It is a general rule that a strategy will fail against the competitor who can master a grand strategy. The reason is that a strategy is composed of one vector where its single focal point is more fragile when encountering unexpected events encountered on the path forward. Grand strategies are composed of multiple vectors and often architected to be emergent in a way that inherently embeds anti-fragility. This is why industry giants invariably emerge from them. However, grand strategies are rare and much more difficult to execute in part because they often must include third parties to bring strength where there is weakness. They are often beautiful in retrospect because competitors will initially see them as weakness, thus giving the added plus of being a blue-ocean strategy.
Morris Chang’s development of the “Grand Alliance” was the most significant grand strategy to come out in the 2010s and is still driving the company today. It was a true blue-ocean strategy in that many competitors ignored it as a PR stunt. At the time, TSMC was struggling to catch up technically, while Intel and Samsung were aggressively investing to take market share. The Grand Alliance was a true grand strategy because in addition to chasing smaller nodes from a foundry perspective, it was able to add vectors in IP and EDA by creating a community of partners who were strong in areas where TSMC was weak. It sounds fluffy, but before that the players were stand-offish, seeing partnering as a threat to growth in a zero-sum game. Instead, Morris was able to convince chip design customers, IP and EDA vendors, and even TSMC itself there was far more to gain with true-partnerships by accelerating Time-To-Market. TSMC was able to accelerate its node cadence to a degree that it would go from being behind to well ahead of the competition.
ASML’s grand strategy was fundamental to its rise to ultimately dominant lithography. For ASML it was a response to far stronger competitors with much greater resources. It rolled out in waves, the first being deep partnerships with suppliers like Zeiss for exclusive rights to lens technology. The second wave came with the failures of GCA and Perkin-Elmer, which had been keystone technology suppliers for America’s efforts to recover manufacturing leadership from Japan in the late-80s and early-90s. ASML became the only viable replacement for them, giving ASML the additional vectors of consortia, customers, and universities. A third wave came with the need for 157nm wavelengths and shortly after, 193-immersion. Prior to that, equipment companies had succeeded by delivering production-worthy tool sets with minimal co-development by customers. ASML inverted this, bringing them in early and insisting customers have skin-in-the-game by paying for development tools. A fourth wave rolled out with its development of Holistic* Lithography, which was built by acquisition
The IBM PC and its open architecture was another great grand strategy. IBM actually invented the open strategy in a skunk-works effort out of Boca Raton. The group was an A/B test experiment to see if an independent could do as well as an internal group relying on IBM’s massive manufacturing resources (which, ultimately developed the successful, but short-lived, Displaywriter). Without these resources, the Boca Raton group developed a complete ecosystem with third-party suppliers, in a manner similar to ASML’s first wave. Unlike ASML and TSMC, IBM was not able to control its ecosystem, nor was it structured to be a low-cost electronics supplier. So the ultimate winners were Intel and Microsoft, which literally inherited the rewards of the grand alliance with ownership of two critical parts of IP in the PC: the microprocessor and the OS. They came out on top, as multitudes of start-ups raced to build clones. The story behind it all was so great that it’s the only technology product to have an entire TV drama series developed around it, called Halt and Catch Fire (definitely binge-watch worthy for any techie).
* BTW: Holistic, derived from the Greek ‘holos,’ is a Jan Christian Smuts’ observation that organisms and systems tend to be ordered from groupings of independent parts. Thus, implying that the whole is greater than the sum of its parts, which is what holistic lithography is all about. Wholistic, derived from the Old English ‘hal,’ which means uninjured. Thus a wholistic litho bay of tools working well yet independently is less than a holistic bay of tools working collectively. Hat’s off to ASML for such subtle word-smithing in its branding.
