One of the Greatest Business Decisions: How Intel got consumers to love its chips (1991)

The material that follows is adapted from The Greatest Business Decisions of All Time: Apple, Ford, IBM, Zappos, and others made radical choices that changed the course of business, by Verne Harnish, CEO of Gazelles, and the editors of Fortune, with a foreword by Jim Collins.

Lesson learned: By deciding to brand its product “Intel Inside,” the chipmaker proved that an anonymous ingredient of a consumer product might achieve its own identity and provide a competitive edge.

A PC is made of various components: the power unit, keyboard, mouse, hard disk, and — the brains of the operation — the microprocessor. Way back when, users of a Compaq no more knew who had supplied those ingredients than a Chevy owner knew who had made the radiator under the hood.

Intel changed all that in 1991. Until then, the high-tech marketing landscape had pretty much consisted of Apple’s rainbow logo and IBM’s Little Tramp. But if a small blue Chiquita sticker could turn a banana into a marketing icon, then why not an Intel Inside logo on a computer?

The genesis for Intel Inside came from inside the cubicle of CEO Andy Grove. His young technical assistant, Dennis Carter — who had two engineering degrees and a Harvard MBA — understood that the company faced challenges in the maturing microprocessor market. The surprising cause: the very success of the microprocessor. Because of Moore’s law — which holds that the number of transistors on a chip roughly double every 18 to 24 months — Intel and other chipmakers were able to quickly make obsolete each generation of chip. So Intel’s 16-bit microprocessor — called the 286 — was replaced within three years by the 386, a 32-bit one.

Trouble was, nobody was buying it; everybody was still wedded to the 286 chip, although the 386 was a much better product. Carter wondered whether the problem was that end users weren’t aware of the product differences. Grove had his doubts, but in early 1989 he agreed to a $500,000 test, telling Carter, “You believe it — you go do it.” Intel took out billboard ads in Denver with a big, bold “286” inside a circle and a large red “X” spray-painted over the 286. After a couple of weeks, another sign went up next to it: a “386” inside a circle. The message was clear, and those buying PCs got it: Sales of computers with Intel’s 386 microprocessor shot up. It was a major moment: Carter had shifted power in the chip industry from the PC makers to a key supplier.

Ultimately Carter became head of marketing, his reward for demonstrating that an anonymous ingredient of a larger consumer product might achieve its own identity.

David A. Kaplan, Contributor

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