Avoiding The Fate Of HP, Zombie Company

A CEO, in announcing 4th quarter financial results:

  1. Pleaded for patience after describing the operational challenges and other internal problems that contributed to a significant year-over-year decline in earnings;
  2. Explained that weak consumer demand and supply shortages contributed to lost revenues;
  3. Blamed years of underinvestment in systems and procedures that made these problems worse;
  4. Revealed the company needed to reduce costs to free up money for investing in growth areas;
  5. Said the company turnaround would be a 2-to-5-year journey;
  6. Said that the company was not as effective as it needed to be in matching supply with demand;
  7. Revealed the company needs to be better turning orders into products faster than its rivals;
  8. Shared that, while the company is “world class” in terms of buying components, the company isn’t sure if it is world class in terms of an end-to-end supply chain.

This could be any company struggling in tough economic times. But, this isn’t the news of just any company. 

This is HP—a $120 billion, Fortune 11 company. The CEO is Meg Whitman, formerly CEO of eBay.

HP is one of the 30 companies included in the Dow Jones Industrial Average number we hear about every day. The DJIA is the barometer of companies traded on the New York Stock Exchange. We expect a Dow 30 company to be amongst “the best of the best.” Now we know that’s not always so.

While I’m all for transparency from corporations, Meg Whitman’s revelations are a bit mind-boggling. Let’s look at some history.

  • Meg Whitman replaced Leo Apotheker, the “SAP guy,” who led the company very clumsily for a bit more than one year (2010-2011). Many of us wondered at the time why on earth the HP Board hired him. Whitman has only been in her present role for about 6 months.
  • Apotheker’s predecessor was Mark Hurd, who had a tenure of about 5 years (2005-2010). I characterize Hurd’s tenure as “focused on business execution.” 
  • Hurd’s predecessor was Carly Fiorina, who led the company for about 6 years (1999-2005). I characterize Fiorina's tenure as being about “growth through acquisition.” 

Hurd would have been a better COO for HP than he was CEO. His focus was business execution, cutting costs, and wringing every scintilla of profit he could from HP products. When he was terminated by the HP Board for a seemingly minor issue, I personally believed that the HP Board had been looking for an excuse to get rid of him. Why?

A CEO has to do a lot of things well, including creating strategy and driving innovation. Innovation was virtually nonexistent during Hurd’s tenure. And, Hurd failed to create and deliver a compelling strategy. Add to this the fact that Hurd was intently disliked by the vast majority of HP employees, and you have a very dark period at HP, just like the Carly Fiorina period.

To hear Whitman talk about the issues above is to acknowledge that, not only did Hurd fail to create a compelling strategy and drive innovation, he failed to provide enduring, sustainable, value-laden change in the fundamentals of how HP does business today. 

And, now that HP is trying to recover from wounds (some inflicted by the global economy and supply chain woes but many more that were self-inflicted), it must now go through a period of significant reinvention that Whitman says could take 2-5 years. If it takes that long, will anyone care when this is finally complete?

I often ask people to name one game-changing innovation that has come out of HP in the past decade. I’m at a loss to think of anything, and no one I’ve asked can come up with a definitive answer. That’s just not right.

Yet, look at what Apple has achieved in the past decade: game-changing innovation after game-changing innovation. Look at Apple’s market capitalization, stock price, and the excitement Apple has created. The folks at HP and Apple breathe the same air—they’re neighbors. But, my, what a profound difference in results these two companies have experienced during the same time period.

HP used to be known as a premium brand. Whatever business HP was in, it was the Rolls Royce in that category. No more. HP at this point is a zombie just going through the motions. No innovation. No compelling strategy. No excitement. No enthusiasm. No passion. And, operational problems galore on top of all of this.  

Where has the HP board been the last decade? They have responsibility for much of this.

HP has done what a lot of companies have been doing for the past 3 years: hunkered down trying to ride out the economic downturn focused only on reducing costs while searching for sales. HP has paid a huge price for this. And, so have other companies that have adopted similar positions.

My wife read this piece aloud to my 89-year old mother-in-law. Her reaction on hearing this is, “Maybe this will get them going and they’ll snap out of it!” For someone who wouldn’t consider herself a business person, I’d say she nailed it.

I wish HP, the HP leadership team, employees, partners and shareholders well on their journey of renewal. Meg Whitman had the courage to accept this challenge—I’m sure there are times when she wonders what she was thinking when she stepped into this role a few months ago. 

The last decade at HP has been really difficult and, very likely, not much fun. We need HP to succeed and thrive as a company. No one wins if HP loses; we all lose. 

What actions are you taking to make sure you don’t become a zombie company? There’s no time like the present to tackle those issues you know are going to hurt you as the economy continues its rebound. Just ask HP.

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Dave Gardner is a management consultant, speaker and blogger in Silicon Valley. His firm helps clients eliminate business execution issues that threaten profitable and sustainable growth. You can reach him on Twitter @Gardner_Dave

[Image: Flickr user Simon Bennett]

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5 Comments

  • David Gardner

    Thanks, David. My sense is Meg understands the issues and has a plan of attack--that's good. The next big challenge is getting people to move towards the changes that are needed. I wish Meg well!

  • David Nour

    Dave - as you know I've been consulting with HP for the last couple of years and having spoken at the Global Partner Conference a few weeks ago, I can tell you that Meg Whitman brings a very steady stewardship of this large, complex, tumultuous organization.  I loved her comment about wanting to take HP out of the headlines for the drama and back into the headlines for great products, innovation, exceptional service, and client success stories.  I also believe she will step aside in a couple of years and return to her board role with Donatelli leading the helm.

    Here are 15 Scintillating Scenes From HP's Global Partner Conference – CRN, February 27
    http://www.crn.com/slide-shows...

  • David Gardner

    Dipak...great observations about the applicability of the concepts to start-ups.  It also explains why it is so difficult for companies to succeed--you have to do a lot of things well simultaneously and not get complacent that one you are done, you're finished for life.

    Jennifer....thanks for your insights here as well!

    Dave Gardner

  • Dipak M. Patel

    Great summation of the current trends with large enterprises in most sectors/industries.  As a startup entrepreneur and advisor, I love this as the startup communities is embracing this challenge to innovate and creating record setting startups.  Most will fail...some will have an impact...& some will change the world.  Regardless, ALL will learn and contribute what they've learned to the overall innovation community.  So in fact, I love that the gorillas are not even in the stands let alone spectators in the game....as it just means we can GO BIG or GO HOME!

  • Jennifer Shutwell

    Spot on with the Zombie concept.  Maybe HP is reflecting something for people too.

    ...may we all avoid turning into zombies with temptations and "Apple".  The new tree of  knowledge of good and evil...which ultimately caused expulsion from the Garden of Eden. 

    Good luck to HP, and all people with the forces of good and evil with technology.