Nvidia went from an IPO in 1999 to being named “company of the year” by Forbes magazine in 2007. Forbes noted Nvidia had gross margins of 46 percent in 2006 and its stock price rose even faster than Apple over this period. In 2013, the firm, with over $4B in sales, provides processors for use in mobile devices, cloud computing, and super computers. However, had it not been for some early stumbles, the firm may have never reached these successes. Nvidia was founded in 1993 by Jen-Hsun Huang and two colleagues. Their first product—delivered in 1995—was a commercial failure. However, a rival firm, 3Dfx Interactive, introduced a very successful 3D graphics chip for the rapidly growing PC-based gaming industry. Chastened by this initial failure, Mr. Huang and his team regrouped. They analyzed the gaming industry of that era and concluded that the market (gamers, as well as others interested in rendering graphics) would want to continuously upgrade to the best graphics technology available for the foreseeable future. Given this situation, Mr. Huang focused the team on a new insight he thought would lead to success. Nvidia would release a new chip every 6 months rather than the standard 18 months used by the rest of the semi-conductor industry. Nvidia decided that if they could gain and keep the highest-performing graphics solutions in the marketplace, they would be able to build a great business. To achieve this position, the company had to deliver on a number of important steps. Nvidia spent nearly a third of the firm’s cash on emulation technology to prototype the graphic chips before they were produced, thus looking for problems early in the design cycle. This allowed them to limit delays in getting to market. They also invented the graphics processing unit (GPU) to assist the customer base in utilizing these new chips more rapidly. Nvidia also created three overlapping development teams so each team had 18 months for the chip design and fabrication, but staggered these with 6 months between releases. Finally, the industry had moved to driving costs down in the design and fabrication processes, but Nvidia pushed their designs to the maximum technical limits for enhanced end-user performance. The strategy worked wonderfully. For example, Intel introduced a 3D graphics chip in 1998, but exited the business only a year later. In 2000, 3Dfx was in bankruptcy proceedings, and Nvidia acquired some of 3Dfx’s key assets in 2001.
3. The final and perhaps hardest part of a good strategy is to deploy a set of coherent actions for the implementation of the strategy. Which of the following is NOT an implementation action taken by Nvidia?
A) Employing a GPU system approach for easier integration of new Nvidia chips.
B) Releasing a new chip every 6 months rather than every 18 months.
C) The creation of three staggered chip development teams
D) Using the maximum technical limits of the chip design for enhanced performance.
E) Investment in emulation systems for rapid prototyping of the chip designs.