Andy Grove as an Industry Change Agent

Summary : How Andy changed our industry in fundamental ways.

Andy Grove is gone … as I am sure you know by now.  I am not going to bore you with the details, as if you google “Andy Grove died” and “Andy Grove passed” you will get around a million results at this writing that describe his accomplishments and the books he wrote. Instead, I am going to focus on how he changed our industry in fundamental ways.

While some may consider it demeaning to say this, I will try to put things in perspective for the younger crowd: Andy Grove was the Steve Jobs of our industry before there was a Steve Jobs. Andy’s breadth of innovation was far greater than Jobs’. It would have been a big loss for the industry had he not become the CEO of Intel. Even still, he would have gone out well respected for his technical and manufacturing accomplishments. His book of diffusion could be found in just about every fab engineer’s space in the industry. As for manufacturing, Gordon Moore and Bob Noyce used to say that the S for Andy’s middle name stood for Andy “Ship the s^#t” Grove. He built Intel’s manufacturing and R&D capability from scratch under Moore. More importantly he was key to developing the first pipeline that moved technology out of R&D and into manufacturing. Before then, virtually nothing passed between the two, as each group saw the other as using WKMs (Worst Known Methods). Today, the pipeline method is a mainstay of innovation management. In fact it is the only way to control development costs and is an important keystone to the foundry/fabless model.  Later, he led Intel through the manufacturing war with Japan when it developed centralized manufacturing and what came to be known as Copy Exactly.

Grove invariably had hidden and deeply creative strategies to create value. The centralized manufacturing model was also a way to trap the dissipation of IP value to customers. Bob Graham, one of industry’s most brilliant marketing executes, told me about long arguments with Grove over second-sourcing.  As Graham saw it, second-sourcing was a necessary evil to ensure supply chain continuity. In those days, yield crashes often put fabs out for weeks, if not months. As Grove saw it, second-sourcing was really just a hammer to beat down chip prices, stealing away the IP value in the process by forcing you to license it to competitors. In the seventies, it was an impassible problem. Grove solved it in the eighties by using Copy Exactly to lever Intel into sole-sourcing the 386 with what Intel called “virtual second-sourcing.” This was arguably superior, Intel’s processes were exact copies, down to the materials, recipes, and tool sets. Thus, customers could no longer hide the price-hammer under gloves of supply-chain continuity. The recaptured value from sole-sourcing gave Intel R&D funding to do what no semiconductor company had done before: systematically take a processor family down Moore’s Law road with a consistent architecture that ensured backward compatibility.

Grove, in doing this, changed supply chain culture to make sole-sourcing acceptable. This proved critical as semiconductor companies shifted from supplying commodities across horizontal markets to IP design-intensive verticals. Think of it this way: without sole-sourcing acceptability, Qualcomm would have never been able to have the profitability to develop multiple generations of cellular technology that were systematically compatible. Without this, the smart phone may have never happened.

PCs: While IBM created the PC, it was Intel under Grove that provided the underpinnings to make the PC a tool with a breadth to span business and consumer. Using Moore’s Law, they brought the cost of computing down to a level that, like cars, everybody could afford to have one. And afford to have it turned off most of the time. This created the largest market for chips that had ever been seen. More that Moore’s Law, they partnered with Microsoft to create an open-architecture layer of customer that they could sell into. The open-architecture of the PC had never been done before. While the PC was designed that way by IBM, it was Intel and Microsoft that took open-architecture from a design methodology and turned it into a market structure.  

Now let’s go back to the Grove/Jobs metaphor I started with and compare the PC to Apple’s iPhone. The invention of the iPhone was brilliant. But it was just a mash-up of existing technologies into a consumer-oriented smartphone. This mash-up had already been done at Nokia. The world would be very different if Nokia management had not decided to kill it. Jobs’ real vision was in seeing, and believing in, the value that an ability to display virtual buttons via a touchscreen would bring.  It was a blue ocean strategy, in that no leader had the same vision and motivation to execute until long after Apple had captured the market. Like the iPhone, the PC was also just a mash-up of existing technologies. Moreover, Intel didn’t even invent it. But unlike Apple, making the PC successful involved changing the way electronics companies dealt with suppliers; creating and managing a software/hardware alliance; and creating a new business model based on open architecture. As Intel took semiconductors out of commodity-ville while they turned systems into commodities, using transition of Moore’s Law from LSI to VLSI scales of integration to pull it off. Seeing such a broad change takes great vision.

And finally, Apple 1998, not long after Jobs came back: Apple was still in recovery mode in a market that was now dominated by PCs. They needed a way to differentiate themselves, so they came up with the ‘Toasted Bunny’ Intel ad. The iPod was still a good 3 years away. This is not widely known, but Jobs came to Grove about the ads before they were ever launched. Grove magnanimously gave his blessing to what would a real hit below the belt. Why??? Grove said something to effect of, “First they are a small part of a big and growing pie … and more importantly … someday they might be a customer.” Eight years later, Apple did switch to Intel in early 2006, when the iPod was all the rage and the iPhone was still a year away. As for the Toasted Bunny differentiation strategy: It worked. Apple did get enough breathing space to change the world … quite possibly from a seemingly inconsequential decision that had real vision.

So while Andy Grove was often seen as a highly combative and only ‘Intel oriented’ by competitors, he actually tore down some significant barriers to growth for our industry. He was a catalyst that changed the semiconductor industry’s structure. There are lots more to list here that this man accomplished or led. Such as the ‘Intel Inside’ campaign that was brilliant marketing that sold to the customer’s customers – something no other semiconductor company had ever done. Or the development of non-hierarchical business environment based on meritocracy. Here are a few links to learn more:

https://newsroom.intel.com/news-releases/andrew-s-grove-1936-2016/

http://www.nytimes.com/2016/03/22/technology/andrew-grove-intel-obituary.html?_r=0

Here are a couple of videos of him. One a conversation I had with him about the development of R&D and manufacturing and the other a talk he gave about the evolution of semiconductor manufacturing at Intel:

Andy on the development of R & D and Manufacturing Strategy at Intel

Andy on the Evolution of Semiconductor Manufacturing

 

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