What Happened To Hewlett-Packard – HP Needs A Group Hug – HP Can Beat Apple

Great post by William C. Taylor at Businessweek (now Bloomberg). He nailed it on the values and culture issues.

Two links to read:
1. Businessweek: Talyors Link: How Hewlett-Packard Lost the HP Way – Three CEOs in six years, boardroom changes, and other contributers to disfunction

2. Reuters: Unlike Reuters writer Robert Cyran who completely whiffed on the HP story – Meg Whitman is unjustifiable choice for HP

Here is my take on HP. (note: I’ll edit this up later for a more indepth piece just wanted to get my thoughts out there.)

I live in Palo Alto and worked at HP for 9years from 1988-1997.  The was the period of time during the last great transformation at HP.  During this time the founders Bill Hewlett and Dave Packard were still around.

I have had a good seat and been covering HP for over 20yrs.  This is a short summary of what I saw from my seat.  I’m sure there are other perspectives, but this is my angle on HP.

Here is what happened to HP:  A short perspective on how we got to this mess.

Because of it’s founders and it’s culture, HP survived many market shifts over the many decades in which they operated.   The most notable shift in the company history was the PC revolution.

The PC revolution took HP by surprise.  It is well documented that HP missed the PC revolution. We all know the story about how Apple’s founders Steve Jobs and Steve Wozniak worked at HP.  They even used parts from HP and brought the original PC to HP. HP rejected it. That is the Apple story.

What is not as documented is what happened after that for HP.  HP ended up dominating the PC business even prior to buying Compaq and officially getting the #1 market share leader.  Most people don’t know this but HP was already the leader in PC before buying Compaq.

How HP Can Beat Apple – A Historical Example

How did HP go from missing the boat completely on PC market to being the market leader?

Can HP beat the market leader Apple?  They did it in the PC business years ago.  It’s not only possible but they did it before.  You could say it’s in their DNA.

This true story shows that HP can be the leader in tablets and smartphones.

PC Revolution is Similar to SmartPhone/Tablet Revolution

Even after a few years after the initial launch of the PC business, HP had virtually no presence in that new PC market – sound familiar with today’s smartphone and tablet business…

What happened was classic HP.

A smart leader at HP and his team created the LaserJet. The Laser printer (key part of the PC revolution) changed the size of HP and it’s fate – in a good way. Because of the revenues the LaserJet threw off HP revenues (and profits) soared from about 6b to 36b over a 10 year period.  Wall Street went crazy with joy with stock price splits happening a bunch of times.

The LaserJet saved HP.  It produced the glory years.  It was a the glory days and it saved HP from dying the same fate as Digital Equipment Corp (DEC) and other minicomputer companies like Data General.  Remember during that time HP was struggling as a bloated minicomputer and test and measurement company.  A rising tide with the LaserJet floated all of HP boats.

Because of the LaserJet HP developed their famous indirect channel.  The company generated tons of cash and developed thousands of new customers.  HP’s division were pumping out new products like it was nobody’s business.  HP funded new innovative products.  They were even involved in creating the Web – that’s the World Wide Web.  HP scientist co-assisted Berners Lee in creating the Web.  Tim only developed HTTP.

Because of their position in the growing market of the PC sector, HP went on a massive run of prosperity.

The rest is history:  inkjet, officejet, client server- (those minicomputers came in handy now when connecting PCs to them-, networking gear, etc. HP had consumer, and enterprise leadership. Their competitors except IBM were out of the picture. In just a decade HP transformed from nothing into a computer industry powerhouse.  Does this sound like Apple?  Yes it does.  It’s possible.

The HP Downfall – The Dark Years - Carly Fiorina Era
The death of the HP Way and their struggles that we see today originate with  Carly Fiorina.

The Carly era was the beginning of the “culture shift” that split the DNA of HP.

Carly was power hungry CEO who sole strategy was to break up the HP way and rebuild it in her own image. She knew what she was doing.  Carly slaughtered all the HP sacred cows at HP.

Here are a few examples of Carly’s take down:  She took down the pictures of the founders Bill and Dave out of every office at HP.  Carly fired as many top old school HP executives as she could.  She shut down some of the most pristine offices at HP (to save a few pennies).  These offices were home to employees for decades from office workers to shipping employee most with the company for 25+ years.  Shutting down those offices were sacred icons to many of the HP employees and thus killing off years of cultural norms and interactions.  Carly employed the telecommuting gimmick that employees work at home.  More chaos was injected by Carly when she reorganized the entire companies sales forces.  Those sales forces were in place for decades.  Then to put more humiliation into the mix she cut everyone’s salaries while lining her pockets, taking private jets and giving herself perks.

