Special Report November 15, 2007, 5:42PM EST

HP's Cultural Revolution

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The tech giant snapped up Voodoo because it's a fan-based, gamer-driven company with a devoted following for its luxe offerings, from lipstick-red PCs to customized $50,000 PCs tricked out with jewels and leather. The machines have cut-out panels that reveal their complex innards—the typical Voodoo units are about as far as possible from the commoditized, no- nonsense gray boxes that HP sells. Sood himself is a fierce gamer, and he began the outfit with his brother to make better machines for himself and his friends. Gamers, not techies, run the business. At Voodoo, "we took the ultimate wish list from customers and rolled it into the product line," says Sood, who has gelled, spiky hair and rectangular hipster glasses. He's now helping to bring that customer-centric DNA to the 600 engineers and researchers who inhabit the huge company's research labs.

"When I first walked into HP Labs, I thought, 'Everyone is smarter than me. They know more about the tech and fundamentals of research.' But I brought a completely different perspective. They don't know what gamers want or need.…No one [at HP] had ever figured this out."

So how is Voodoo, the innovation unit's initial project, changing its new parent? The first fruit of the acquisition, the HP Blackbird 002 personal computer, was available for preorders online in September and hit stores this month. The PC was originally designed by an outside shop, but HP scrapped that plan and redesigned the machine with Voodoo after the deal. It has distinctively Voodoo—and un-HP—touches such as a customizable black metal panel with elegant geometric designs and a liquid cooling system that replaces the distracting hum of fans. It's so user-friendly that consumers who want to customize it themselves can do so without using tools. It takes 10 seconds to replace or upgrade a hard drive on Blackbird—a job that typically requires 30 minutes. Although it's a premium PC (priced at $2,500 to $5,000) aimed primarily at hard-core gamers, the high-margin machine was purchased by film editors, animators, medical imaging specialists, an energy trader, a plastic surgeon, and even Navy SEALs, according to the company. It's a powerful, fast computer with room for five hard drives to accommodate rich graphics.

Curious HP engineers, frustrated at not being able to translate their ideas into products quickly, have been making pilgrimages to the gaming room. Chat up researchers at HP Labs, and the tension between engineers and the suits is clear. "There's an overabundance of ideas in our labs, but there's a gap between labs and product development," says Patrick Goddi, a senior researcher. Before the innovation office was created, he says, "It was hard to get a sense of oomph."

Goddi and various other researchers who are avid gamers visit the room in their spare time. After hearing about the speed (just three months) in which Sood pushed the projector system from a mere idea toward a prototype shown at trade shows, Goddi says he felt a rush of energy. With new confidence, he pursued a potential product aimed at gamers based on his current project, a video-messaging service called Conversa, a cross between YouTube (GOOG) and e-mail. "Rahul fired us up to build something, and to bring fun to work," he says. Goddi was inspired, he says, to develop Conversa as a social-networking tool for online games.

Startups are even providing HP with a new customer-based system that accelerates product development in other divisions. Snapfish (HPQ), an online photo-sharing service acquired by HP in 2005 with more than 42 million members now, inspired an experiment called Snapfish Labs that begins this month. Targeted members of Snapfish vote on proposals coming out of HP Labs and provide instant feedback. One upcoming idea: a service that allows people at conferences to upload, manipulate, and archive photos of meeting materials, including the writing on whiteboards, and share it with people not attending.