Meg Whitman and HP: Most Likely to Succeed

Wednesday Dec 14th 2011 by Rob Enderle
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After a run of unsuccessful CEOs, Meg Whitman appears poised to greatly boost HP’s fortunes.

As we look back on HP over the last decade or so, we see a company that has moved to the #1 or #2 position in each of its chosen markets, despite the fumbles of the last four COEs. Current CEO Meg Whitman is different: she wasn’t selected on narrow criteria like Fiorina or Hurd, or in the panic like Apotheker. She was a more measured choice with skill set uniquely suited to the problems facing HP.

To examine her chances at HP, let’s first take a trip down memory lane at the past four CEOs and what each has done to damage HP, and then match Whitman’s background to the task at hand to see if it is a fit. I think you’ll find, as I did, she is the perfect CEO for HP at this critical time.

Past CEOs

It is interesting to note that until Meg Whitman it appeared that every CEO wanted to exceed their predecessor in terms of how much they unintentionally hurt the company. We’ll start with Lewis Platt, the last internal CEO hire and work forward.

Lewis Platt was a solid HP player but, similar to John Akers (the only CEO fired from IBM), he was unable to see the trees for the forest and was unable to cut, what had become a lumbering company with massive entitlements, down to fighting weight.

Carly Fiorina, who was brought in to shake the company up, was able to cut and provide a vision but she was almost like royalty and didn’t take care of her people. In addition she wanted to move on to a political position and fancied herself as the first woman US president – and started working aggressively toward that goal before finishing at HP.

In what appeared to be an attempt to forestall her termination she undertook a dangerous merger with Compaq, alienating the founding families and creating one of the most damaging proxy fights in the tech industry. Not to mention a mess of overlapping products and lines, many of which still exist today.

Mark Hurd was a cutter, having recognized that to make financial analysts happy you could constantly cut costs as long as you held revenue. He’d actually gotten his tires slashed at NCR before joining HP for similar behavior and was apparently deeply hated by the HP rank and file.

He crippled HP marketing, R&D, and almost put the company so deep into a hole that it couldn’t dig out. He was fired for falsifying expense reports in an alleged attempt to cover up an affair with another HP employee who was also a soft porn actress (you can’t make this stuff up). He left with employee loyalty scores lower than I’ve ever seen them before.

Leo Apotheker was a fast hire to try to cover up the HP board’s bungling of the Hurd termination. It was consistent with a strategy that mirrored the one that killed Sun: to turn HP, a hardware company, into a software company, with a likely similar outcome. Leo could neither speak well on stage or individually to analysts and while he actually often said the right things he wasn’t at all qualified to run HP.

In what has to be one of the worst bone-headed moves ever he panicked after HP’s signature tablet sold poorly and nearly destroyed the $1.2B Palm acquisition. He then appeared to massively overpay for Autonomy – a company that Oracle indicated they’d turned down for a fraction of what HP paid.

To add to what became an historic number of mistakes he announced HP was thinking of spinning out its PC unit which, after a decade of saying HP would never do this, torpedoed trust in the company and nearly cratered HP sales. He single handedly did more damage to HP in his 8 months than any competitor of record over the same period that I can recall.

The company that was left after this mess of different strategies, self-dealing practices, and bureaucratic bungling was a mess internally and in desperate need of rebuilding.

HP After Apotheker

So the HP that Whitman inherited was a mess. It still was dominant or near dominant in most of its markets but still hadn’t reconciled all of the products from the Compaq merger. R&D was at or below survival levels, employee satisfaction was at an all-time low, and infighting (particularly in the PC unit where the head has been in the process of leaving the unit for 3 years) at an all-time high. One recent billion-dollar acquisition (Palm) was in shambles, and the company’s board was brand new, thanks to the Hurd scandal.

Oh, and to add to all of this, corporate marketing was in turmoil (having been cut to near nothing and having revolving door executive management), and trust in the company was at an all time low.

Servers are in good shape, services have been heavily cut, software is in mid transition and reported to be a mess, PCs have a leadership uncertainty problem, and networking (thanks largely to the 3Com acquisition) is hitting Cisco harder than expected. Printing and Imaging, while dominant, is seeing declining growth and is missing the move to electronic books and media.

