HP Strategy: Finding its way back
HP is rapidly devolving from a leading PC manufacturer into a can’t-look-away soap opera. Getting back on track requires innovation in its development and execution of corporate strategy as much as the development of new products.
I’m not going to bother rehashing the sad executive-leadership saga that has turned HP from the leading PC manufacturers into one of the most-watched soap operas. No wonder we don’t need Days of Our Lives orAs the World Turns anymore–big companies flailing wildly can create all the drama we need, sans sponsor.
I do, however, want to offer Meg Whitman and her new team a few pieces of advice on how to execute whatever strategy they eventually land on.
Define a strategy OK, so this is a no-brainer, but with all of the turmoil, it isn’t clear what HP wants to be. The CEO shuffle also tells me the board isn’t convicted about a direction either. Endorsing Leo Apotheker’s strategy isn’t a strategy. A strategy isn’t just a stated direction, it is action IN a direction. The Autonomy acquisition was a good start, regardless of if you like the valuation or not because it was an action that said: “enterprise analytics” is our future. Big, bold bet.
Align with the strategy quickly The one thing I’ve heard Whitman say that encourages me is that she wants to move the decision on what to do with the PC business up to December. It encourages me that it isn’t next year, but I’d like to know what due diligence they need to still do given that they have already gone public with that information. I would suggest they move the decision up to the first week of October so employees, partners, and investors can start their own personal and business planning cycles. Leaving an ecosystem as far-reaching as HP’s in strategic limbo until December is a disservice to all constituencies. They should rapidly decide what businesses they are keeping and how they plan to structure, and then get on with it.
And let me go on the record as saying that the separation of the PC business from HP may look brilliant in 2-3 years. The business may be too big to sell, but only short-term thinkers will be drawn to the gravity well that is PC revenue and not the gravity well of the long-term demise of all but the most specialty PC businesses. Sure, HP will receive a potential bump from a successful Windows 8. As a scenario planner, I need to remind my readers that they shouldn’t count their Windows licenses before they are signed. Early hype doesn’t necessarily translate into success. On the other hand, Windows 8 could be big, but my bet is even if it is big, it will be the last big traditional OS release that matters. So HP getting out of the PC business now, spinning it off, but maintaining a majority stake that they can later sell (like at the height of a Windows 8 frenzy), may well make them the smartest PC maker on the planet. If you don’t want to be a low-margin commodity business, then you don’t want to sell consumer PCs or basic business PCs. Specialty, high profile designs and unique differentiation will eventually be what remains of the PC business, and those attributes are better left to smaller firms or focused firms (e.g., an HP PC spinoff focused on its own future and not the future of a conglomerated behemoth).
So, define the strategy and the mission (and by the way, when Whitman says she’s “behind the mission,” she should point out exactly what that is. Most of us don’t really know what HP’s mission is at the moment).
No one is talking much about the printer business, another low-margin cash cow compared with the much higher-margin print-cartridge business. A real indicator of strategic intent would be to spin that unit off with the PC business. (I would say keep the server business because analytics will continue to generate a learning feedback loop. Owning that hardware will confer competitive and performance advantages derived from innovative IC designs and architectures)
Reboot the review cycle Strategy starts in the boardroom, but it is executed in factories and in the field. If there is a new direction, don’t wait for the annual review cycle to update people’s commitments and objectives. As soon as you land on a new direction, get people to align with it. This is where you realign, refocus, and de-invest. A strategy shift that results in people doing pretty much what they used to do isn’t much of a strategy. If HP is going to become an enterprise software and services company, then everyone should line up their commitments to the transformation to that strategy, and then to its execution. Rapid internal adoption of the new strategy and a renewed commitment to the company by employees and partners would make a great thought leadership case study to prove that HP knows how to run an enterprise, starting with itself.
Prepare strategic communications As with the review cycle, the communications plan must be designed to meet the needs of all segments of the business. One e-mail from the office of the CEO isn’t going to cut it. Nor will a few messages from the next tier down. In a company under the strategic strain HP is experiencing, people want to know what the strategy means to them. It needs to be communicated in a way that employees can understand how their work contributes to accomplishing the strategy. Employees also need to understand how and what they should communicate to effectively inform the new strategy. If no one cares about your results, then they probably don’t care about what you are doing, and that leads to disengaged employees. All organizations should be as precise on their communications design as they are on their firewall design, but most aren’t. HP needs to design for strategic communications. This will help it execute in an agile way because there won’t be any guess about who knows what or what people should be doing.
Establish hyper-transparency Stop talking in circles. Say what you don’t know as much as what you do. This is the 21st century. Futurists talk about transparency as a key 21st-century company attribute, but I haven’t really seen the forecast in practice yet. HP should step up and show its cards. They need to say openly and honestly what they know and what they don’t know. Share the scenarios that led to the divesture option. Investors and customers need to know what HP believes in, what it wants to be, and how it arrived at its current state–even if they don’t know to ask. Children in school are always told to show their work. Investors and executives should hold public companies accountable for revealing not just what they think, but how they think. Companies are often happy to share internal thinking when it comes to R&D labs or customer service practices, but they miss crucial trust-building opportunities when they aren’t open about their strategic business approach. Being more open about internal decision models and problem-solving techniques could offer an initial increase in trust. Of course, further trust will only accrue when they turn rhetoric into action.
Exploit increased degrees of freedom The spin-off of Agilent should be seen as a good case for HP, as they already know how to give another company its own destiny, and then double down on its own. Agilent has divested and acquired, and it is probably executed strategic choices that it never would, or never could make under HP. HP’s PC business would have the same degrees of freedom because they wouldn’t need to coordinate, combine, or wait for other parts of the company to execute their very clear and focused strategy. And that would leave HP to develop its own degrees of freedom without worrying about whiplash from its silicon necklace of a PC business hitting it in the back of the head every time it made a strategic move. If HP pulls this off well, Google and Microsoft could learn a thing or two about the strategic disadvantages of a vision that has become too precious.
What just happened? I’m sure that as I was writing this, some new revelation has come from HP as they work the airwaves and the Net in an attempt to rebuild trust and establish credibility for the new team. Before HP spends too much time babbling to the press like a runaway printer, they need to decide what they want to be and make the decision that they are going to invest in the success of the strategy. This means making the necessary choices about what they will do and what they will no longer do, along rapidly realigning their resources, being hyper-transparent, and actually embracing the emergent opportunities afforded by a new, differentiated strategic direction.
Perhaps most of all, HP needs to figure out what it wants to be in this incarnation and get on with it, before the market limits its choices or the strategic direction becomes irrelevant.
This post originally appeared at Fast Company 09-23-2011
[Cover image: Flickr user malias]