HP or Hewlett Packard - The Conundrum!
From the exciting times of Lewis Platt and John Young to
the bleaker times started by Carly Fiorina, HP has lurched from
disaster to disaster. And the list looks endless.
Fiorina decided to move to reorient the company to a
marketer of computer equipment and enterprise systems. Her acquisition of
Compaq Computer so that HP- Compaq would be the leader in low-cost personal
computers was a disaster. She tried to focus simultaneously on high-end
enterprise systems. Luckily or unluckily she had bid for the business
consulting practice of PricewaterhouseCoopers, but lost to IBM.
NCR's Mark Hurd followed her and appeared to appeal to the
stock market. The efficiency expert, he focused on short term sales
growth and cost reduction, doubling the company’s earnings and stock price. His
notable acquisition was Electronic Data Systems’ computer services
capabilities which led to an $8 billion write-down in 2012. And given his short
term focus, the company’s investment in R&D, fell to 2.3 percent from 4
percent.
In 2009 and 2010, HP acquired 3Com and Palm, the latter
after an intense bidding war.
Hurd left primarily due to his entertainment of a certain
person of the fairer sex on company expenses, the board hired Leo Apotheker,
the failed co-chief executive of SAP. He proposed selling the company’s PC
business and dropping its tablets and smartphones, to make HP a systems and
software company (a la IBM). He acquired the British software maker Autonomy
for $10 billion.
Apothekar focused on what he knew rather than what
was good for the company. As a matter of fact almost all CEOs Fiorina onwards,
focused on what they knew.
Somewhere down the road in a string of unending disasters,
Hewlett Packard became only HP. That aptly summarized the fall
of the company.
What HP Needs to Do
The founders Bill Hewlett and David Packard, developed a
unique management style that came to be known as The HP Way. The tenets of
the HP Way are as follows:
1. We have trust and respect for individuals.
2. We focus on a high level of achievement and contribution.
3. We conduct our business with uncompromising integrity.
4. We achieve our common objectives through teamwork.
5. We encourage flexibility and innovation.
It is very obvious that HP has deviated from the very tenets
which were set.
1. Go back to the roots - Innovate
The erstwhile HP's bedrock has
been innovation for a company which or was once a great company. The
answer lies in innovation and come up with products that have unique benefits.
It seems apt to fall back on a by-line of HP which said 'Invent'. To make
the company great again, the need is to innovate, create new products/
categories.
Cost prudence and efficiency are processes which
need to be followed as a rule and not as
a differentiating strategy.
2. Spot the trends and recognize opportunities
The spirit of innovation
creates opportunities across various markets. It gives a perspective
to encourage and take risks. Somewhere in the cost cutting
saga and cutting on R&D spends, risk taking decreases. This can be
seen in the missed opportunities too.
Light emitting diodes - It was one of the early leaders in
light-emitting diodes. Infact Roland Haitz coined the industry-guiding
Haitz’s Law while at HP. However the company did not think that there was a
significant opportunity in the near future and the LED team was pushed into
Agilent who in turn sold them off to Philips. Needless to say the lighting
market is huge and LEDs are one of the main products to drive this.
Memristors - HP announced in 2008 that they
had designed a circuit with which one could make dense, long lasting memory
chips. For decades other companies had been working on it with
success eluding them. However, feeble efforts were made to take this
forward and since then other companies have cracked the code to set standards.
It is very important that risks are taken especially if the
innovation is unique. Agree that risks are higher but the company itself has
proved that it is this risk taking ability which had created the HP of the
glory days.
3. Split the company into Hewlett Packard and HP
Of the revenue of $120 million, PCs and printers still
account for roughly $ 60 billion in revenue and $5.3 billion in operating
profit which is approximately half of the company’s revenue and 45% of the
operating profit.
In reality, HP is two diverse businesses - a personal
computer and printer business which is highly commoditized and an
enterprise focused systems, services and software business.
The former business with its wafer thin margins and
high competitive pressure requires high efficiencies of logistics,
distribution, and production along with quick product introductions catering to
small micro-segments. The enterprise business requires high levels of
customer engagement, customized solutions
and sophisticated software.
Given that the requirements both internally and externally
are very different, it makes sense to split the two.
d) Hire the right CEO
Over the last decade, HP has hired stars - stars who
worked in environments which was conducive to them. In a new environment like
HP, these stars lurched from mistake to mistake. The CEOs tried to mould the
company to suit them and not mould themselves to suit the company. Each
CEO has created more confusion and direction of the company changed very so
often. It is important for the CEO to understand the ethos the company and then
plan the way ahead. It’s not every day that you get a Steve Jobs who could
change things! And he came back to company to which he had co-founded.
e) Get a new board
The board is to drive the overall vision of the company but the
HP board has been an unmitigated disaster. Their selection of candidates has
been pathetic and so to have been their understanding of the business they
govern . They have also not guided the CEOs.
There is still a lot of hope and the doors to growth are not
shut. It calls for a mix of culture re-orientation & practicality in approach.
Comments