How Hewlett-Packard Lost the HP Way
Posted on Harvard Business Review: September 23, 2011 9:20 AM
Really, Hewlett-Packard? This is what’s become of the company of Bill and Dave—not just the founders of HP, but the founding fathers of Silicon Valley? Three CEOs in six years. Two of those CEOs who embarrassed themselves with inept campaigns for elective office. The other CEO who managed to get tossed out of his job by virtue of his (still largely unexplained) fascination with a B-level (and that’s grading generously) actress. Not to mention boardroom soap operas, front-page ethics scandals, and more changes of direction than a surfer in a hurricane.
It’s hard to argue with the assessment of Thomas Perkins, the legendary venture capitalist and a former HP director (who has hardly covered himself in glory during this mess), who told the New York Times back in August: “I didn’t know there was such a thing as corporate suicide, but now we know that there is. It’s just astonishing.”
I’m not interested in offering yet another thumb-sucker on what the tragedy at Hewlett-Packard says about the status of corporate governance. Do any of us really believe that changing the composition of a few board committees, or recruiting a few more independent directors, would have allowed HP to maintain its status as one of the most prosperous organizations ever to rise from Silicon Valley? What’s important about HP is what it says about how hard it is for any organization to maintain its leadership position from one generation of technology and markets and culture to the next. It’s virtually impossible to do so without leaders who are committed to an enduring set of values, even as they are prepared to question a wide range of business practices. HP hasn’t just lost its way in the marketplace. It has lost the “HP Way”—the values and behaviors and principles and commitments that made it more than just another company, but a beloved icon and institution.
Several thoughts occurred to me as I read the press accounts of the latest machinations at the company—the fall, less than a year after his appointment, of CEO Leo Apotheker, and the appointment, less than a year after her abysmal race for Governor of California, of former eBay CEO Meg Whitman.
The first thought was how tough a challenge HP has faced and will face even with the best of leadership. As the cofounder of a magazine called Fast Company, I’ve always been struck by the slow-going rate of change inside most organizations. Indeed, in the earliest days of the magazine, after we had a business plan but before we published the premiere issue, we convened a conference around the theme, “How Do You Overthrow a Successful Company?” It wasn’t a gathering of hotshots eager to take on the corporate establishment. It was a gathering of big-picture thinkers and change agents from illustrious big companies who sensed that there were massive shifts on the horizon, but who worried that there wasn’t a commitment among their colleagues to reckon with what was coming and create the next great wave of growth opportunities.
That was 1994. Here were are, 17 years later, and that’s precisely the question HP has been wrestling with for a decade. That’s because the work of making deep-seated, meaningful change—sustaining success and unleashing innovation over the long term—is that hardest work there is. Few organizations, especially high-tech organizations, can sustain a track record of growth, prosperity and leadership over more than 70 years. It’s hard to go from two guys in a garage in 1939 to 325,000 people around the world and expect to maintain even a semblance of that original energy, urgency, and relevance.
That said, it is possible. I was struck that as the West Coast watched with agony at HP’s implosion, the East Coast watched with celebration as IBM marked its 100th anniversary with a two-day global summit in New York’s Lincoln Center. I’m convinced that the deep-seated transformation of IBM over the last 20 years, and its capacity to remain in the vanguard of the technology sector for literally 100 years, is the most underrated story of corporate renewal and relevance in the world. What the leadership of IBM has done, that leadership of HP has been unable to do, is to overthrow a successful company. That is, to remake a glorious enterprise, born in one business environment, for an entirely new business environment, to rethink strategies and practices and markets, without reneging on the values and principles and cultures that fueled that glory in the first place.
Which leads to my second big thought about the current HP news. Forget the board: Where are all the leaders at the company? Here is an organization with a legendary reputation, a world-renowned culture, a track record of innovation and R&D, and three times in a row it has to go outside the company for its CEO? Where is the succession planning? Where is the talent pipeline? Where is the “bench strength?” Why can’t a company with more than 325,000 people find its new CEO from within its ranks—especially when it’s had three opportunities to do so in the last decade?
Think about the contrast with Apple. If any leader would seem to be irreplaceable, it would be Steve Jobs. And if any leadership crisis would seem to be more dispiriting, it would be the resignation of a visionary CEO because of dire health problems. But Apple replaced Jobs as CEO without a beat, the company, for now at least, remains as strong as ever, and there was not even a hint of drama—or interest in a leader from the outside. If Apple can replace the greatest CEO of the last 50 years with someone with a history and track record inside the company, couldn’t HP have done that at least once in the last three tries?
I’m still hoping for the best at HP—it’s a noble company filled with gifted engineers and technologists. But if its record over the last 10 years is any indication of its long-term strategic vision, and if Meg Whitman’s performance as a political candidate is any indication of her current leadership chops, I am preparing for the worst.
Here’s hoping HP somehow rediscovers the HP Way.
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