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Summary:

Over the past year, HP’s board has led the company through more than a few stumbles. The company’s next CEO will not only have to bring back the innovation of “the HP way” but will also have to wrangle the board back in shape.

hp money

I generally avoid editorializing about business. Too many years writing “objectively” about the technology industries makes me gun shy about taking an un-reported stand. But since I covered Hewlett Packard closely when I was a tech reporter in the 80s and the company was nearing the pinnacle of its reputation as one of the keystone companies in technology, the news this morning that its entire board didn’t have the gumption to even interview its latest, and apparently lame-duck CEO, Leo Apotheker, feels like the last straw in a decline of Sheenesque proportions and so, of course, I have to say something.

HP’s dominance in printers, PCs, workstations, minicomputers, medical diagnostics, even financial calculators was the culmination of a noble heritage that literally started in a veritable garage when the founders hand-built an oscillator they sold to Walt Disney for post-production sound work on Fantasia. HP was never the hippest company — it wasn’t a place I ever associated with the bearded sandal-wearing characters that made Sun and Silicon Graphics and Apple and Next so colorful in their heydays — but it was the most solid and mythic, a place that capitalized on smarts and research and innovation and was able, against the laws of Silicon Valley physics as it broke $100 billion in revenues, to maintain its edge even as it absorbed companies like Compaq and DEC. I believe “corporate culture” is an oxymoronic construct, yet “The HP Way” seems to indeed have been a good thing, one that held the massive organization together for a remarkable record of growth and innovation over six decades.

When the founders retired and faded into the philanthropic background, things became unhinged. Lew Platt missed the Internet. Carly Fiorina over-acquired. The wire-tapping of reporters and board members seemed, at the time, like a weird aberration (now it doesn’t). Then Hurd couldn’t keep it in his pants and mortgaged the company’s future by slashing R&D … and now after one remarkably weird year characterized by throwing in the towel over and over, Leo Apotheker — the CEO no one had ever heard of before — is the next to walk the plank.  The question is why was he ever even on the boat? I didn’t even know how to properly pronounce his name until yesterday at lunch when my partner corrected me and put an emphasis on the “e” with an accent (It’s “Lay-O” not “Lee-O”).

HP CEO Leo Apotheker

So what went well in the last year? Not much. The Palm acquisition yielded an operating system that was a lame dark horse out of the gate. The company had a great success in tablets — once it discontinued them and slashed the price and alienated the first customers silly enough to pay full price at launch. And the greatest bumble of all — telling the world that it is considering getting out of the vicious PC business before it had a buyer for that business —  effectively killing, in a single utterance, all corporate/enterprise demand for fleets of its PCs and future demand by whatever greater fool buys the business off of them.

The headhunters and the board that was too divisive and busy to interview its last round of CEO candidates is drawing up yet another short list of possible leaders. Whoever gets tapped, they have a major mess to muck out. The situation as I see it without looking at the balance sheet:

  1. The PC is dead. It has another decade in the corporate world, but the game over in PCs. Apple won and tablets are the new form factor. HP made its bid and failed there.
  2. The Wintel standard is irrelevant. Microsoft and Intel no longer call the tune. Operating systems are irrelevant in the cloud. WebOS was nice looking, but too late in the Apple, Android, Windows race.
  3. HP dictates few standards, has no APIs, has no developer community.
  4. Printers are the last mechanical appendage. Think about it. Once hard disks stopped spinning and went solid state, the last thing with a motor is the printer. Printers are a means to an end, not a future.
  5. Crisis communications. Beginning with the CNET wiretapping, the Hurd scandal and this summer’s string of can’t-shoot-straight missteps, the once golden credibility of the company is very tarnished and tattered.
  6. Marketing. Once Lenovo snagged David Roman — the marketing rock star that gave HP its awesome “The PC is Personal Again” campaign — the air went out of HP’s creative consumer balloon.
  7. China and emerging markets. Nowhere near as nimble or familiar as Lenovo and Acer.

What would I advise the next CEO?

