Chipping Away at Intel ART 1 139 Craig R. Barrett sat reflecting on the fact that he was halfway through his tenure as the fourth CEO of Intelonly another three more years to go until his mandatory retirement age would be reached. He had come into an organization that Andrew S. Grove, chairman of Intel, had shaped into a major global technology company. He had replaced Gordon E.More but retained his principle of doubling micro-processor performance every 18 months while at the same time making it progressively cheaper. In this context, what would be Barrett's legacy? When Barrett came in three years ago, he took some bold moves, taking Intel beyond chip making for PCs into the production of information and communication appliances as well as services related to the Internet. Trouble is, the company was now in the worst shape that it had been for many years. Of course, every technology company had been affected by September 11, 2001; the slowing economy; and the potential threat of war with Iraq. But in Intel's case this had been compounded with problems such as product delays and shortages, recalls, overpricing, and even bugs in its systems. Analysts were predicting that by the end of the year, Intel's share of the PC chip market would be 9 percent worse than when Barrett had taken over three years earlier. He had ploughed money into new marketsbut then had to withdraw from these. For example, Intel withdrew from the production of network servers and routers after copping flak from Dell and Cisco, its biggest customers for its chips, for directly competing with them in these other markets. He also closed down iCat, which was an e-commerce service for small businesses, providing Web broad-casting of shareholder meetings, and cut back on Web-surfing applications except in Spain. In Bar-rett's mind, most of these withdrawals were a direct result of the downturn in economic conditions generally. There were also weak demand and overcapacity in the semiconductor industry with some researchers expecting a 34 percent fall in global sales of chips. Moreover, long-time rival Advanced Micro Devices had produced its Athlon processor chip, which turned out to be faster than Intel's Pen-tium III chip. At the same time, people seemed to be more interested in how fast their modem connec-tion was than in the speed of their computer chip. And September 11, 2001, hadn't helped; before this catastrophe, Intel's shares, at $26, were down 60 percent compared to their highest over the pre-vious year. After September 11 they fell furtherby October they were only $20. Barrett felt that in this competitiveand segmentedmarket, Intel needed to be reorga-nized to make it more nimble. It also needed to be reorganized to avoid duplication and create better coordination. For example, the network operations group and the communications unit sometimes were in competition with each other, selling similar products to the same customers. Barrett engaged in a series of reorganizations during his first three years. In 1999 he created a new wireless unit that combined new acquisitions such as DSP Commu-nications Inc. (a chipset supplier for digital com-munications) with Intel's flash memory operations. In his second year, Barrett created the Architecture Group, which combined development and manu-facturing of core processors. In his third year, he reorganized the Architecture Group and created a new unit consisting of a merger of communica-tions and networking operations. For Barrett, these reorganizations were needed to enable decentral-ization and delegation of decision makingall designed to make the company better coordinated and more nimble. But there was so much reorganization over these years, trying to get the structure to work, that some commentators saw it as \"shuffling execs like cards in a deck.\" Following the March 2001 restructuring, with up to 80 percent of the staff in the micropro-cessing unit being given new jobs, one customer thought that people seemed to be moved around a lot without them really knowing where they were going. A former general manager saw Intel as now \"dabbling in everything and overwhelming noth-ing.\" Other commentators claimed that another oblem was that chip managers were now being put in charge of new markets and products about which they knew very littlea charge denied by Barrett. There were also job cuts, with 5,000 jobs lost through attrition during 2001and more expected. At the same time, Barrett wanted to change the culture of Intel, drawing on outside consultants to assist him in the process. He wanted to move the mindset of Intel toward better customer relations and away from a perspective of being the only real competition in the marketplace. Strategically he decided to invest in research and development into new production technologies in order to cut chip-making costs. Reflecting on his time ahead, Barrett hoped that he would be able to increase sales and pull out in front of his competitors through these investments. But the jury was still out at this point: Running head: CHIPPING AWAY AT INTEL Chipping Away at Intel Student's name: Institutional affiliation: 1 CHIPPING AWAY AT INTEL 2 Chipping Away at Intel Of the environmental pressures for change, Intel experienced market decline, hyper