As I noted, last week Intel lost its CEO, Brian Krzanich, and really needs to think through its executive selection process as a result. I knew when I first saw Krzanich on stage that he was an inappropriate choice for the role because he had an obvious tendency to be unnecessarily cruel. And months ago, I predicted that he’d likely be fired by mid-year and listed likely causes, which included an affair. But, in thinking about this over the weekend, the causes of Intel’s grief have a lot to do with the firm’s culture, which devalues ethics and loyalty, and places getting something done fast ahead of getting it done well. These are long-term problems which, if not fixed, may eventually kill the company. They have killed many others.
Intel’s Historical Ethical Problem
Intel has a long an ugly history of behaving unethically, mostly against competitors like AMD and more recently Qualcomm (its partner in this, Apple, was just highlighted as being basically anti-innovation). This last is particularly troubling because the strategy it has executed, win or lose, should have a negative result for the company (what is also fascinating is that partner company Apple is generally listed as the reason Intel isn’t performing better). There is actually a book written by a past AMD CEO on Intel’s unethical behavior. If you look up Intel’s Code of Conduct, the reference was written by Intel’s now disgraced and recently fired CEO, not its legal, HR, or finance departments (typically where behavior is enforced). Right now, that looks pretty stupid, but given the degree and depth of Krzanich’s mistakes, I think I could argue it also makes Intel’s board look negligent.
Seriously, I’ve never seen a board so out of touch with what was going on at the company they were protecting. And realize that even with the policy against fraternization, Krzanich was likely fired for not disclosing the affair rather than for the affair itself. (The vast majority of Intel’s past CEOs either had known affairs with subordinates or were rumored to have had them.) While Intel talks about a relatively recent policy, it was been known to be improper to have affairs with subordinates back when Intel was formed.
Intel has always seemed to operate under the actual policy that it is okay to do something unless you get caught for it. Internally, it even has a practice called Constructive Confrontation, which sounds really nice until you realize, as practiced, it is basically institutionally approved abuse. You don’t win arguments on merit, you win on power and often because you’re the biggest bully at the table.
But when the person who owned ethics just got fired for an ethical problem, that problem is likely endemic, and Intel’s ethical problem needs focus before another executive or group of executives takes the company down. You’d think the record fines would have been an adequate warning, but no.
Lack of Loyalty
Loyalty is also an historical problem with Intel. Whether we are talking its biggest OEM customers, Microsoft, New Balance, or makers, Intel has, particularly in the last two decades, showcased a distinct lack of loyalty. This has become so bad that key partners seem to trust the company no longer. One of the most glaring instances was back when Microsoft did its Windows Vista launch. At that time, Paul Otellini refused to step on stage and show support for this admittedly troubled version of the product, not because it was buggy, but because he’d have to stand next to AMD’s CEO. He wanted Steve Ballmer to send AMD’s then CEO home before he’d show support for this, to Microsoft, critical product (he flew to the launch but refused to participate like a spoiled child). This infuriated Ballmer who, also being childish, then started calling Otellini “Tortellini,” and both firms embraced competing platforms for their mobile efforts, which subsequently failed. I’d also argue that the decline of the PC market in general really started after the WinTel alliance seemed to come apart and that wasn’t good for either firm.
Under Krzanich, both Intel’s wearable and maker efforts collapsed. The first blind-sided New Balance and others that had embraced Intel’s wearable platform, damaging the partners’ customer relationships, and the second collapsed what was a critical seed corn effort designed to assure Intel’s future. The maker collapse was particularly questionable because it looked punitive and in response to the fact that no one wanted to watch the TV show Krzanich had funded and put himself in. And finally, the arguably treasonous behavior of disclosing the recent security problems to China months before the company disclosed to its own country places a huge cloud over whether you can trust the company. I’d argue you can’t trust a firm that betrays its own country.
Currently, there is a massive lack of trust for Intel’s ability to live up to its promises and that will pull resources from critical partnering efforts. This also speaks to ethics because if you can’t trust a company’s word, you basically believe it to be dishonest. This industry was built on partnerships; it likely will fail with them, as well.
Quality as a Priority
I’m talking here about quality not as absolute, because every vendor has quality issues. I’m talking about it in terms of priority. I’m also not just talking about product quality but quality in everything a company does. This includes the company’s diversity efforts, which have been kind of a bad joke, its treatment of employees, which has been painful to watch, and its messaging, which has been mostly a firehose of nothing of late. The old saying of “better, faster, cheaper, pick any two” may apply here, with Intel picking the wrong two.
Intel Inside used to mean something powerfully positive in the 1990s; increasingly, it means you likely got screwed. The most recent problem is highlighted here with the screwy Optane platform, which has, to date, really underperformed expectations. I expect this to end in a class-action suit of some kind because this is clearly false advertising and one or more OEMs will likely get burned as a result.
Wrapping Up: Beware the Board
Intel is one of the legendary companies of Silicon Valley. It actually helped me get started in the early years and I feel I owe the company as a result, but it has lost its way with the firing of the CEO being only the very tip of the iceberg. Intel’s board really doesn’t seem to be doing its job, suggesting the shake up at the company needs to go higher; otherwise, these problems aren’t going to go away. Whether they stay or go, it won’t be long before folks wonder if Intel’s problems exist in the firms and organizations these people are coming out of. If they couldn’t do proper due diligence for Krzanich or govern his bad behavior, well, why would anyone think they can choose a replacement, run their companies, or provide advice that is any better? Boards often don’t survive one CEO scandal. They almost never survive two.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+