In my very first blog on The Directive, I wrote a not-so-nice article about Mark Hurd, the CEO of HP. The blog was a reaction to Hurd’s major cutbacks in HP’s R&D expenditures, and the idea was that by cutting back on R&D programs, HP would lose its innovative edge and corner itself into commoditized markets. I find myself perplexed by Hurd again. I have nothing against the man, or the company he leads. In less than 12 hours from publishing this article, I’ll be buying an HP laptop, so there.
This isn’t about laptops though. How much innovation is left in laptops? Or margins for that matter?
In a Q&A with Gartner analysts this week, Hurd made some comments about cloud computing that need major PR damage control. In a nutshell, he said that he doesn’t trust cloud computing due to security issues, and that if HP CIO, Randy Mott, had a big idea and wanted to put general ledger and accounting in the cloud, Hurd “would send him back to work.” He added, “We have 1,000 hacks a day and I can’t tell you why, but they keep showing up. We wouldn’t put anything material in nature outside the firewall.”
Really?!
This, coming from the CEO of a company that is heavily pushing cloud computing into the enterprise markets, and boasts articles and brochures about “Cloud Assure” for “enabling business confidence in the cloud.”
Wouldn’t you know, I have a few thoughts on this.
Thought #1. HP needs to think about why its customers should believe in cloud computing if HP’s own CEO doesn’t. Sales rule #1: believe in what you’re selling.
Thought #2. Millions of internet users trust in their banking and brokerage firms keeping their financial data in the clouds. If Fidelity and Wells Fargo have figured out how to keep client data securely in the clouds, shouldn’t HP be miles ahead of them? This is the company that’s developing the technologies for cloud computing in their R&D labs.
Thought #3. I work out of a small office on a single computer (sometimes two), and I get hacked several times a day (I know this because my computer is set to alert me with that annoying ding whenever a hack has been attempted). I have relatively inexpensive software to protect my computer and my data. 1,000 hacks a day on HP? I’m sure someone at HP’s IT can figure out how to deal with this. You can’t control the problem, but you can control the solution.
Thought #4. Cloud computing is here to stay. Instead of open expressions of doubt about this market and related technologies, shouldn’t Hurd discuss how HP is working to alleviate the problems in this relatively nascent market through innovation and technological excellence?
Thought #5. Google will lead the way and leave the rest in the dust. Enough said.
Thought #6. HP needs to ponder Thought #1, really really hard.
HP is on my radar screen because I followed the company’s product line competitively for many years. I have the highest regards for the company and its culture, but I want the company to show some signs of innovation again.
Bring back “HP invent” any time!
Showing posts with label HP invent. Show all posts
Showing posts with label HP invent. Show all posts
October 22, 2009
May 4, 2009
Is HP’s CEO, Mark Hurd, stifling innovation?
When I worked at Xerox many years ago, our division (unsuccessfully) competed with HP’s printer division. HP was the king of that sector, and all we could do was idolize the company and grapple for the dust they left behind. As masters of innovation, they drew the maps for everyone else to follow.
I hadn’t followed HP closely for some time, so when I ran into a profile of the company and its CEO in NY Times recently, I was a bit perplexed. Mark Hurd, who was brought in as the anti-Carly from NCR (not exactly the beacon of innovation), is known as a calculating left-brainer, obsessed with operational efficiency, and someone who would rather talk in numbers than words.
This worked out well for some time. Silicon Valley companies are not known for their operational efficiency, and this helped HP stay lean. But there’s more in the article. Since he arrived at HP, the HP Labs “has whittled down the number of projects it tackles at any given time to 30, from about 150”, and according to some employees “the willingness to take risks has faded”.
Really?! Is this HP, the “innovation company”? What did ever happen to the “HP Invent” mantra?
The core of HP’s products are in mature, highly commoditized sectors: printers, PCs, servers, storage devices, etc. And the problem with commoditization is the vicious cycle of continual price reductions feeding back into commoditization. Cost cutting becomes essential if the company is to survive, but the way to break this cycle is to feed innovation, to develop new technologies and product lines in order to ensure future revenue growth.
I thought I’d compare HP’s R&D expenditures to a couple of other companies: IBM, a tech behemoth, and Apple, the poster child for cutting edge products; and the results are quite surprising.
Here’s a look at how much each company spends on R&D as a % of revenues (common benchmark).
IBM: 6%
HP: 3% (lowered from 4% a year earlier)
Apple: 4%
Not a pretty picture for HP. IBM’s % is double that of HP’s. In fact, IBM spends over $6B in R&D annually (vs. HP’s $3.5B), and the result was that in 2008, IBM was awarded more patents than any other company. Apple has increased R&D expenditure by over 20% year-over-year but its % looks low because revenues also accelerated at a healthy pace.
