BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
COVER STORY ONLINE EXTRA: Q&A with Carly Fiorina Reinventing Hewlett-Packard is "just like sailing, you are going to tack at times" Since arriving at Hewlett-Packard in mid-1999, chairperson and CEO Carleton S. "Carly" Fiorina has been chin-deep in a management overhaul designed to return the Silicon Valley pioneer to the fast growth, hefty profits, and innovative fire that characterized its first six decades. While she is forthright about the fact that this reinvention remains a work-in-progress, she has granted four interviews to BusinessWeek in recent months to describe the management journey she's on. Here are edited excerpts from the last interview, with BW's Peter Burrows. It was about 10 p.m. in Davos, Switzerland, where Fiorina was attending the World Economic Forum. Q: It seems as though you had a very clear idea of your plan for reinventing HP at the time you became CEO. Is that true? A: I think it would be fair to say that I had a good sense of the problems to solve. I have been a customer of Hewlett-Packard, I had tried to partner with HP, I had benchmarked HP, so I had a sense of them from the outside. That is not to say that I knew in every detail the solution or the strategy. But I did have a sense of the things I had to fix. Q: You chose to go with a front-end, back-end organizational structure, in which two "back-end" units focus on product development, while two "front-end" units sell those products to corporate and consumer customers. Why did you go with this structure, and do you think it is unique? A: We needed to revitalize the innovation engine of the firm and at the same time change how we interacted with customers. There are a number of other firms that have looked at front and back models [to try to solve those two problems simultaneously]. We are not the first ones to do it, we won't be the last ones to do it, but we are doing it across a portfolio that is fairly unique to us. Q: How does the current slowdown affect your reinvention plans? Does it change your long-term goals or the timing of achieving those goals? A: It certainly doesn't change the reinvention and it doesn't change our goals in the medium to long term... What the slowdown has meant is that the whole water level has dropped, we hope for a short period of time.... If the market slows, obviously that impacts how fast you can grow. But ultimately, we believe the markets in which we participate -- storage, software, the always-on Internet infrastructure, the exploding market in imaging and printing -- are very healthy growth markets. Q: You have been criticized by some Wall Street analysts for setting overly high revenue growth targets. Rather than "underpromise and overdeliver," there's a sense that you aren't leaving any wiggle room for the company. A: Our growth goals are based upon the market segments [we compete in] and our ability to grow at least as fast as those segments and hopefully faster as we take share. So our growth goals are not some theoretical number we pull out of the air. They are based upon the growth of the markets we choose to participate in. That is how our growth goals are set. Q: Analysts were particularly concerned when you raised your 2001 revenue growth targets from 15% to as much as 17% on the day you announced that fourth-quarter earnings were 25% below expectations. Now, HP has reduced growth expectations for the next two quarters to low-to-mid single digits. Is this just a reflection of the new economic outlook or is it also a change to a more conservative approach in how you set expectations for Wall Street? A: Let me back up for a minute. Think back on what I have said to Wall Street in terms of revenue guidance. The company prior to my arrival had put revenue guidance at between 10% and 13%. I lowered the guidance to 10%... and we hit 10%. The next set of guidance I provided was 12% to 15%. We hit 14%, then we hit 15%. I raised [our guidance] to 15%, and we hit 15%, and then we hit 17%. Our revenue guidance has been relatively accurate. Having said all that, I was clearly wrong about the nature of the soft landing. We were betting on a soft landing, and we didn't get it. So, I think that given that uncertainty, prudence in how we manage the business and prudence in how we set expectations is appropriate. Q: In the course of our reporting, we're hearing from many HPers that while your reinvention started off very well, it has begun to bog down. What are your feelings about that? A: This is a multiyear effort. I always would have characterized Year 2 as a harder year than Year 1, because this is when the change really gets binding. This is when people understand at a deeper level that [the need to reinvent] means them, not just everybody else. It is a normal thing in a change process to have initial enthusiasm and an embracing of change in the theoretical. [But] it is no longer theoretical, it is real, and change means [everyone]." Q: So the reinvention is not falling behind schedule? A: If there are people who thought it would be over and done with in 12 months, I would have said to them that they do not have an appreciation for what it takes to change a very large, very complex, very successful company -- because this company has been successful for decades. Q: You have created cross-company initiatives designed to get all of HP working together to help create new growth opportunities for the company. How are they going? A: First, the way you need to think of the cross-company initiatives is that these are not things that happen outside the normal operating environment of the organization. If they were special projects, they would fail. What we are after is to engage our businesses in a collaborative process that leverages the unique portfolio of Hewlett-Packard in a way that differentiates it in the marketplace. But it cannot be a special project. There is no separate staff, no separate building. Q: Many HP executives and observers of your management style say you take an approach that it is better to try something and fix problems as they come up, rather than overstudy everything and never do it. Would you agree with this? A: Yes. One of the things I am fond of saying to people at HP is that you have to have a sense of direction. You have to have a vision, you have to have a destination -- but the key is to maintain forward momentum with sufficient velocity. Just like sailing, you are going to tack at times. You know where you are going, but you adjust your course as necessary to fit the tide, and the time. Q: Let's talk about the legacy of HP's founders, in light of the passing of Bill Hewlett on Jan. 12. Do you feel any special pressure or responsibility to carry their legacy forward? A: I do feel a great responsibility to the people and the communities and customers of this company, to keep a legacy alive that I think is valuable. And the only way to keep that legacy alive is to find ways to keep Bill and David [Packard]'s values and spirit in how we work and operate every day. That is, of course, up to more than me, but it takes...a tone and expectation [that must be] set at the top. Q: Is it true that you read Packard's autobiography, The HP Way, five times? A: Yes. The last time I read it was before I interviewed for the job. Q: How did it influence you? How did the founders' management style affect your approach upon taking the helm at HP? Did it make you question your desire to change many aspects of the company at once? A: No, it gave me the courage to change it as quickly as we are. Because it really is all about having this company achieve what it is capable of. It is important, and it is worth doing. Q: I understand you met Hewlett once soon after you came to HP. I know he was already ill [he had suffered debilitating strokes], but were you able to talk with him about what you were trying to do with the company? A: He was not able to speak very well. I talked to him for a few minutes about what I was trying to do with the company, about how important I felt his example had been, and about the fact that he remained an inspiration for many people, including myself. I think he understood. He had a look in his eyes that he understood. Q: I know it's late there [in Switzerland]. Are there any other thoughts you would like to end with? A: Just that while many have tried, this is not a company or a [reinvention] process that can be explained in an offhand sentence or two. And this is a company that in many ways needs to be reintroduced to the world. That is part of my job. Because many people had concluded certain things about the company that need not be true. Q: Like what -- that it is stodgy and slow-moving? A: Yes, that it is slow, stodgy -- a follower, rather than a leader. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS The Radical COVER IMAGE: The Radical CHART: HP Stock Price GRAPHIC: HP the Fiorina Way TABLE: Carly to HP: Snap to It ONLINE EXTRA: Q&A with Carly Fiorina ONLINE EXTRA: HP Sees the Future--and It's Printing VIDEO: Q&A Carly Fiorina and BW's Steve Shepard INTERACT E-Mail to Business Week Online

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