Digital Competition - Avram Miller

Give up control. (Guess what? You already have.)

Companies used to be self-contained, vertically oriented. They did everything -- designed products, manufactured products, and sold products with their own sales force. With the rise of the PC in the computer industry, we started to see the horizontal company: Companies tried to get good at whatever the one thing was that they did. This meant that they became dependent on each other. The product itself is market-driven: Nobody is really in charge of it anymore.

With the arrival of the Internet, corporate control has completely disappeared. Business today is about all kinds of companies participating to make something happen. Nobody knows anymore what the products will do and what the markets will be. Markets define themselves. You have to be able to react to them organically.

Intuition rules.

Today, when Intel builds a new factory, it's investing $2 billion in products it hasn't yet designed for markets that don't yet exist. This is hard for American businessmen, and I say "men" because in order to do this, you have to give up control -- and giving up control makes guys really miserable. Control is an illusion. I don't think that it ever existed, but now even the illusion is gone. As a result, we're experiencing the rebirth of intuition.

In our society, we often don't want to admit that we know something if we don't know why we know it. At Intel, I used to have a horrible problem. I'd go into a meeting, and I'd be very convinced about something, and people would say, "What evidence do you have for it?" And I'd say, "I don't have any evidence." They'd expect me to be analytical about it, and I wouldn't be. Over the years, I learned to make up some bullshit story to convince them, but it had nothing to do with why I thought it would work. I just knew.

In Hollywood, you're expected to be intuitive. In the entertainment industry, you have people who have intuition and people who imitate. Nobody there analyzes. But for the most part, in our society, if you know and you don't know why you know, then obviously whatever you know doesn't matter -- which is stupid. If you have been right about things for 20 years, then you should be able to say, "I don't know why I know, but I know." If I'm hiring people, I don't want to know how they know, I just want to know that they have a good record of being right.

Decide now. Analyze later.

On the Internet, you have to do things serially. You have to say, "Let's do this. And then we'll decide if it was a good thing to do." I just left a board meeting where we made a decision to do a deal, and we're going to do the due diligence after we do the deal. Because it's simple: We can decide either to do the deal or not. We have a sense that it's a good idea now. And we'll go through the analysis process later to discover if we were right. When we look at it, it will help us to be better judges in the future -- whether or not our intuition was right. With this deal, we didn't have a choice of saying, "Wait a second. Hold everything! We're going to take three weeks and do some analysis here." That's just not the way this world works.

Iterate, iterate, iterate.

The power of the Internet is that you can experiment. When you do something on the Internet, you find out right away whether people like it or not. The smart skill on the Internet is to be able to change course quickly.

The old way of doing business would have been to say, "They don't like our product. How are we going to make them like our product?" Take Intel, for example. Say we just spent $2 billion to build a factory and three years designing a product. Then this is our dog food, and the dogs had better eat this food. If there's a problem, then the marketing department has to figure out a way to convince the customers that they really do want the product.

On the Internet, if the customers don't like the product, they're right. Let's change products. It's a lot cheaper to change products than to convince them that they like our product. So the question is not "How do we make them like what we have?" The question is "What do they like?"

Change hurts. But indecision kills.

What American business is able to make decisions that might appear to destroy shareholder value for several years before they pay off? Let's say that you give a CEO two choices. You say, "Here's your business. It's growing at 4% a year, and if you keep going in this direction, then it will flatten out. In five years, it will probably start declining." Or you say, "Here's another business, whose revenues will decline 3% a year for the next three years. In five years, it will be worth twice as much as it's worth now." I don't believe that there is one CEO in the United States who would decide to take the second business. He or she would be convinced that "No, that can't be true. I'll figure out a way later. I'm not going to make this decision today that will really hurt me." Most companies are unable to make decisions that would hurt them in the short term.