competition and reputation. Primarily, market decline came in play after the September 11, 2001 incident, which is said to have slowed the economy following the possible war in Iraq. Intel faced a big challenge during these moments following product shortages, recalls and even product delays. The subsequent closure of iCat by Barett was one show case of a declining market. Intel shares went down by 60%, which is such a big figure regardless of the efforts showcased by the new CEO after surviving for three years. The idea of hyper-competition comes in play after reviewing the performance of longtime rival Micro Devices. Intel saw a big blow of its market share after the rival company introduced the Athlon processor chip said to have been faster compared to Intel's Pentium III. In addition, withdrawal of Intel from production of routers and network server was basically due to better performance showcased by Dell and Cisco. Lastly, the company had a reputation to keep as far as innovation is concerned. Intel is one major global technology company with customers waiting for even better and more innovative products from it. Apparently, this pushed Barett to question his legacy and his contribution to this long standing and reputable organization with a big name to observe. Of the internal pressures for change, Intel was keen enough on growth, reestablishment of organizational identities and power. Preliminarily, Barett's efforts saw him combining new acquisitions like DSP Communications Inc. He tirelessly worked on flash memory operations. These efforts were meant to indicate a growth in Intel following the 9/11 incident that almost saw the downfall of the company. Given the fact that Intel is a technology company, it has to be dynamic in a way that makes it to cope with new changes and taste in the market. The Architecture Group was set in place with the central purpose of driving a big change in Intel, CHIPPING AWAY AT INTEL 3 which is a defining mark of growth. Secondly, the idea of reestablishing organizational identifies is evident through Barett's efforts in driving a series of reorganizations especially in the first half of his tenure at Intel as the CEO. In the third year of his management, he worked on reorganizing the Architecture Group, which saw combination of developing as well as manufacturing of the core processors. The CEO went ahead initiating a merger of networking operations as well as communications to yield a new identity for Intel. Lastly, power can be seen in the sense that Intel desired to command a bigger market share compared to its competitors (Dery & Fox, 2000). The company wanted to command innovations without being surpassed by any external efforts. Barrett wanted to move the mindset of the company towards excellent customer relations and this made him to invest more in research and development believed to yield new production technologies. When it comes to changes, there are limits to changes that can be accomplished at Intel. Barrett's efforts to drive change at Intel is limited by the decision making team. This means that as the CEO, proper communication is important to set a harmonious agreement across the entire management (Huy, 2002). Changes at Intel are also limited by the culture of the organization. The culture of the organization is essentially defined by employees, who are not machines but people with their own senses and feelings too. At the end of the excerpt, it evident that managers and employees were moved around without knowing what they are doing. This means that one cannot drive change without convincing and ensure total compliance to the organizational culture. Lastly, it is important for change managers to have a clear, personal understanding about pressures that significantly lead to change. Most organizations are normally faced with either lack of or even diminishing resources and this exerts pressure on the management required to CHIPPING AWAY AT INTEL 4 respond towards both the unplanned and planned changes. The probable success of any organization largely depends on the manager's ability to assimilate the change and work on formulating as well as articulating a clear vision, which should be accompanied by strategic goals. Change managers' skills in handling faster changes remains to be a significant element especially when addressing unprecedented changes. The 9/11 scenario must have called for a change manager to make Intel survive the turmoil in the long run. The pressure of straining resources, such as labor force, is common especially when the firm is not performing well. Tactical planning remains to key in this process as far as the potential of accommodating changes by organization is concerned (Dent & Goldberg, 2000). CHIPPING AWAY AT INTEL 5 References Dery III, G. M., & Fox, J. R. (2000). Chipping Away at the Boundaries of Privacy: Intel's Pentium III Processor Serial Number and the Erosion of Fourth Amendment Privacy Expectations. Ga. St. UL Rev., 17, 331. Huy, Q. N. (2002). Emotional balancing of organizational continuity and radical change: The contribution of middle managers. Administrative science quarterly, 47(1), 31-69. Dent, E. B., & Goldberg, S. G. (2000). Challenging \"resistance to change\".The Journal of Applied Behavioral Science, 35(1), 25-41