A recent New York Times article (link at the end of this post) addresses the puzzlement that has occupied many, about the flimsy reasoning behind the dismissal of HP CEO Mark Hurd. The article sheds much necessary light on the larger reasons for this action, but what also caught my attention in the piece was this section:
Charles House, a former longtime H.P. engineer who now runs a research program at Stanford University, openly rejoiced when he heard that Mr. Hurd was leaving. “I think the sexual harassment charge was a total red herring,” Mr. House told me. He didn’t care. “I was delighted,” he said.
Mr. House’s brief against Mr. Hurd went well beyond his outsize compensation and penchant for cost-cutting. As Mr. House saw it — indeed, as many H.P. old-timers saw it — Mr. Hurd was systematically destroying what had always made H.P. great. The way H.P. made its numbers, Mr. House said, was not just cutting any old costs, but by “chopping R.&D.,” which had always been sacred at H.P. The research and development budget used to be 9 percent of revenue, Mr. House told me; now it was closer to 2 percent. “In the personal computer group, it is seven-tenths of 1 percent,” he added. “That’s why H.P. had no response to the iPad.”
I am always bemused when I hear this “HP great, but failing to compete now” argument. My questions arise on two fronts:
HP’s greatness and research/innovation
Without doubt HP is a tremendously successful company. It dominates its field, ranks #1 in mark share for certain products, and can boast a few firsts as well. I have no particular beef against the company (despite HP/UX) and I think they were, as claimed on their web site, ahead of their times in some of the human resources practices, such as offering flex time, employee profit sharing and stock options, and employee health insurance. But what is also noticeable on the HP timeline web site is that what has flowed from HP Labs is a steady stream of evolutionary advances, not breakthrough inventions or innovation.
Compare the HP time line to That of AT&T’s Bell Laboratories. Bell Labs is (or was) the home of seven Nobel Laureates, the birthplace of the transistor, the Unix operating system, the C and C++ programming languages, information theory, the laser, as also significant advances in diverse fields such as photonics, astronomy, cryptography and digital music encoding.
My intent here is not to “diss” HP or HP Labs. HP’s ability to productise its advances, and in turn to target productive fields of research, is made apparent by the same comparison with AT&T (Bell Laboratories), and the current status of each: HP continues to be a successful and healthy company while AT&T and its spin-off Lucent Technologies (now Alcatel-Lucent) are languishing with little to show for their pioneering achievements.
HP’s consumer presence
When HP acquired Compaq, the latter had already lost a good bit of its standing as a top consumer computer systems manufacturer. Nimbler outfits like Dell had stolen the mantle from Compaq, and though HP leads the pack today in US and global desktop and laptop sales, I suspect this leadership is a result of corporate and government contracts, rather than consumer purchases (unfortunately I could not find any reliable data online that breaks down computer sales into consumer and corporate/governmental categories).
News and data are available for other forays by HP into consumer devices, and that news doesn’t speak well. For example, in 2007, HP abandoned the digital camera market, having shrunk from a meagre 7% market share in 2006 to 4% in 2007. HP’s acquisition of Palm and it’s possible entry into the mobile communication space and reentry into the tablet space will provide another data point. But even there, with the dominance of Apple and Google’s Android based systems, we can somewhat safely predict that HP would be lucky to gain a double-digit market share.
In summary, (once again) my wish is not to trash talk about HP. A company that has demonstrated some level of decency towards it’s workers is commendable for that action alone. What I would like is for the media and bloggers to give the rest of us some insights into what they mean when they talk about HP’s greatness and innovation. For, it seems to me, HP’s lack of an answer to the iPad has nothing to do with lack of R&D, but likely more to do with the very strategy that makes HP successful: creating or leveraging relationships that facilitate volume sales. That works for netting multi-million dollar orders from the US Government, but, among other things, being in bed with Microsoft and at their mercy, rules out any chance of their developing something like the iPad (by the way, I think the iPad is over-hyped, but that’s another post). What am I missing?