Friday, January 25, 2013

Thoughts on "What Happened"

Forceful reminders come back in early morning hours.  I'm doing some work around the early deployment of routers (think Cisco, Wellfleet), and found a passage in Ed Paulson's 2001 book, Inside Cisco, that resonated re HP.  Chambers developed a very specific M / A strategy, essentially based (he was reported to say) on the HP model -- buy small, keep all the people, assimilate into YOUR culture.  Specifically, DO NOT ATTEMPT a merger of large companies, there is no merge of "EQUALS".   And, aside from Sanborn, the first thirty-three acquisitions HP made were all small technology plays compared to HP's size at the time.  The first one, Moseley recorders, which started the phenomenal printing and imaging world for HP, was a $400,000 down payment on a $2 million company.  When Moseley was bought out in 1963, HP was sixty times larger.

Paulson's book spends much time on the merits and issues of M / A, which at Cisco is called A / D.  The notion is that Cisco did little R for the traditional R / D, instead acquiring key technology and technologists via small companies that had proven new ideas.   This approach got a lot of traction, and in fact became known widely as "the Cisco Way", titled "A / D" in place of "R / D".

The words I particularly liked are on pp. 138-39:  "A merger of equals is not a good starting point for a successful acquisition..... A large organization will have its own set of integrated cultural ideas, standards, and rituals, which will likely differ from those of (yours).   If the merged organization is to appear as one after the merger, then it is important that the cultures somehow blend into a hybrid.....  If this does not work out smoothly, the infighting, squabbles, and daily distractions with a poor cultural merging can make the combined entity far less valuable than the total of the two separate companies, ... in essence, eroding the values of the two previously healthy companies (particularly true with respect to the interactions between managers of the two companies)...."

Sound familiar?  From our book, The HP Phenomenon, p. 465, there is a heading "Merging Two Cultures" which describes the extraordinary effort led by Webb McKinney to blend the Compaq group with HP in 2002.  The difficulty in part was that Compaq itself was a heady brew of three disparate cultures -- Compaq's PC lines, DEC's mini lines, and Tandem's Non-Stop lines; each had 'quarrels' with the respective HP units, which themselves had come through a series of cultural wars for reasons having to do with HP's own evolution (think Fort Collins and its 'war' with acquired Apollo; and the classic Cupertino/Ft.Collins battles).  Throw in the multiple contenders for PC hegemony at HP, and the merging seems daunting in retrospect, as well as from the savage civil war that broke out between oldtimers and the new Carly-led team.  This is years before the challenge from Hurd's EDS 'merger'.

On p. 501 in our book, it is noted that a long-term cultural company -- HP -- divided 125,000 folk, sending 52,000 to spinout Agilent, and three years later, adding 65,000 Compaq folk, and then five years later adding 140,000 EDS folk.   So in nine years, at most there were 60,000 "HP Way" people in a company of 310,000 bearing heavy doses of The Compaq Way, The DEC Way, and the EDS Way.  And the odds were almost nil that these were aligned with Dave and Bill's view of dignity and personal contribution at all levels of the company.

Leaders as solid as Dave and Bill would have found this task extremely hard; Fiorina and Hurd certainly didn't bring the Bill 'n Dave HP Way views and leadership approach to the challenge.

Make sense?  Large scale mergers seldom work.

Webb McKinney's forthcoming book will hopefully shed some insider perspective on the huge effort he led to integrate Compaq into HP; it'd be great to get Anne Livermore's views on the EDS merge.

Thursday, January 24, 2013

InnovaScapes Institute tracking

Folk asked (from yesterday's blog post) -- "How do I find out more about InnovaScapes Institute?"

Sorry about that...  use to find the blog

A website is in preparation, but not yet available.

Ten Most Hated?

Wow!  Affirmation of a disaster appeared this week in the Wall Street Journal re HP.  Two stories, the first about the legal machinations of HP vs. the previous owners of Autonomy, HP's ill-fated acquisition to get into the Business Analytics space under CEO Apotheker's regime.  

