Andy Grove Clayton Christensen
CC is very tall, AG is small - for a magazine they had a photo of CC leaning on his shoulder - he took a photo the other way round.
Valley of Death
Grove: Business growth was fuelled by structural transformation - mainframes to PCs - defined it for the whole industry.
that framework lasted 15 years, but it is changing with the Internet redefining software and hardware.
The horrible misjudgments about growth rates, this is due to a lack of understanding of the new framework - we still don't understand it.
It is going to be dominated by intellectual property created in digital form and transmitted in digital form.
We move from a computing world to a connected world where computing is subservient to this connected world, business changes.
Digital pipelines. Copying used to lose quality - attempts to ward of digital copying will fail this is a disruptive technology for everything - publishing, music.
This is immature, and we all have desires fro the other side of the valley.
Moderator: Strategic dissonance and accountability - how do you lead through this kind of transitions?
AG: He was watching the Sopranos while exercising - expecting a book on the management secrets of Tony Soprano. Beset by management challenges all the time, asks his uncle fro help 'you take your bumps, make your mistakes - half the time you are right, half the time you are wrong - enjoy the journey' None of us have an understanding of where we are heading. I don't. Take a shot and clean up the bad ones later and bump off the mangers you should. Try not to get too depressed. Keep your own spirits up even though you don't understand what you are doing.
Mod: How do you keep up?
AG: Partly self discipline, partly deception. The deception becomes reality - if you act confident you become more confident. Do two things. Act on your temporary conviction as if it was real. When you realise you were wrong correct course quickly.
AG: Notes that CC dodges question like politician.
CC: Watching execs launch new businesses. If you look back at companies that have launched successful new disruptive business, it has been by the founder. MBAs from Harvard never do this. Is there something about being the founder that gives you the self-confidence to make an irrational decision that changes direction. A pro manager has to make an evidence-based case, and if you wait for that evidence the game is over.
AG: Agrees 100%. Build your confidence. If you believe you have support of organisation above and below, you can make it happen. It is more likely to happen if you' re a founder and your life is interwoven with the company.
Secondarily, if you funded it you understand implicitly - it is in your skin. If you are an outside manager you are less likely to have confidence in your intuition. It ahs to be intuition as the numbers aren't there. Name examples otherwise?
CC: Multi-divisional companies eg HP LaserJet then InkJet. Dick Hapborn(?) of printer business - he J & J have 183 companies and have launched 4. Only two exceptions.
AG: Hapborn had been
CC: Uncomfortable with the teaching model in the HBS - 2 years from now a 2 year MBA will be regarded as a expensive mainframe, displaced by crummy on the job learning. On the job learning is getting better and more convenient. He did a case study - how could Harvard MBA program be disrupted? The patterns match the already case studies 99 said no 3 said yes. What data would convince you? Harvard's market share amongst CEOs of global 1000 - game over by then. All convincing data are trailing indicators. They crucify students who don't use data, but the teaching model makes managers act after the game is over. Can you teach intuition?
AG: Promote a sense of organisational commotion. Recognise people's aptitude to grasp what cannot be spelled out by data. You have to assume the persona making promotions can grasp this too - hard. What about Brand?
CC: Brand is exclusive - can't go down market.
AG: a degree from Harvard whether you learn anything or not the NPV of earnings is higher.
Mod: networked learning is next gen education.
CC: Spate of horrible accounting practices - Principal Agent theory from conferences. The agents (managers) can't be trusted to carry out the wishes fo the Principals who own the stock. Weight compensation to stock options to align incentives. The shenanigans to inflate stock prices have their root in this theory. Their behaviour is more complex. No hint of scandal at Intel
AG: Stock options are means to salve agency problem for top level managers. When people who own 20% of it give themselves 20 million options to get him over his motivational hurdle? Horrendous distortions of motivation of handful of people. It works with a broad distribution of stock to manangement and employees. Stock owners keep it closer to the company. Look at distribution fo stock options between top 5 officers and general staff. Stock options are not guilty- who you give them to is important.
Boards are moving in the right direction, under duress, but they started from being an advisory body to the CEO, selected by the CEO, rubber stamping his actions, like government scientific advisors. The CEO is supposed to be selected by the board - the other way round. Real world and theory are other way round.
Look at percentage where the Chairman and CEO are separate people. 85% it is the same person.
Mod: disruptive tech for governance?
CC: Not seen anything - feel the problem. resource allocation - senior managers only know what layer below divulges - managers have to struggle to get the info. A professional board is even more filtered; only know what they choose to divulge. More outsiders put even more uninformed people.
AG: Could ask for more subjects to be presented - exposure to more individuals. You can do a lot if you speak up. Board participation should be encouraged by chairman. I smell a disruptive technology coming that will make corporate life a nightmare - governance by shareholder propositions. Business-related propositions on the ballot for votes - eg get Intel out of Flash memory business - now board can make it invalid - proposal will eliminate these obstacles. I can see detailed propositions like this happening - governance is based on shareholders as individuals - institutions hold a large proportion and they will put propositions on strategic direction businesses will be run by shareholders.
Mod: Plebiscitary democracy.
Audience:Intel as brand? Ingredient brand - how was it created, and where is it going Intel Inside?
AG: 12 years ago prod mktg director didn't sell processors directly, so had to brand it indirectly. No matter what, there will always be an intel inside - it may mean things in addition to the microprocessor - communication too. He had to insist on keeping money for it, and argue with customers to put it in - diluting their brand. Now taken for granted. Needs refreshing.
Is the science of management getting in the way of the art of leadership?
CC: People reacting to data from bubble rather than intuition on what is right in the future. A lot of bad intuition from the past few years - how do we foster this.
AG: Business strategy has a problem between the science and the intuition. There is more to running a business than strategy The revolutions in QC and manufacturing techniques were all data driven and statistically driven. the economies have benefited incredibly from embracing the science of manufacturing & QC. Figuring out what to do is important, doing it well is equally important.