Finally customers were fleeing the company, thanks to the handling of the PC unit and the CEO revolving door, and because most of HP’s partners were now competitors or, worse, at war with HP. Oracle and Cisco had been changed from partners to competitors with Oracle wanting HP dead and Microsoft (thanks to the Palm games and some screwy stuff between them and the HP PC unit), was treating HP more as a competitor than a partner.

Meg Whitman’s Skills

HP needed a turn around, which is similar to the transition phase when a company moves from startup to corporate entity. Meg Whitman’s background at eBay speaks to this problem and she recognized the need to get the company back into growth mode and away from the crisis of the hour.

She did this by reinstituting HP’s internal advancement mentoring and selection process so that the next HP CEO could come from inside rather than outside, and in meeting with the employees to hear grievances and address them. I’ve met with several of the HP divisions and in passing they indicate that Whitman has begun the process of restoring employee loyalty and getting employees focused more on HP’s future than their own resumes.

Her background at Proctor and Gamble should help her better manage HP’s massive number of brands and excessive number of products. Her most visible effort was to take the crippled Palm organization and place it directly under her control in an effort to personally rebuild it. This was likely the only thing that could possibly recover that critically damaged asset and eventually restore its value. This is consistent with a brand strategy background. You’d eventually expect to see her deal with the redundant Compaq brand and lines and the excessive number of products in several HP divisions.

HP’s image needs rebuilding and one of the things you learn at Disney is how to effectively manage image. Walt had a concept of on-stage and off-stage and that as long as you were in view or on the clock you were on-stage. This is something that Mark Hurd clearly didn’t understand or he would have retained his job.

Part of this training is the importance of marketing and image management which is even more powerful than that at Proctor and Gamble and she will likely pull on this background strongly as she rebuilds HP’s image and turns the company back into one known more for its products and philanthropic work than the latest scandal. In particular, from Disney would be the clear knowledge never to cross certain lines and make a mistake like the one that got HP in trouble for Pretexting, or identity theft.

Hasbro teaches the importance of children and these customers form HP’s seed corn. The iPod was largely driven by kids who initially wanted it. Consumer products have languished a bit under prior administrations. Carly Fiorina was tricked into giving up HP’s iPod competitor in order to get closer to Steve Jobs and that ended badly. HP bought Voodoo PC, a PC Gaming company, and killed it. HP’s efforts with its Palm Tablet, the Touchpad, were catastrophically inept, nearly wiping out that $1.2B asset.

Whitman’s experience at Hasbro should prevent her from repeating these mistakes and to better see the potential for what may be HP’s iPod opportunity. The WebOS, played right, could become HP’s iPod and the skill for seeing that opportunity likely would come more from her time at Hasbro than Disney. To be clear, the next iPod might be a platform and not an individual product and there is precedence for this with Windows.

Finally, HP is an umbrella company, which means the CEO is mostly a super investor serving as operational proxy for the board. Each of HP’s divisions is a company in and of itself. This requires some deep asset management skills and here Whitman’s stint at Bain & Company becomes important.

One of the leading advisors to large scale companies on management and Bain is also considered to be one of the most prestigious in this critical (to an umbrella company like HP) field. Whitman’s time there should have helped her develop the skills and contacts necessary to step into various different businesses and quickly assess what needs to be done.

Wrapping Up

HP was left crippled by a series of CEOs who initially were unable to act, eventually were excessively focused on their own advancement to HP’s detriment, and finally lacked the necessary competence to run the company. This left a bureaucratic nightmare of poor marketing, critically low R&D, record low employee loyalty, redundant products, and the seemingly monthly scandals or information leaks.

This will benefit from a set of skills she acquired by working at Bain on large scale corporate management, Disney on image and the importance of marketing and R&D, Proctor and Gamble for brand and product management, Hasbro on the importance of children as customers, and eBay on how to transition a company back into a global powerhouse. Whitman may represent the closest thing to a perfect positive storm in executive leadership who arrives at the right place at the right time in HP’s history.

We top this all with Whitman’s experience in politics where you learn to carry a message, see the bigger picture, and can fend off attackers who fight dirty. Particularly against Oracle, this last skill may be unmatched and uniquely valuable.

Progress so far has largely been positive to date. Palm has been stabilized and now is viable again; HP is the premier vendor for Microsoft’s Office 365 effort, suggesting that this relationship is improving; and HP has reaffirmed their PC unit. This amount of progress so soon does suggest she hit the ground running but that there is still much of the job to do.

In the end the question shouldn’t be whether Whitman is right to run HP but why she wasn’t hired much sooner.

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