The second, written for 24/7 Wall Street by Douglas A. McIntyre and Michael B. Sauter on January 9, 2013, listed HP as the 10th most hated company in America.  The article said, among other things, that: 
The case against Hewlett-Packard is devastating. According to the ACSI, HP was the second worst-ranked personal computer brand in 2012. HP may also be the most mismanaged major company in the U.S., which gives shareholders a reason to turn on it as well. Five years ago, the company had annual net income of more than $8 billion. In the 12 months ending in October, HP lost $12.6 billion. The company shares are down more than 40% in the past year. Further complicating matters is HP’s acquisition in October 2011 of British data company Autonomy, which is now under investigation for fraud for misrepresenting its value. HP may have lost billions in the deal. Last year, in an attempt to restructure and stop the bleeding, the company laid off 27,000 employees, more than double any other company in 2012. Employee research firm Glassdoor reports that HP is also disliked by its employees.

This report would enrage the founders if they were still alive -- almost the worst indictment of all that they believed in and stood for.  And it isn't like we haven't heard this for some time now, tracing back all the way to the meltdown under Fiorina with the proposed Compaq merger in 2002.  Lessee, from January 2005 to January 2013, the CEO list includes Fiorina, Wayman*, Hurd, Lesjak*, Apotheker, Lane*, and Whitman.  Hard to expect much stability or consistency with that much turmoil, right?

But such reports are always composed from a particular point of view, in this case the Shareholder view primarily.  And yes, HP shares have not fared well in this decade -- but neither have Microsoft, Intel, or Cisco and no one is putting them on the Ten Most Hated list.  As for layoffs, those other three have suffered similar situations, and similar numbers frankly, in the past two years.

So I went to Glassdoor, as the article indicates, and guess what?  I took thirty companies -- the Ten Most Hated (starting with JC Penney, Dish Network, and T-Miobile) and then ten high-tech outfits (Cisco, Intel, Microsoft, Oracle, IBM, Dell, Qualcomm....) and some others (Boeing, P&G, Johnson and Johnson, Xerox...) -- and compared the ratings for "Employee Ratings" of the company, and of the CEO.  HP was 2.8 out of 5.0 for the company, rated by 5,174 employees, and 80% approval for Meg Whitman as CEO (from 1,178 employees).  The 2.8 rating was in the bottom quartile of the thirty companies I picked somewhat randomly; the 80% for the CEO though was in the top third of the list.

Last time I looked at Glassdoor, Hurd was ranked very near the bottom -- if there had been a list of Most Hated CEOs, he was the clear winner for the Fortune 100 while running HP with his savage brand of tyranny.  Shareholders loved him.  Employees hated him.  He killed the HP Way, no question about it, and while he was at it, killed the creativity that was the hallmark.  Guess why HP is stuck?

Here's another paradox of "vantage point".  The highest two ratings for CEO in the list of thirty were Mark Zuckerberg at Facebook (97% approval by his employees, and 4.6 out of 5.0 for the company) and Tim Cook at Apple (95% approval for Cook, and 3.9 for the company).  Larry Page at Google gets 95% approval, and his company earns a 4.1 rating.  Yet Facebook is rated the #4 Most Hated company on the WSJ list, and after yesterday's "dismal" earnings report by Apple and the 35% meltdown of their lofty stock price from last September, who knows how soon Apple will make that list.

What's the takeaway?  I think it is simple:  "What have you done for me lately?" drives most ratings.  Judged that way, HP certainly has a lot of room for improvement.  But if employee morale and belief in a CEO is any indicator, HP is going in the right direction.  Consider Antonio Perez, who used to run HP Printing, as CEO at Kodak today getting a 23% approval from his folk, or the Danaher company (owners of Agilent's chief competitors Tektronix and Fluke) with 2.4 and 40% approval ratings.

