What Me Worry? How smart entrepreneurs harness the power of paranoia

Depending on whom you're talking to, paranoia is: 1) apsychotic disorder characterized by delusions of persecution, 2) anirrational distrust of others, or 3) a key trait in entrepreneurialsuccess.

Sound crazy? Not according to Andrew S. Grove, president and CEOof Intel Corp. in Santa Clara, California, and author of Onlythe Paranoid Survive (Doubleday/Currency). The title ofGrove's book comes from an oft-repeated quote that has becomethe mantra of the chip king's rise to the top of the technologybusiness.

"I have no idea when I first said this," Grove writes,"but the fact remains that, when it comes to business, Ibelieve in the value of paranoia." To those who suffer fromclinical delusions of persecution, of course, paranoia is neither ajoke nor a help. However, in a business context, the practice ofvoluntarily being highly concerned about potential threats to yourcompany has something of a following.

"If you're not a little bit paranoid, you'recomplacent," says Dave Lakhani, an entrepreneur in Boise,Idaho, who offers marketing consulting to small businesses."And complacency is what leads people into missedopportunities and business failure."

Pick Your Paranoia

Being paranoid, according to Grove, is a matter of rememberingthat others want the success you have, paying attention to thedetails of your business, and watching for the trouble thatinevitably awaits. That basically means he is paranoid abouteverything.

"I worry about products getting screwed up, and I worryabout products getting introduced prematurely," Grove writes."I worry about factories not performing well, and I worryabout having too many factories."

For Grove, as for most advocates of paranoia, being paranoidprimarily consists of two things. The first is not resting on yourlaurels. Grove calls it a "guardian attitude" that heattempts to nurture in himself and in Intel's employees to fendoff threats from outside the company. Paranoia in business is alsotypically defined as paying very close attention to the finepoints. "You need to be detail-oriented about the mostimportant things in your business," says Lakhani. "Thatmeans not only making sure you're working in your business butthat you're there every day, paying attention to yourcustomers."

As an example of paranoia's value in practice, Lakhanirecalls when sales began slowly slumping at a retail store he onceowned. He could have dismissed it as a mere blip. Instead, heworried and watched until he spotted a concrete cause.

"It turned out one of my employees had developed a negativeattitude, and it was affecting my business," Lakhani says."As soon as I let him go, sales went back up."

The main focuses of most entrepreneurs' paranoia, however,are not so much everyday internal details as major competitivethreats and missed opportunities. Situations in which competitionand opportunity are both at high levels are called "strategicinflection points" by Grove, and it is during these times,typically when technology is changing, that his paranoia issharpest.

Paranoia is frequently a welcome presence at major clientpresentations for Katharine Paine, founder and CEO of The DelahayeGroup Inc. In the past, twinges of seemingly unfounded worry havecaused Paine to personally attend sales pitches where she learnedof serious problems with the way her firm was doing business, shesays.

The head of the 50-person Portsmouth, New Hampshire, marketingevaluation research firm traces her paranoid style to childhooddays spent pretending to be an Indian tracking quarry through theforest. When she makes mental checklists about things that could gowrong or opportunities that could be missed, she's alwayskeeping an eye out for the business equivalent of a bent twig.

"If you are paranoid enough, if you're good enough atpicking up all those clues, you don't have to just react,"says Paine, "you get to proact and be slightly ahead of thecurve."

Paranoid Parameters

There is, of course, such a thing as being too paranoid."There are times when it doesn't make any sense,"acknowledges Lakhani. Focusing on details to the point of spending$500 in accounting fees to find a $5 error is one example ofmisplaced paranoia. Worrying obsessively about what everycompetitor is doing or what every potential customer is thinking isalso a warning sign, he says.

Lack of balance with interests outside the business may beanother. "If your whole life is focused around your work, andthat's the only thing you're thinking about 24 hours a day,that becomes detrimental," Lakhani says.

For Paine, failing to act is a sign that you're going pastbeneficial paranoia and into hurtful fear. "Fear for most ofus results in inaction--absolute death for an entrepreneur,"she says. "If we feared the loss of a paycheck or fearedentering a new market, none of our businesses would have gotten offthe ground."

All this may be especially true for small-business owners. Whileparanoia may be appropriate for heads of far-flung enterprises,some say entrepreneurs are already too paranoid.

It's all too easy for entrepreneurs to take their desire forindependence and self-determination and turn it into trouble, saysRobert Barbato, director of the Small Business Institute at theRochester Institute of Technology in Rochester, New York.Typically, entrepreneurs take the attitude that "nobody caresas much about this business as I do" and exaggerate it to thepoint of hurtful paranoia toward employees and even customers, hesays. "They're seeing ghosts where ghosts don'texist," warns Barbato.

That's especially risky when it comes to dealing withemployees. Most people--not just entrepreneurs--do their work forthe sense of accomplishment, not because they are plotting to stealtheir employer's success, Barbato says. He acknowledges thismay be a difficult concept for competition-crazed entrepreneurs,especially those who have never themselves been employees, tounderstand.

"People who own their own business are not necessarily usedto moving up the ranks," Barbato notes. Entrepreneurs mustlearn to trust and delegate if their businesses are to grow.

Practical Paranoia

Now matter how useful it is, paranoia may be too loaded a labelfor some entrepreneurs. If so, critical evaluation or criticalanalysis are the preferred terms of Stephen Markowitz, director ofgovernmental and political relations of the Small BusinessAssociation of the Delaware Valley, a 5,000-member trade group. Thedistinction is more than name-deep.

"When I say `critically evaluate,' that means look ateverything," Markowitz explains. "If you're totallyparanoid, the danger is not being able to critically evaluateeverything."

For example, Markowitz says a small retailer threatened by theimpending arrival of a superstore in the market would be betterserved by critically evaluating the potential for benefit as wellas harm, instead of merely worrying about it. "If you'reparanoid," he says, "you're not going to criticallyevaluate how it might help you."

Whatever name it goes by, few entrepreneurs are likely to stopworrying any time soon. In fact, experience tends to make them moreconfirmed in their paranoia as they go along.

Paine recalls the time a formless fear led her to insist ongoing to a client meeting where no trouble was expected. She lostthe account anyway.

"The good news is, my paranoia kicked in," she says."The bad news is, it was too late. That made me much moreparanoid in the future."

Contact Sources

The Delahaye Group Inc., (800) 926-0028, (http://www.delahaye.com);

Dave Lakhani, c/o Direct Hit Marketing, 770 Vista, Boise,ID 83705, (208) 368-7979;

Small Business Association of theDelaware Valley,320 MacDade Blvd., #100, Collingdale, PA 19023, (800) 533-3732,(610) 237-1336;

Small Business Institute, (716) 475-2350, rjbbbu@rit.edu.

Mark Henricks is an Austin, Texas, writer specializing inbusiness topics.