Can Intel Become an Industry Disruptor Again?
Intel is one of the world’s most revered disruptive technology brands. Having ‘Intel Inside,’ our laptops became a byword for quality. The multiple generations of central processing units (CPUs) designed and manufactured by Intel powered the world’s personal computers. More recently, this revered x86 processor has become the backbone of cloud computing, with over 90% of the data center market.
And yet, clouds of uncertainty and concern hover over Intel’s headquarters in sunny California. Blinded by its own prior success, Intel has been stuck in the past, obsessed with the CPU technology heritage that made it great. This same obsession caused it to miss the mobile revolution, a miss that its wireless division reversed under the inspirational leadership of Aicha Evans.
The data center market breathed new life into the old obsession, though even that is under threat as the ‘hyperscale’ data center players – like Amazon, Google, and Microsoft – have announced that they plan to dump Intel and design their own chips.
Even Intel’s execution in the CPU market is faltering too: while its new Rocket Lake processor provides some incremental improvements in performance and is nicely prized, it does not migrate off the 14 nm process node to the 10 nm format, as previously expected.
Can Innovation Save Intel?
It looks like Intel may have run out of innovation on its current trajectory. The next two or three years will decide whether Intel follows the crash-and-burn path of Nokia or Kodak, or whether it can find new life like IBM in the late 90s, early 2000s.
The appointment of Pat Gelsinger as CEO bodes well—helped by some excellent executives, like the highly talented Safroadu (Saf) Yeboah-Amankwah as Chief Strategy Officer. The markets have welcomed Gelsinger’s commitment to renewing Intel’s manufacturing. However, will he be about to shake an institution so steeped in its own brilliance? The scale of change is not trivial. It may represent the most important transformation underway for any technology company in America.
Gelsinger has many options and people a lot smarter than me to advise him on which one to take. However, four priorities appear to be key:
Back new sources of growth
The world has moved beyond silicon. Semiconductor firms are now far more concerned with how to deliver complete systems having a real business impact. Nvidia that has built an ecosystem around its EGX AI platform is a poster child of this disruptive strategy. Its philosophy is one of participation and openness, encouraging innovation on its platform. In contrast, Intel is still holding on to its mindset of control and dominance that it forged during its heyday in the 1990s.
Intel needs to realize that its future lies in adopting disruptive business models, not simply new manufacturing processes and product lines. From this point of view, Intel’s acquisition, in 2017, of Mobileye, an Israeli company manufacturing advanced driver-assistance system (ADAS), is a step in the right direction. But to make this acquisition a strategic success, Intel must resist the temptation to use the new business as a cash cow and instead allow it to mature.
Convert EGI into an engine of transformation
Intel does have a big bright spot in its strategic arsenal: The Emerging Growth Initiative (led by Sagi Ben Moshe) that has built an engine for ideating and incubating disruptive innovations from within the company.
The objective of the Initiative is to find ideas that challenge internal orthodoxies and then scale them to a $1 billion valuation. (I must admit that I’m not a huge fan of this valuation-based approach, but that is a topic for a separate conversation.) To realize this objective, EGI desperately needs commitment from senior leadership in terms of investment, and long-term support, especially in times of inevitable future economic downturns.
Challenge core assumptions
Intel’s legacy is partly design engineering but also manufacturing. In a world of ‘fabless manufacturing’ semiconductor firms like Qualcomm, Intel has stayed true to its formula of manufacturing its own chips. It always argued that this gave it a technology edge.
Great companies are often destroyed by leaders who fail to challenge fundamental assumptions of the past. Nokia believed the smartphone market would be just 5% of the total cell phone market; Polaroid couldn’t conceive a camera without instant images and so created the wearable printer in the late 1990s.
Intel needs to challenge this core assumption that it must remain a manufacturer. The future for Intel may well mean splitting the company in two so that it can win at technology and at manufacturing. This would allow each to compete without the restrictions of the other. There is also a national security angle to consider as America is incredibly vulnerable to any Chinese aggression toward Taiwan that threatens supply from the world’s largest contract semiconductor manufacturer TSMC.
Take on the culture of arrogance
Adopting the disruptive strategy of splitting the company in two–and admitting that its future lies beyond the CPU–would be an earthquake of sorts for Intel as it would cut right to the core of Intel’s identity. However, it is this moment of ego-busting humility that will perhaps be the most powerful in renewing Intel’s culture.
Satya Nadella was able to face down the powerful forces that tried to tie Microsoft to Windows. Now it is time for Gelsinger to do the same. And taking one more lesson from Microsoft: Nadella has famously said that Microsoft had to move from being a ‘know-it-all’ to a ‘learn-it-all’ culture. The same could be said of Intel that needs to move from counting success only in CPUs.