Compaq Battle – HP Board of Directors Awakes

All this mess that we are seeing with HP today can be traced to the Carly battle for Compaq. The battle around the Compaq deal that occurred over a decade ago was really about Carly and the old guard of HP.  The board of directors at that time was divided between the families of the founders and outside individuals and execs not plugged into what was happening at HP.  It was the beginning of all this board mess.

What happened after Carly and her battle with the board over Compaq is just a footnote in the downfall of HP.  Sure it happened but not due to anything other than Carly and the ghost of the HP Way past.

Carly Aftermath – The Ghost of the HP Way Emerges

Mark Hurd was the savvy operator who cleaned up Carly’s mess.  Hurd did a good job on cleaning up and whipping HP into shape.  However, Hurd cut to close to the bone to get results for his compensation and Wall Street approval.  Mark Hurd was never CEO material. At best Hurd was a COO with a CEO title.

Moving on to Leo Apotheker.  Leo was just a bad choice at a really bad time.  Leo who was clueless on corporate management and communication in a complex incestous American company.  Leo was a smart strategist and knowledgeable person.  Leo at best was EVP material not CEO.  Leo was a desperate move by a desperate board.

Board of Directors Struggles

The board of directors at HP has been sideways since the Carly fiasco.  The main struggle was between the old school and new school board members.

The board was split between three groups: 1) old school HP purists who are the defenders of the old Bill and Dave way, and 2) retired “checked out” executives who can’t keep score of what’s going on, and 3) power hungry industry celebrities who don’t care their reputations over the legacy of HP.

Post Leo Apothoker – Finding a New CEO

Finding a new CEO amist a almost 50% drop in corporate value in just a few months is hard. Brand equity falling faster than a rock in the ocean, HP had to move fast again.  Never a good thing.  Do they go internal or external for the CEO?

Internally within the company there were a few choices for CEO.  Two candidates come to mind:  Dave Donatelli and Todd Bradley.

Todd Bradley is not well liked in the industry as a CEO candidate.  Mainly due to his lack of leadership in smartphones and tablets, and how he’s been so vocal in the press of around the PC controversy.  I think that he was damaged by his grandstanding.  Also some are saying that Bradley would not be likely to bring a new compelling “laserjet” like product to the market.

Dave Donatelli was the likey choice. Donatelli the perfect CEO operator. Donatelli is the best of a task master and strategist. Donatelli understands technology. Donatelli was the perfect choice for CEO. The issue with Donatelli is that he’s new to the company. He was brought in from EMC where he was a key leader there.  What gets me is that something else might have been at play with Donatelli because the “he’s new”  argument doesn’t hold against the choice for Meg Whitman.  Donatelli is just as accomplished as Whitman.    Maybe there are others issues at play internally.  Clearly HP brought in Whitman for her communications savvy and corporate management experience.  Donatelli might still emerge or at least be elevated to work close with Whitman.  According to friends of mine that worked closely to Donatelli  and Whitman tell me that Donatelli has more execution and operating skills than Whitman, but Donatelli has not been vetted.

Internally there were not many old school HP candidates hanging around.  Most of the old school Bill and Dave crew have left or were forced out.   The only possible candidate that I could think of is Ann Livermore.  Ann was phased out a year ago.

HP Way Guardians or Ghosts of Bill and Dave.
HP’s turmoil, board battles, executive in fighting, and other HP struggles all come from a deep desire to keep the iconic company alive. You can’t swing a dead cat without hitting someone who loves HP. Their brand value and corporate value is extremely valuable.  HP has earned deep loyalty and trust in Silicon Valley and around the world.

The HP Way touched many people including employees, charities, universities, and communities around the world. Much of the tussle internally and at the board of director level comes from what I’ve called the ghosts of Bill and Dave or simply put the “HP Way Guardians.”

The HP Way Guardians are all those people who were affected by the amazing positive community benefits that they received over the years by HP and it’s founders. The HP Way Guardians were the families of the founders Bill and Dave, former employees, charities, customers, and other individuals who experienced the greatness of corporate values and citizenship.

I argue that like the PC business with the LaserJet show HP that they can easily get a position in the massive smartphone and table business. Same with the transformation of cloud computing.  A turnaround is not only possible but HP did it before.  Granted it was a different time but the PC revolution is similar to what is happening today.   Even Marc Andreesen is kind of saying that in his Software is Eating the World essay.  Although I think Marc’s vision is too narrow.

The challenge for HP will be organizational.  Getting products to market will be straight forward.  HP is not screwed up internally.  HP is performing well.  They have the team.  The CEO just needs to do a group hug, set a path, get the right people in managment positions, and then get the hell out of the way.  It’s a culture issue.  HP needed the cultural leadership.  We saw that with Ray Lane and Meg Whitman’s messaging.

Can Ray Lane and Meg Whitman walk the talk?  Can they align their management teams?

We will be watching.  Of course SiliconANGLE.com will be writing about it and SiliconANGLE.tv will be broadcasting it.