How Intel lost $475M during the Pentium processor crisis

Welcome to the second edition of the Brand Preppers newsletter, where we cover everything a marketer needs to know about getting through a brand crisis.

Today we’re going back in time to 1994 (aka when I was 7 years old) and talking about Intel’s bug in the Pentium processor crisis, which cost the company almost half a billion dollars to resolve - ouch.

So what exactly went wrong?

Intel’s $475M Pentium Processor Crisis

As an emergency manager who’s studied the destruction of natural disasters and global health outbreaks, it seems a little silly that a mathematical error that occurs once every 27,000 years would be deemed a crisis.

But to math professor Thomas R. Nicely, it wasn’t silly at all. After the contents of a personal email made its way onto the Internet, it set off a storm of negative press for Intel, who still viewed themselves as a manufacturer, not a B2C company.

It wasn’t as if Intel didn’t know about the error - they did. They had done investigative studies but just didn’t feel it was worth the trouble to stop production.

Unfortunately, IBM, one of their biggest customers, didn’t seem to agree when they stopped shipment of all Pentium-based computers.

Luckily, this story has a happy ending. Intel survived. But to do so, they had to spin up a customer call center, pull materials off their production line and change their policy to allow anyone to replace their part, no questions asked.

3 Ways to Know If Your Industry Is Experiencing Strategic Inflection Point

After reflecting on this experience years later, former CEO and chairman Andy Grove believes Intel was experiencing what he deems a strategic inflection point, which is when change has happened so rapidly (or maybe not) to the point of never going back to way things were done in the past.

This could be for several reasons - new competitors, market shifts, a change in quality standards, but the result is always the same - an impending identity crisis of who you are and what you deliver as a business.

This is important because a strategic inflection is exactly what’s happening to industries right now because of COVID-19. This is line with the survey done of 500 B2C marketers, which stated that their top concern was the “growing demand for convenience and safety.”

In other words, now brands that rely heavily on in-person experiences have to figure out a way to make sales goals AND ensure that customers don’t feel like they’re risking a highly contagious virus by making a purchase.

It’s not exactly easy to detect strategic inflection points, but Grove offers some pointers that may help. They are:

  1. Feeling that something is different
  2. Experiencing a disconnect between beliefs about what your brand is doing vs. what its actually doing. Usually between C-levels and individual contributors
  3. When a new framework emerges (Usually followed by new values and a new set of managers)

For more on the Intel crisis and strategic inflection points, check out:

Still Debating If You Want to Attend MailCon?

Even if you're not an email marketer, you should at least experience the strategic inflection point that is the up-and-coming virtual event space.

You have until the end of the day to register for MailCon- and I would be honored to have you as my guest if money is an issue. Just use the code SLE_GUEST when you register. I only have a handful, so first come first serve.

Click on the photo to go to the registration page

Stay safe,

Sophia :)

Brand Preppers

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