At HP, the broad Board problems

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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