It's been a few days since Intel announced it would lay off 12,000 employees, capping a tough ten months for the old-line tech industry. VMWare, HP, Microsoft, and others have been slimming the ranks.
Various reasons have been suggested, including a move to cloud computing and less expensive open source software substituting for the more expensive proprietary offerings from large companies. It's all true; all valid.
But Intel is a special case. Beyond the reduction in chip sales because cloud and virtual computing use servers far more efficiently, there was the move to mobile from desktop computing. Intel could have had a big chunk, except that it didn't.
You could call the strategic problem the Innovator's Dilemma, in which companies work hard to protect their cash cow products when technology threatens. You could call it blindness to market forces. Instead, let's talk about the fundamental issue: focusing on their own convenience rather than the interest of their customers.
To some extent, all companies have to be circumspect about the customers they seek. You want people who are a match for your business strategy, for the types of product you make, and for the prices you charge and level of service you offer. The old saying that the customer is always right is wrong. You can't arbitrarily drop prices to satisfy what all people want, nor can you necessarily create small runs of products to satisfy a handful of people who don't order enough to make the manufacturing profitable.
However, you do need to keep the interests of your customers in mind, and if many of them start to change how they want to do business, that becomes paramount. Intel, as did Microsoft, for years tried in vain to ignore mobile. They wanted everyone to keep buying desktops and laptops. But it turned out that many people didn't need the oversupply of computing power and could get along perfectly well with a phone or tablet.
Intel's answer was to extend its underlying x86 chip architecture to the mobile market. It would be a convenient move for the company that would let it leverage existing R&D, intellectual property protection, production know-how, and other aspects of doing business that would save money and let it maintain a majority lock on chip sales.
However, there was a problem. What was convenient for Intel didn't work well in mobile and wasn't good for consumers. By focusing on what would be a strategic advantage for them, the company essentially asked people to subsidize its business model by accepting technical performance that wasn't the best match to the needs of mobile. Chips had to use far less power, generate far less heat, and be far cheaper.
And so, Intel has had to scale back. PCs won't be the backbone of computing. The opening Intel left while not taking mobile seriously enough allowed others to establish products that were better positioned. Ultimately, trying to make customers adapt what they wanted for the economic convenience of Intel didn't work.
The irony is that Intel's dominance in the PC space was the result of the type of move it should have made this time. Originally the company made memory chips. But the market was becoming saturated and there was this whole new world of microprocessors that interested customers. Andy Grove and Gordon Moore shifted the company, taking what some thought was a dangerous leap. But it was a move to where customers were going. They put customers first in the most fundamental and important way -- as every business should.