Pivot in Company Strategy – the Nvidia Example

After making chips and graphics chips for personal computers for most of the almost-20 years it has been in business, Nvidia has plunged headlong into a new market; that of the mobile chip, the chip that powers tablets and mobile phones.

Why has Nvidia changed its product strategy, and therefore its market strategy, and therefore its company strategy?

Well, because it feels it has to, that’s why. It’s current market is not only slowing dramatically because computer sales are down, it is beset by competitors like AMD and Intel who now include very adequate graphic processors in their standard setup, thereby effectively cutting Nvidia out of the picture in terms of selling an add-on graphic processor to the target PC manufacturer. Nvidia, and more specifically, Nvidia’s CEO, Jen-Hsun Huang, has made a tough decision that staying in their current market will lead to slow, but certain death, and is now striking out for the frontier of mobile chips.

The writing is certainly on the wall. As noted, Nvidia’s graphics chip business is taking some hits, and so is the segment they supply. Meanwhile, the obverse side of the coin has the Android operating system, which Nvidia has built its chip for, forecast to comprise over half the smartphone and tablet market within three years. Android is such a strong newcomer that most credible market analysts in the mobile industry believe that tablets with the Android operating system will outsell the current market champion iPad by over 50 million units by 2015. As a sidebar to this forecast, it certainly doesn’t bode well for the just-introduced Blackberry Tablet, but let’s focus on the matter at hand for today.

Okay, it’s one thing to make the decision, another thing to make a product, and then yet one more thing to actually sell a whole lot of whatever you make. There is little doubt that Nvidia has made the right strategic decision for their business, but can they execute on their new strategy?

Nvidia has a new chip called the Tegra 2, which is already in the new Samsung Galaxy Tab 10.1 and the new Droid X2 smartphone, the new Motorola Droid Bionic, the new Atrix 4G, and others and has gotten good reviews.

Nvidia also has an even newer quad-core processing chip called Kal-El (yes, that was Superman’s real name from his parents on Krypton) that is still not yet on the market that promises to make some serious waves. Nvidia has released a video of a homegrown game called Glowball that shows off the new (and obviously expensive) processor’s capabilities, and those capabilities are very impressive. The company says the new chip will be in Android-powered smartphones and tablets by September of this year.

If you’re wondering what the main competitive thrust is with improving the Android platform as it compares to the iPad, it’s mostly all about the ability to get movies and music on the device, and play that media back without crashing the device. The iPad is better than Android-powered devices at doing those things right now, but the new processors developed for Android by companies like Nvidia are closing that gap very quickly.

The Achilles heel in all of this is battery life. Nothing is free, and those processors suck up a lot of juice.

Which brings us full circle back to whether Nvidia can execute on their change in strategic direction. In fact, it is probably giving this scenario short shrift to describe what Nvidia is doing as a change in strategic direction; it is much more accurate to call it a reinvention of the company.

My personal opinion is that Nvidia has a very good chance of executing this massive reinvention. They read the tea leaves of where the market was going, and acted early. Huge kudos to them for their alertness in this regard. This, folks, is how you’re supposed to look out for your company’s future. But, praise aside, I think they’re doing everything they can to be successful in their new market. The next few years will be the test.

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.comm.


Measuring the Success of Business Strategy

It’s so easy, right? A successful strategy means the business grows and is profitable. There might be other consequences that are positive that occur because of a successful strategy, but growth and profitability are the only ones the really matter.

Right?

Well, what if you have a technology company that is never intended to become profitable, but instead is intended to attract attention as an acquisition? How about another company that doesn’t grow but still manages to outlast almost all of its competitors?

I could go on and on with a lot more “what if” scenarios, but then someone from the back of the room would pipe up with this: “A successful strategy creates shareholder value. Whether it’s improving employee morale, market growth, building a brand, better HR systems, a strict business-attire dress code, netting a profit, it doesn’t matter. All those things create shareholder value.”

Okay, I can roll with that, but how in the world do you really measure the impact improving employee morale has on shareholder value? It’s more or less voodoo, isn’t it? You can measure an increase in employee morale and say that a subsequent increase in the value of the company happened as a result of the boost in morale, but I defy you to prove that beyond a doubt.

So is there a soft side to business strategy, intangible results that you intuitively believe exist, but cannot be proven? Is the checklist regarding strategy success employed by companies and strategy consultants incomplete? Should the success of strategy be measured using a large, holistic dashboard (and free crunchy granola and delicious banana bread for all)? Are we deluding ourselves with all of these rigidly-defined paths of business strategy that lead to an unalterable destiny, measured by accepted models, numerological systems and systemic markers?

Holy smokes! My world has been torn asunder and my mind is reeling right now.

No, just kidding, I’m fine.

The answer is that those measurement tools like KPI, Strategy Maps, ROC, IRR, Balanced Scorecard, ROA, Benefits Measurement, share price, etc. work very well for measuring the success of most business strategies. That’s why they’re used.

But strategy is dynamic and so are the successes attached to it. Sometimes, depending on the strategy, it’s going to be a little more Art than Science. This not going to happen very often, but sometimes you just have to let go and trust that it will pay off. Sometimes you do the right thing because it’s the right thing to do, and sometimes you do the right thing because it’s good business to do the right thing, and the positive results of the former are sometimes not as readily apparent of the latter.

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.