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What the Best Ceos Know

In: Business and Management

Submitted By armentrout25
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Compare Chapters 2 and 5
What the Best CEOs Know
Written by Jeffery A. Krames

The purpose of this paper is to compare and contrast two very successful corporate leaders within the IT industry based on the book What the Best CEOs Know (Krames, 2003).
Chapters two and five cover Michael Dell from Dell Computer Corp and Andy Grove from Intel
Corp, respectively. We will look at five topics including their main contributions, resistance encountered, similarities, differences, and significant factors. Michael Dell knew as a young man it was critical to focus on customer needs. His concept of cutting out the “middleman” to improve information flow was genius and not common to the computer industry (Krames, p. 58). Dell’s strategy of listening, responding, and delivering on customer needs proved very successful. The CEO talked to customers as often as possible and used technology to his benefit (Krames, p. 61). The Internet was used extensively to reach customers globally for ordering, demand forecasting, and to gain product feedback.
Dell’s efficient use of technology and the direct marketing model minimized overhead. The cost efficiencies gained were passed on to the consumer and helped quickly differentiate Dell from its competitors (Krames, p. 62). These concepts also helped Dell remain responsive and agile as they grew exponentially. The CEO was successful at inspiring his workforce and organizing around the customer (Krames, pp. 68-70). As an example, the Small Business Sector was originally established to cater to the small business and small office markets. As these grew they eventually split. Because Dell stayed laser focused on customer needs, his company enjoyed unthinkable growth. Andy Grove believed a healthy amount of fear and paranoia was good for a company.
He also believed success breeds complacency and attempted to eliminate all complacency
(Krames, p. 135). Grove occasionally used history to forecast the future. He focused on three primary areas: technology, manufacturing, and marketing. The CEO believed execution and strategy were critical: both bad strategy and failure to execute good strategy can bring a company down (Krames, pp. 136-137). Quality, and its perception, are hugely important to gaining and keeping customers especially in the volatile computer industry. Grove advocated looking at things from the outside looking in and not to assume a company can’t fail (Krames, p. 139).
He talked about a SIP-strategic inflection point (10X change) which can offer promises and threats, but early detection of SIP is key (Krames, p 143). He mentioned three warning signs: listen to alarmists, encourage rigorous discussion and debate and experiment early and often.
The CEO required managers to communicate from bottom to top (Krames, pp. 145-146). Grove also encouraged broad use of the Internet and decisive leadership. Having a healthy amount of fear caused Grove to watch the market closely, anticipate changes in the tide, and respond. All leaders encounter resistance. Michael Dell responded to resistance of his direct model by experimenting with third party marketing and distribution. His first attempt was unsuccessful and he swore it off for several years (Krames, p. 59). The approach was ultimately modified to support other distribution channels such as today’s Best Buy. Although his goal was to move 100% of his business to the Internet, there is still resistance to do so
(Kramer, p. 66). Some did not agree with Grove’s decision to leave the memory business, but he and his partners knew the company had to (Kramer, p. 138). He also met resistance when he directed the $500M recall of the early Pentium microprocessors, but he did so to ensure
Intel quality and to protect the company’s image. Both CEOs dealt with resistance effectively.

Despite different business models and challenges, both Dell and Grove learned from botched projects and bad strategy. They learned to respond quickly to changes in the market and generated huge profits. Their leadership also enabled each company to thrive in bad times as well. Dell and Grove appreciate effective use of technology like the Internet. By modifying strategy and execution, Dell and Grove produced revolutionary change and created new standards within their respective sectors. Though they share some similarities, Dell and Grove differ in leadership philosophy.
Michael Dell focuses exclusively on the customer and delivering the best value. He believes getting every employee involved in satisfying the customer prevents guessing what the market needs (Krames, p. 60). In fact, he segmented his company into business units early on to stay closer to its diverse customer base. That focus has insulated Dell from some of the hard lessons
Intel endured. Andy Grove focused more on ensuring his company could withstand drastic change and used history to help forecast the future. This is partially due to Intel’s failure in the memory market and shift to microprocessors starting in 1985 (Krames, p. 139). Grove also advocates looking at ones company from the outside in. Early on, Intel focused more on market conditions and competitors than it did customers…that started to change with the Pentium microprocessor problem. The Intel CEO decided to recall the entire batch of questionable processors to alleviate quality concerns and to strengthen corporate image (Krames, p. 141). He also advocated experimentation early and often. Two different CEOs; two differently philosophies; each successful in their own right. Various factors impacted Dell and Intel leadership. When the market dropped, Dell stuck to its model and slashed prices. Despite being blamed for starting a price war, the ensuing market consolidation eventually helped Dell grow market share during tough times. Both technology refresh rates and foreign manufacturing significantly impact both companies. During the Pentium microprocessor issue, Grove could not afford to lose customer confidence in Intel.
Although costly and gusty, the decision ultimately proved to be best for the company. We looked briefly at Michael Dell and Andy Grove; two of the most successful
CEOs in the IT industry. Using the book What the Best CEOs Know (Krames, 2003), we analyzed five topics to compare and contrast these two industry leaders. Both men were successful in different IT sectors using diverse leadership philosophies. Each has changed the IT industry forever with innovative thinking such as complete customer focus and expecting and embracing change. We should thank them for their contribution.

Reference List

Article
Krames, J. A. (2003). Place the customer at the epicenter of the business model. In What the best CEOs know: 7 exceptional leaders and their lessons for transforming any business (pp. 55-77) Blacklick, OH McGraw Hill Professional Publishing. http://site.ebrary.com/lib/ncent/docDetail.action?docID=10045327&p00 Article
Krames, J. A. (2003). Prepare the organization for drastic change. In What the best CEOs know: 7 exceptional leaders and their lessons for transforming any business (pp. 131-152) Blacklick, OH McGraw Hill Professional Publishing.
http://site.ebrary.com/lib/ncent/docDetail.action?docID=10045327&p00…...

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