Should we consider a follow-on book to "The HP Phenomenon"?  Maybe it could be called (as a parody of Jim Collins' Good to Great) "From Great to Gone: Who Killed 'em?"

Wednesday, January 23, 2013

Announcing a new blog -- InnovaScapes Institute

The New Year, 2013, for me is exciting.  I am launching InnovaScapes Institute, ISI, to tackle challenges and issues with technology and society.

InnovaScapes is a contraction of "Innovative Landscapes" and a play on the idea of Innovation Ecosystems.  I think of innovation much more often as a local and specific set of activities than a broad sweep on the historic pantheon, and "landscape" captures that mood and perspective better than the all-embracing "ecosystem".

ISI has several topics underway at the moment, some with commercial sponsorship, and some with a personal vector.  We'll have some active discussion, and some stimulating debate.  Topics might include the wonders of location-sensitve devices (your smart phone, tablet, and camera) which help you with social media, but give both authorities and 'bad guys' the chance to find and finger you.

Or the idea that our emerging medical instrumentation for gene tracking and molecular measurement can help change the AMA (American Medical Association) fiction that COPD (Chronic Obstructive Pulmonary Disease) is 85-90% caused by smoking, when in fact smoking has been on the decline in America for three decades, and COPD is on the rise, now the third leading killer in America, higher than strokes or auto accidents -- and virtually no research into its true causes or treatments.

Similarly, the rise of the InterNet, while fueled by Tim Berners-Lee and his URL work at CERN, the brilliant TCP/IP work of Vint Cerf, Bob Kahn, Len Kleinrock, et al fifty years ago, and of course Netscape with Marc Andreasson (now on the HP Board, right?), was really installed and made nearly ubiquitous by much more prosaic work in the trenches (or would it be in the Hubs and Routers and glass fiber in the ground).  We will examine how the trench warfare unfolded, which elements mattered the most, and why and how they got done.

Why are these things important?  Who will care?  Can we in fact provide some useful service?  Time will tell, but I for one am as excited as I've been with any project I've ever undertaken.  Here's an invitation to ome along and join in....

a new year with "NOW WHAT?"

I've been sporadic with this HP Blog for the past year.  Thinking about "why" is somewhat depressing. HP was such an inspirational company for so long, at least for me, but I think for many, many other people as well.  The feedback we received for our 2009 book, The HP Phenomenon, has been quite positive in terms of "you captured what it was" -- while lamenting that it has changed so drastically that it would likely be unrecognizable by the founders or any of the old-timers.

So I've been dispirited by this iconic company's all too visible stumbles.  Who hasn't?

HP is still a huge factor in electronics -- sales of $10 billion per month are not to be sneezed at -- and they've seemingly recovered most of the damaged position in worldwide leadership for PC sales after the gaffe about "well, we might get out" from mid-summer 2011.

But times change, and mobile devices find little HP presence. Ironic, when you think that HP pioneered its own growth with the first sophisticated mobile devices, the handheld scientific and business calculators from the early 1970s.  And even the first decent 'portable' printers that could be put at your desk or carried with you on a trip.

I recall with some nostalgia when traveling for Intel ten years ago, and upon arriving somewhere might need 100 copies of some presentation.  It was cheaper and much more effective on occasion to go buy a printer at Staples or Best Buy or Fry's and print in my hotel room than to go to Kinko's at midnight.  I'd give the printer to the maid when I left -- she or he would often be appreciative.  Intel expense account managers were upset for awhile with this practice, but the economics were compelling.

But... I digress.  The question on the table is WHAT NOW?  Let me pose that question to you.  This blog has had 100,000 page views, a number I find amazing given that I started it just to answer a few questions raised by the book publishing.  The book has virtually sold out the first printing as well.  I'm not sure that I have the stomach to write "WHAT WENT WRONG" -- it'd be more fun to write HOW THEY CAME BACK.  Do you agree?