And here’s a look at another (less popular) metric, the amount of R&D each company spends per employee.
IBM: $15,600/employee
HP: $10,900/employee
Apple: $40,600/employee
Even an uglier picture for HP, and a big WOW for Apple (this also shows that Apple has significantly higher revenues per employee – talk about efficiency!). But even if we assume Apple is an anomaly, IBM spends about 45% more in R&D per employee than HP does – those patents didn’t come out of thin air.
By the time Hurd took over in 05, HP’s stock was already on an upward swing, and it continued its upwards move. Reasons for the rise: general market conditions, Hurd’s cost cutting measures, and top-line improvements from the Compaq acquisition, among other factors.
But there’s only so much fat a company can cut out, and right-sizing can help a company’s balance sheet and stock price for only so long. HP has lagged its peers in new and exciting market development. Is it counting on acquisitions to refresh its product portfolio? If not, where will its stock price end up 2-3 years from now? Is HP forced into cost cutting because of its commoditized markets or is it unintentionally digging itself deeper and deeper into the cycle?
Finally, is HP competing on operational efficiency or on an innovation platform? At its extreme, excessive sandbox experimenting can waste valuable corporate resources, but intense efficiency measures and streamlining work better on factory assembly lines, and not necessarily so with high-tech R&D organizations.
This is HP’s post-post-Carly era, and the company needs to plan and execute accordingly. Perhaps Mike Hurd can allow himself to unleash innovation on a massive scale at HP, and allow HP’s talent to start drawing the maps like they used to. It’ll be good for him, and even better for HP.
I hadn’t followed HP closely for some time, so when I ran into a profile of the company and its CEO in NY Times recently, I was a bit perplexed. Mark Hurd, who was brought in as the anti-Carly from NCR (not exactly the beacon of innovation), is known as a calculating left-brainer, obsessed with operational efficiency, and someone who would rather talk in numbers than words.
This worked out well for some time. Silicon Valley companies are not known for their operational efficiency, and this helped HP stay lean. But there’s more in the article. Since he arrived at HP, the HP Labs “has whittled down the number of projects it tackles at any given time to 30, from about 150”, and according to some employees “the willingness to take risks has faded”.
Really?! Is this HP, the “innovation company”? What did ever happen to the “HP Invent” mantra?
The core of HP’s products are in mature, highly commoditized sectors: printers, PCs, servers, storage devices, etc. And the problem with commoditization is the vicious cycle of continual price reductions feeding back into commoditization. Cost cutting becomes essential if the company is to survive, but the way to break this cycle is to feed innovation, to develop new technologies and product lines in order to ensure future revenue growth.
I thought I’d compare HP’s R&D expenditures to a couple of other companies: IBM, a tech behemoth, and Apple, the poster child for cutting edge products; and the results are quite surprising.
Here’s a look at how much each company spends on R&D as a % of revenues (common benchmark).
IBM: 6%
HP: 3% (lowered from 4% a year earlier)
Apple: 4%
Not a pretty picture for HP. IBM’s % is double that of HP’s. In fact, IBM spends over $6B in R&D annually (vs. HP’s $3.5B), and the result was that in 2008, IBM was awarded more patents than any other company. Apple has increased R&D expenditure by over 20% year-over-year but its % looks low because revenues also accelerated at a healthy pace.
And here’s a look at another (less popular) metric, the amount of R&D each company spends per employee.
IBM: $15,600/employee
HP: $10,900/employee
Apple: $40,600/employee
Even an uglier picture for HP, and a big WOW for Apple (this also shows that Apple has significantly higher revenues per employee – talk about efficiency!). But even if we assume Apple is an anomaly, IBM spends about 45% more in R&D per employee than HP does – those patents didn’t come out of thin air.
By the time Hurd took over in 05, HP’s stock was already on an upward swing, and it continued its upwards move. Reasons for the rise: general market conditions, Hurd’s cost cutting measures, and top-line improvements from the Compaq acquisition, among other factors.
But there’s only so much fat a company can cut out, and right-sizing can help a company’s balance sheet and stock price for only so long. HP has lagged its peers in new and exciting market development. Is it counting on acquisitions to refresh its product portfolio? If not, where will its stock price end up 2-3 years from now? Is HP forced into cost cutting because of its commoditized markets or is it unintentionally digging itself deeper and deeper into the cycle?
Finally, is HP competing on operational efficiency or on an innovation platform? At its extreme, excessive sandbox experimenting can waste valuable corporate resources, but intense efficiency measures and streamlining work better on factory assembly lines, and not necessarily so with high-tech R&D organizations.
This is HP’s post-post-Carly era, and the company needs to plan and execute accordingly. Perhaps Mike Hurd can allow himself to unleash innovation on a massive scale at HP, and allow HP’s talent to start drawing the maps like they used to. It’ll be good for him, and even better for HP.
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