  1. Revive R&D. The game is about smarts and vision and innovation, not balance sheets. Hurd made the Street happy slashing costs. Any brown-suited execution drone from finance and ops can cut costs. People who invent the future are in tight supply and rather be hanging their hats at Google, Facebook, Apple and Amazon.
  2. Get a better board. It sounds like a shit fight in the monkey cage at the zoo inside of HPs board. The CEO needs to stack the deck with allies and advisors, not glory seekers who pull down each other’s pants.
  3. Become the builder and integrator for customers — not a supplier of boxes and cables. It’s a cliche to say services are the future – a third of HP’s business is from services now. IBM under Gerstner retreated to services, divesting themselves of the PC business and other commodity hardware plays like printers. But the demand for a big bad ass builder with a vision, who can quickly and elegantly bring a non-tech global customer into this very weird, very tipping-point-world of clouds and tablets and HTML5 and content-anywhere driven by NetGen Millenials is huge. The kernel is there with EDS, but not the panache and glory.

HP needs a larger-than-life personality leading it, someone extroverted and blunt but who is jazzed about the future and loves chaos and the thrill of the new. Things are serious, so a serious shakeup and re-think is called for to get re-hinged. Think Gerstner making the Elephant dance with Jerome York at IBM. Applying a pure balance sheet mechanic is a mistake. The next leader needs some technology credentials as well as operational ones. If Apotheker’s replacement is a grey-faced MBA in his or her late 40s or 50s then the company is going to molder and lose even more relevancy. If the next CEO is too young they could easily be overwhelmed by the enormity of the organization. I don’t envy the people running this search — HP is a seriously dented can and apparently, according to the excellent piece by James Stewart in this morning’s New York Times – the board had a hard time getting candidates to even consider taking a look after Hurd’s ignoble departure. I literally can’t think of a single name that would get the job done.

David Churbuck is a digital media and marketing executive, with more than 25 years’ experience. He was the founding editor of Forbes.com and is currently a strategy advisor with a New York City-based strategy firm. This post originally appeared on his blog.

Photo courtesy of Flickr user LifeSupercharger.

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  1. @ David,

    You’ve certainly identified the problems and the possible solutions. But what makes the solutions *impossible* is in fact the entrenched board. Boards only get fired if there’s a takeover. Otherwise it’s continual shit slinging with impunity.

    And you say innovate? I say why should you innovate at HP when you can actually be rewarded for innovation either at a startup or at a Google or Apple?

    HP’s future is a breakup by a private equity firm.

  2. A well-written piece, with one exception: PCs aren’t dead, they’re just not going to be as dominant. Instead of multiple PCs in a home, people will supplement them with tablets and smartphones. And they will continue to get less expensive, which will make them less profitable to build, but they’re not dead. And HP didn’t fail in tablets, they gave up and quit. There was room for them, but Apotheker didn’t want to be in the hardware business (I guess that’s what happens when you don’t interview your CEO candidate).

    Unfortunately for HP, the board isn’t going to listen to Churbuck, It looks like they’re going to hire Whitman as CEO. One step forward, two steps back. She’s everything they don’t need.

  3. Nice analysis. Carly Fiorina was a major problem. She scrapped HP’s own plans for an HP iPod competitor and decided to become an international distributor of iPods solely so she could make a splash in her 2004 CES keynote. This way she got to have Jimmy Iovine, the Edge, Dr. Dre and Sheryl Crow up on stage, but abdicated a crucial market to a competitor. It as laughable at the time and is sad in hindsight. A good strategy if you want to be governor someday I guess.

  4. The only person who can save HP at this point is Carl Icahn

  5. Board members had better start calling their attorneys. If it is true that they hired Lay-o without ever meeting and interviewing him, they are very likely personally liable to HP shareholders.

  6. We worked with HP from 1987 through 2002.

    I didn’t think it was possible for such an iconic company to become fodder for Conan jokes. Then again, there are probably a few folks still surprised that DEC went under.

    David’s point that HP was “never the hippest company” is certainly true. But was that necessarily a bad thing?

    I don’t think so. There’s always a place in the market for a brand that you can count on.

