Intel initially manufactured dynamic random-access memory (DRAM). It was an inflection point in computing – by implementing memory in an integrated circuit, DRAM was cheaper, smaller, and faster than magnetic-core memory units.
The company grew insanely fast for a decade, growing to over $400M in sales by 1978. But Intel wasn't the only company manufacturing DRAM by then. Competitors like NEC, Toshiba, Hitachi, and Mostek grew just as fast.
Andy Grove, one of the co-founders of Intel and the COO at the time, had a conversation with Intel's chairman and CEO, Gordon Moore. Grove recounts the conversation in his book:
"If we got kicked out and the board brought in a new CEO, what do you think he would do?"
Gordon answered without hesitation, "He would get us out of memories."
I stared at him, numb, then said, "Why shouldn't you and I walk out the door, come back and do it ourselves?"
– Only the Paranoid Survive, Andy Grove
Grove executed that plan, and in three years, Intel was out of memory1. Intel refocused on microprocessors. Of course, Intel would be wildly successful in its microprocessors (although today, it's maybe a different story).
Grove would guide Intel through many inflection points, eventually becoming CEO in 1987. Grove was always paranoid about competitors and Intel's position. He worried about products getting introduced too early, factories not being productive, and hiring the right people.
...when it comes to business, I believe in the value of paranoia. Business success contains the seeds of its own destruction. The more successful you are, the more people want a chunk of your business and then another chunk and then another until there is nothing left. I believe that the prime responsibility of a manager is to guard constantly against other people’s attacks and to inculcate this guardian attitude in the people under his or her management.
– Only the Paranoid Survive, Andy Grove
1Out of memory errors are usually a bad thing for programmers.