. Remember Compaq, DEC, Wang, Unisys – and even what happened to IBM in the 1980s? Dell and Intel must react to their market Challenges quickly, because if they stall the losses this far are just a start to what could be an even more painful decline.
