Hewlett Packard – From There to Here is only part of the story

I started my professional career at Hewlett Packard. I joined at a time when the founders (Dave Packard and Bill Hewlett) were still alive, very old but still very much an influence on the day-to-day culture of Hewlett Packard.
It may seem quaint nowadays, but when a company, successful in so many ways (such as HP) still has the founders around, there is a lot of pressure to run the business in their image.

I used to work in a major site in Europe, the site contained a development and manufacturing operation, as well as an arm of HP labs, a pure research facility full of PhD’s with foreheads significantly larger than can be comfortably considered normal. Because it was a major site, company board meetings and visits from the highest echelons of the company’s management team were quite frequent. Even though I was a neophyte in the company I was able to attend all-hands meetings and hear the views of these leaders over the years. And it was normal for executives visiting a site to offer to meet one on one with anyone who would care to make an appointment.

The idea of management by wandering around and of being open with all employees was so engrained in the culture that whenever a dignitary was visiting there was a signup process to arrange for a one-on-one meeting. I made a point of always putting my name down on the list. And so it was that I got to meet both Bill and Dave among others.
Bill Hewlett was quite infirm when I got to meet him, actually travelling around the inside of buildings in a golf cart, waving at everyone and saying “you’re all doing very well” in a rather frail voice (I did notice the similarity at the time to young Mr. Grace, from the UK TV show “are you being served”). But his thoughts were still an amazing thing for a young engineer to be exposed to.

Young Mr. Grace – Are you Being Served
Catch phrase “You’re all doing very well, carry on”

When I spoke with Dave Packard I remember him telling me a story about how HP drove innovation. He said that the model was quite simple, every year they would undertake a dozen game changing projects, knowing full well that most of them would not turn into strong businesses directly. But the ones that did succeed would be the future of the company, and would more than pay for the ones that had failed. But just as importantly the people who had worked on the failed projects has the experience to become the company’s success in the next round. It was just as much about gaining the positive experiences of failure as it was about the positive experiences of success.

This was a lesson I’ve taken with me through my career and life. The fact that Hewlett and Packard created a culture of respect for people was much more about creating a good long-term business strategy than it was about creating a good ethical playing field.

When Bill and Dave left their executive positions at Hewlett Packard, they still were very much involved in the running of the company until pretty much the days that they died.

John Young was the CEO when I joined Hewlett Packard, and I believe Bill Hewlett was the Chairman of the board. I remember quite clearly the time when the annual revenue of the company passed the $40 billion mark. As companies grow the levels of management between the CEO and the workers has to grow as well. And I remember that all of the management team of the company was trained on how to deal with the growth the company was going through. There was a paper from Harvard that analytically explained the pains company’s need to go through to be able to keep innovating. Hewlett Packard addressed this by refocusing on the founding principles of the company, and created an internal campaign called “the rules of the garage”. This is well documented and I’m sure you can find a copy on the HP site or around the web. But the rules were a practical set of cultural definitions, the core values of the company.

As time moved on John Young was replaced by Lew Platt. I remember some of the fundamental changes we started to see around the company. Where before decision-making was quite a public affair, we started to see a change. Information about the business was scarcer to the average employee, and the pressure was on to grow the business beyond purely new products. The company started to grow into markets such as printing and PC’s, areas where partnerships with original equipment manufacturers (canon, intel etc) drove amazing market-share growth. But where previously the leadership used to take a holistic view of the business, large fiefdoms started to form. I remember a time when laser printers, inkjet printers and consumables were all different fiefdoms. The heads of laser printing and Ink printing (Doug Carnahan and Rick Belluzo) were very different personalities and didn’t seem to see eye-to-eye on many things. Both I remember were amazing inspirational leaders.

It was very clear to the sales and marketing teams that the money was in toner and ink, and the way to sell more toner and ink was to get as many printers in use as possible, whatever that took. It took another decade for the company to agree on a way to link the consumables and printers together in a way that would maximize printer unit placements, and of course by that time, the competition had grown and had taken a significant share of the market that previously Hewlett Packard had been primed to dominate in-perpetuity. HP’s did create some amazing software to make their printers better than the competition in the form of printer drivers and logic boards, which were considered the best in the industry. But when everyone on the planet seemed to by buying printer it was easier to lose market share than to gain it.

This was the power of the fiefdoms, and it has had a continually detrimental effect on the business (in the view of this author).

Lew did have the respect of his dukes (the business group heads of the fiefdoms). But this loyalty was not automatically passed to him replacement.

I had the pleasure of being at HP when Carly Fiorina became the CEO. I found her to be an incredibly smart woman. But I saw quite quickly how the Dukes listened to her direction and then did whatever they thought was preferable for their individual fiefdoms. Carly drove HP to become larger by acquisition, the most obvious being Compaq (who had at the time only recently absorbed DEC). Many of the leadership were replaced by incoming Compaq executives, much of the culture of the company at this time moved from one of innovation in R&D to innovation in acquisition and just-in-time manufacturing processes. Ms. Fiorina tried to address the new risk-averse nature of the management team by trying to refocus HP on innovation and invention, hence the new company tag line “HP invent”. But I suspect too much time had passed from the passing of the founders and their passion for their culture, and the latest management team was not effective in trying to reinvigorate the culture of “huge corporate entrepreneurialism”.

The amazing thing to me was that all through these decades of change, HP was still able to bring out such amazing products. There technology is still preeminent in so many categories. And I know that HP still has some of the best engineering and field staff in the world. A lot had changed but it’s hard to un-teach greatness from engineers, however hard you try.
During the time of Carly, I left HP for an exciting new opportunity, but still continued to follow the company closely.
After Carly (whose end as CEO was quite shocking), eventually the HP board found a new CEO in the form of Mark Hurd. I have never met Mark personally, but many of my friends at HP at the time described him as “cut throat” and were dismayed at the deep cost cutting exercises he continually delivered. I can only imagine the pressure he was under to right the ship, and a combination of cuts in many areas along with massive acquisitions in others were made. Frankly the strategy (while hard) did seem to hold a lot of business sense. Unfortunately another very public falling out with the board along with some salacious stories that were never fully substantiated (in my opinion) had Mark leave the company well before his strategy could reach a point of ROI.

Again the board took some time to find a new CEO, and this time it was the ex-ceo of SAP, Leo Apotheker. Leo then started a new round of trying to right the ship, and again it seems (to me) that he didn’t really grab hold of the dukes of the fiefdoms in such a way that they truly followed his lead. I have no inside knowledge here, but it seems that his views on the direction of the company were not widely supported by those that worked one or two levels down in the business. His public plans to divest of the PC business, and move the company to be in high value, lower volume enterprise markets such as enterprise software, while entering new markets such as tablets didn’t seem congruent. Again it may just be that his time at the company was too short to be able to show the world the full value of the plan.

Leo was then replaced by the current CEO Meg Whitman, and boy does she have her hands full. This week we heard from HP about their analysis of the purchase of Autonomy. From my experience of enterprise software company’s, I’m not that surprised. Enterprise software in inherently a relationship business, and I suspect every software company holds themselves in incredibly high esteem, combine this with the track record of acquired software companies and it seems par for the course.
It was very impressive that Ms. Whitman was so open about their analysis, and being able to draw a line under the politics of the situation speaks very well for her ability to drive change.

Again below all of the complexities of the last thirty years, HP still creates amazing products, and I suspect their new CEO may be just the right person to fix some of the gaps in their thinking culturally and strategically.

HP’s strength started by valuing people, especially those that had learned the lessons taught through failure. I suspect the people there today have been battle hardened and when the ship is again pointing in a single direction they will dominate the markets they serve.


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