    Reflecting on the CEO musical chairs, the company hired Hurd for his operations acuity and Apotheker because he’s a software guy.

    Perhaps it’s time to hire a CEO with one characteristic as the primary criterion, leadership.

  7. They need Steve Jobs. Someone who will tell Wall Street to go suck an egg and restore their technological prowess. They are and will be a joke, because there is no Steve Jobs to do it. And nobody with a Harvard MBA has the nerve to rock the boat enough to change the company’s direction.

    Meg Whitman? Ha. That’s a good one. She tried to buy her way into the governorship here and we saw from her outright lying, distortion and lack of integrity when it comes to telling the truth, proved she cannot be trusted running anything bigger than a desk.

  8. Oh lol. Is this a troll post?

    No? Really you’re serious? HA!! This is even more hilarious!

    Let’s do this point by point, shall we?

    “The PC is dead. It has another decade in the corporate world, but the game over in PCs. Apple won and tablets are the new form factor. HP made its bid and failed there.”

    Yeah no. Tablets aren’t the new “form factor” they’re a fad. A fad for consumers. Folks in the corporate world need things that will actually get things DONE. Machines capable of doing work. Keep in mind, these are the same people who still run Cobol. PCs aren’t going anywhere, anytime soon. Yeah, some of the market share will just go to tablets, but that’s the consumer market share. The people who use their current PCs for watching youtube videos and reading BS editorials on GigaOm.

    For people who actually need to get work done, the PC will be standard for a long time coming.

    “The Wintel standard is irrelevant. Microsoft and Intel no longer call the tune. Operating systems are irrelevant in the cloud. WebOS was nice looking, but too late in the Apple, Android, Windows race.”

    Haha, again no. Because PCs will still be needed and in demand, intel and windows will be here for a long time still. Of course, Linux, and Unix will also be there as a free and open source alternative. Mac OS probably won’t be there, since it has no functionality to speak of, unless you run windows on it, but then you’d be wasting RAM by running 2 OSs.

    “HP dictates few standards, has no APIs, has no developer community.”

    They don’t need it. They made PCs for the consumer market. They also had the largest, and very STABLE market share. The problem is, is that HP seems to have an unlucky streak of having CEOs that want to destroy the company.

    “Printers are the last mechanical appendage. Think about it. Once hard disks stopped spinning and went solid state, the last thing with a motor is the printer. Printers are a means to an end, not a future.”

    Except you forget that the various fans inside a computer also have motors… and magnetic hard drives are worth more for the money… and solid state HDs die after a certain number of read write operations.

    Also it’s required by law that things like contracts are printed on paper. In ink. And archived. Not to mention business transactions, payroll statements, receipts… I hope you see where I’m going here.

    A majority of your points here about future tech are moot and absolutely off base. The rest of the stuff about marketing and stuff I don’t care much to comment on. It’s not my field of expertise.

    But if this is what passes on GigaOm as an editorial, and an insightful one? Then I might as well become a paid writer for GigaOm, at least I can see the forest for the trees, and have a bit of forsight.

    1. “Mac OS probably won’t be there, since it has no functionality to speak of, unless you run windows on it,”

      So you’ve never used a Mac, then? You should read some customer satisfaction reports — there’s a reason Apple has topped pretty much every category for years.

      1. I have used a Mac. Since the OS9 days in the 90s up to today. And with each generation, it’s lost more and more functionality.

        And does it really matter what Mac OS users like? They’re only using it to surf the internet, and use condensed websites we, for some reason, call “Apps”.

        It’s very EASY for apple to make an OS that’s stable, and therefore enjoyable by the mass audience. They’re not building software that has to account for every possible piece of hardware out on the market.

        But as a fault, you can’t use it for anything. And the few uses it previously had, mainly video editing, Apple has gone and shot themselves in the foot with the new version of Final cut.

        So what does that leave for Mac OS in terms of unique functionality?

  9. Not even Steve Jobs himself can save this company.

  10. @om The Wintel standard is irrelevant http://t.co/MS7IkbOc

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