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Has HP Become A Zombie Company?

By David J. Gardner



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 turn-around would be a 2-5 year journey

6.    offered 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 is not 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 is not 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 a Dow 30 company, one of the 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 is not always so.

While I am all for transparency from corporations, Meg Whitman�s revelations are a bit mind-boggling. Let us 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. Meg has only been in her present role for about 6 months.

        Mr. Apotheker�s predecessor was Mark Hurd who had a tenure of about 5 years (2005-2010). I characterize Mark Hurd�s tenure as �focused on business execution.�

        Mr. Hurd�s predecessor was Carly Fiorina who led the company for about 6 years (1999-2005). I characterize Carly�s tenure as being about �growth through acquisition.�

Mark 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 non-existent during Hurd�s tenure. And, Hurd did not 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 Meg talk about issues 1 through 8 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, HP must now go through a period of significant reinvention that Meg 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 am at a loss to think of anything and no one I have asked can come up with a definitive answer. That is just not right.

Yet, look at what Apple has achieved in the past decade: game-changing innovation after game-changing innovation. Look at the market valuation, the stock price, the excitement Apple has created. The folks at HP and Apple breathe the same air � they are neighbors. But, look at the profound difference in results.

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 has taken on the characteristics of a zombie, a company that just goes through the motions. No innovation. No compelling strategy. No excitement. No enthusiasm. No passion. And, problems galore on top of all 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.

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 am 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.

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 will snap out of it!� For someone who would not consider herself a business person, I say that she nailed it.

What actions are you taking to make sure you do not create a zombie company? There is no time like the present to tackle those issues that you know are going to hurt you as the economy continues its rebound.  Just ask HP.

David J. Gardner, has held senior management positions in Product Development, Manufacturing, Sales, Marketing, Customer Service and Product Management.  He joined Tandem Computers in 1979 where he was responsible for Corporate Documentation Standards for Tandem's highly configurable and expandable computer systems. In 1983, he designed and implemented a Configuration Guide for Dialogic Systems instituting a process that greatly simplified a complex, modular product such that the field sales organization and international OEM customers could easily define their order requirements. This methodology satisfied the product definition needs of sales, marketing, engineering, manufacturing, customer service and finance. David founded his consulting practice in 1991.  He is a graduate of San Jose State University (BA) and Santa Clara University (MBA). David is a member of the Society for the Advancement of Consulting (SAC) and has been Board Approved in the Area of Configurable Product & Services Strategy and Implementation. In 2010, he was inducted in the Million Dollar Consultant Hall of Fame.  Out of over 1,000 consultants who have completed Alan Weiss�s mentoring program, only 26 have been inducted into the Hall of Fame.

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