The global technology market will be watching HP as it opens up for Discover 2013 in Barcelona Spain, which will be covered live on SiliconANGLE.tv.  HP is in the middle innings of its five-year financial and innovation strategy turnaround.  HP, many believe, is facing a deciding moment in its history, one that could determine whether it will remain a vital driving force in IT or become a fading legacy player.  It had good financial results in its last quarter, showing that it is moving toward financial stability with its recent dividend and stock buyback announcements.  However its stock has been consistently underperforming, reflecting continuing doubts in the financial markets, as it faces a critical moment in the history of the IT industry, with multiple forces driving major change.

The real question, as SiliconANGLE Founder and CEO John Furrier has said, is not what new features or even product directions HP may announce at the conference but whether CEO Meg Whitman can create and enforce a corporate vision and direction that will keep HP relevant. In her quarterly earnings call she talked about a five year plan to turn HP around. The question is, does she have a plan, and if so will it work. And will HP’s board give her that five years or will we see more churn at the top of the hardware giant?

Defining the problem

The problem is not something Whitman caused. It is a product of the internal political battles inside the company that have driven the parade of executives through the CEO’s office over the last several years, each with a different plan for taking HP forward, combined with the unprecedented upheaval in the industry itself, driven by several techno/marketing forces including Web 2.0 services, mobile, flash storage, software-defined infrastructure, and globalization. These are changing IT in fundamental ways, making it difficult for anyone to predict how the fabric of the IT industry and market will look in five years. Guiding a vendor the size of HP through this period is very difficult at best, and HP is not eBay, which was created on a successful vision of Internet commerce that remains valid today.

To do it, Whitman, in Furrier’s words, must “develop a plan that looks relevant and then make it relevant.” She must develop the internal political clout not just to keep her job for the five years she has asked for — not a foregone conclusion given recent history — but to get all the major factions of an organization that has never been known for its corporate unity to line up behind that plan, even when it means upheavals in the established order. She must sell that plan to the financial community to regain the financial resources HP will need to make adequate investments in its future. And HP, which has also not always been an effective marketing organization, must sell the strategy and the changes it requires to its customers to maintain its leading position in the marketplace.

Difficult decisions

She must make difficult decisions about what divisions of the company to invest in and, in some cases, possibly which to sell off. Should HP continue investing in its commercial printing division (not desktop printers, which remain a profitable market for HP), which has little relevance to its core IT business? Today it is a major player in a market that is shrinking in the face electronic publishing and which eventually, probably fairly soon, will see a shakeout of large players.

And what should she do with the PC division? John Furrier strongly believes that selling it, as one former CEO attempted, would be a mistake, because that would cut off a major part of its consumer business and a channel it can use to sell other products. But this is another shrinking market, and clearly the growth is in mobile devices. Would HP be better off to shift its R&D and marketing to mobile? Without a smartphone and with limited presence in a consumer tablet market dominated by Apple, Amazon and Samsung, it already looks like a legacy consumer player. And even in the office market the growing corporate IT interest in virtual desktop solutions foreshadows a day in the near future when HP’s office customers will start shifting to low-end laptops and desktop terminals. Given limited resources, Whitman surely has to consider treating PCs as legacy cash cows and focusing development and marketing on mobile.

Core decisions

Even the investment in core hardware such as the server and storage divisions needs to be examined. HP historically is a hardware company, but today hardware is increasingly commoditized. The growth in IT is largely in software and services. One basic decision Whitman must make is should HP remain primarily a hardware manufacturer and redesign its operations to become a lowest cost provider, or should it shift large amounts of its resources to software and services in the hope that it can grow those businesses fast enough to offset dropping revenues in its traditional product lines. That worked well in the end for IBM, but it was a close thing.

Most of all, as Furrier often says, HP needs to redevelop the core creative energy that drove the company in its period of highest growth. What these times demand more than anything else is new answers. HP needs a unique vision of the future. Apple’s history over the last two decades, as Steve Jobs transformed it from a moribund has-been to a dynamic leader that reshaped how people live with the iPod, iPhone, and iPad, shows both the potential for creativity and the rewards for getting the right vision. Sadly geniuses like Steve Jobs are rare. But what Whitman needs to do is promote and enable others to generate creative ideas, even when they take the company in new directions — perhaps especially then. If she can create an atmosphere and organization that encourages creativity and lure highly creative people to HP, which today certainly is still in a much stronger position than Apple was in when Jobs started development of the iPod, then she can turn the company around and lead it back into a leadership position in the industry.

Seeking strategic signs

Discover 2013 Barcelona is a perfect opportunity for Whitman and the senior management team she leads to articulate their plan for the future of the company. CIOs should pay careful attention to all strategic statements and to indications of whether division-level executives subscribe to those statements. This is not a time for bland statements but rather for visible, dynamic leadership, and the extent to which Whitman and her team display that will be a measure of what customers can expect from the vendor in the future.