MAD Perspectives Blog

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 HP's Tug of War

Peggy Dau - Wednesday, August 24, 2011


(caveat:  I am a former HP employee.  The comments below do not reflect any official opinion from HP)

The big news last week was HP's announcement that it MIGHT spin-off its PC business.  It is assumed that this is in response to the appalling sales of the HP TouchPad.  But can the failure of a single, albeit significant, product launch incite the sale of a multi-billion dollar business?  Sure, tablets are replacing laptops in the consumer space.  Why?  Because they are easy to use and enable the consumer to easily find and access the content they desire through the use of apps.

However, HP's PC business is about more than the consumer.  PCs are still used by businesses large and small.  It's not that enterprise workers don't carry a tablet, but ask them how they use it and most will answer that it's great for email and sharing content in the form of a presentation or demos.  But it is not for managing day to day business (i.e., ERP, Supply Chain, RFPs, financial management, etc.)  HP's commercial PC business is thriving and profitable.  In fact, in its recent earnings announcement, HP revealed that revenue from its commercial PC business increased by 9%.

So why all the negativity in the press?  In my opinion, HP's in a persistent state of tug of war - with the many markets it plays in, with its competitors and most importantly with itself.  The market's disappointment is due to several factors. 

1)  HP confuses the market.  It does not easily fit into a single category.  It is both a commercial business and consumer business.  The business models are quite different for each of these markets. While HP enjoys great leverage (call it buying power in the supply chain) due to its wide array for products using Intel, Microsoft and other core technologies, the ultimate use of the resulting products is quite different.

2) HP has an identity crisis.  What does HP want want to be?  Are we the leading provider of PCs and printers or are we a solutions provider to the enterprise?  I can only assume that the difference, between the consumer marketing budget and the enterprise marketing budget, is
dramatic and widely in favor of the consumer budget.  Does HP want to be about price or value?  IT hardware is a commodity business.  Only volume can make it viable.  That was the route pursued by former CEO, Mark Hurd.  Now, Leo Apotheker wants HP to become a software & services company.  And with each new CEO, the plan changes and Board of Directors approves it.  In the social media arena, we talk about identity.  I'm not sure I'd know where to start with HP anymore.

3) HP's intentions are unclear.  Never has this been more true.  The launch and subsequent cancelation of the TouchPad and WebOS is a complete debacle.  HP needs a cohesive strategy that is cut s across all business units.  If that strategy cannot be supported by a business group due to lack of logical alignment, then it might make sense to offload that business group.  For example, if it is HP's LONG TERM (not 3, 6 or 12 months) intention to become a leader in cloud computing and enterprise software, they must align all efforts around that strategy.  HP printers support this strategy with their ePrint capabilities.  Perhaps there is a play for WebOS within this strategy.  Does the Autonomy acquisition support this strategy?  If not, they should forget about overpaying (they've already done that in the past - remember Compaq?).

HP must learn how to communicate.  I worked at HP for 24 years.  I always laughed off HP's appalling attempts at external communication.  Somehow customers were faithful to HP regardless of their communication skills.  However, the world has changed.  The financial markets are demanding.  The need for clarity, consistency and measurable results is a basic requirement, not only to appease the market but to serve customers with excellent products, solutions and services.  Change is painful.  Change is constant.  In my early days at HP, former-CEO John Young had a poster distributed to all offices.  It stated something like "change is constant for technology to evolve, if you cannot keep up with the pace of change you are in the wrong industry."

Like others commenting on this recent news, I would like to see HP pull itself up by the bootstraps.  I would like HP to remember its roots of innovation.  I would like to see HP plan for the long term and execute against the short term tactics that will achieve the long term goal.  HP may not be as exciting as Facebook, Google or Apple, but it can be relevant.  It simply must make a decision about who it wants to be than JUST DO IT (thanks Nike!). Good Luck HP!

What's your perspective?