The nth self-inflicted injury (Autonomy) flings Hewlett-Packard into recovery mode once again. I feel pained each time one of these poor decisions comes to light and takes its toll. I loved that company. You would have loved it too. It was not just another business entity, it was one of the great institutions of Western Civilization. David Packard and Bill Hewlett created a management system that was absolutely the best system for turning human capital into societal contribution. Part of the evidence of this is that that system worked worldwide and across industries.
I speak of Hewlett Packard in the past tense not because I think they are doomed but because the company that now bears the name is a completely different company from the one I knew. I left HP in 1999 to join the spin-off, Agilent Technologies. So I don’t pretend to know anything about the current situation there. But I do know that the original HP’s formula for greatness is too important to allow it to be discredited by association with the current mess and too valuable to be forgotten. There is so much to share with you about the very accessible magic of the HP that grew at a compounded annual growth rate (CAGR) of 23% for over 50 years. Today I think I will just share a story and a summary description of the magic.
When I Realized Something Was Very Wrong
In the mid 1990’s the late Lew Platt was CEO of HP. He and his CFO understandably worried that it would be increasingly difficult for HP to keep up the phenomenal record of 23% CAGR from 1942 to 1995. In 1995 the company reached $31.5 B in annual revenues. To grow even 15% in a year meant that the company would need to find $4.7B in new revenue. So they asked the Corporate Development group to identify strategies that other companies had used to created growth. I got the assignment. It was a great project. Since the General Managers of the businesses units were already thinking continuously about how to grow those existing businesses, I put particular emphasis on how companies got into new businesses.
I presented the findings to the executive team. There was good discussion and questions. Close to the end, one executive spoke assertively, saying in essence: “This is all very interesting, but things are going pretty well. Things have gone pretty well for us without doing any of those things, so maybe that means that we don’t need to do them.” Though stated as a hypothesis, it was a conclusion. The interesting thing is that he was wrong on two counts:
- First: The company HAD done those things. Bill (Hewlett) and Dave (Packard) were intuitively new venture investors. The entered new businesses when the company did not NEED to do so. They went into countries (like China in ) when there was “no” market there yet.
- Second: Financially things were going fine but that cadre of professional managers were focused on being careful stewards of their large businesses, not on creating high value new businesses. This paucity of internally generated growth encouraged later CEOs to plunge into a series of unfortunate acquisitions.
What Was Astoundingly Right Before So Much Went Wrong
I share this with you now because notwithstanding the many mistakes of the current HP, the important message of this post is that the key success factors of the original HP apply today. Here is my summary of the HP success formula:
- Products that made a big unique contribution
- A system that built and unlocked human potential better than any other
- Executives that used informed intuition to make bold moves that they then made successful
- A commitment to customer success
- Financial discipline
This formula does not seem to have been applied at the company with the HP name for some time but none of us should make the same mistake.
The original HP version of those elements create virtuous cycles of high expectation and high performance. Those cycles, in turn create their own fuel of profit and goodwill.
More specifics on this in future posts.
For a personal discussion of how to apply the HP formula contact me.