Meg Whitman’s Fascinating HP Turn Around

HP’s turnaround is actually going far better than I thought it would and far better than it appears.  This first is because I had doubts, given how complex HP is and the series of failed CEOs, that the firm could be turned around. And the second is because HP has been very light on corporate marketing and messaging when compared to Lois Gerstner’s benchmark effort at IBM.  

The IBM turnaround is very familiar to me both because I was there for the critical years and because I was one of the folks chronicling the effort.  In addition, the IBM turnaround, while far from perfect, sets a benchmark for how a company like HP successfully goes through the effort.   HP could beat that benchmark. 

Let’s talk about the state of HP’s turnaround this week.

Printing and PCs

This was perhaps the most interesting part of the turnaround effort.   One of the things that folks credited to Carly Fiorina, the first external CEO HP hired, was that she tried to get the head of the Printer unit to take over the PC unit.  

This failed for two reasons. One was there was very little product synergy between the two groups, particularly at the high end where industrial printers sold to print service providers.   The second reason was that Vyomesh “VJ” Joshi, the head of HP’s Printer unit at the time of the first attempt to combine the units, had no interest in PCs whatsoever. And so either he would need to be replaced or the combined division separated. And this was the path Mark Hurd took after he replaced Carly Fiorina. He broke the units apart again.

So Whitman’s effort to combine them, from the outside, looked very foolish but it actually was damned smart.   By the time she took over, the PC division was still in trouble and the Printer division had started to underperform as well.  In addition, her most vocal internal rival was Todd Bradley, who had been working tirelessly to convince the media that he was the best choice to be HP’s CEO.  

Clearly Bradley had acquired too much power for Whitman to just fire him so instead she combined the Printer and PC division, had VJ retire, and put the combined unit under Bradley.   The extra effort would occupy his time and keep him from sniping at Whitman. And were he successful the success would reflect well on Whitman, and if he wasn’t, it would showcase he wasn’t ready to be CEO (if he couldn’t run a large part of the company, he clearly couldn’t run the company). As it turned out, this shuffling led her to remove him.   

Bradley was replaced by Dion Weisler, who had a much stronger pedigree, having come from successful runs at Lenovo and Acer, and didn’t appear to be chasing Whitman’s job.   Weisler is also an expert on the Asian market, which is where most growth for this unit is likely to come near term.  In short, Whitman took three liabilities and turned them into one, and put a guy in charge that was better trained to deal with the one liability that was left.  

Large Systems

Perhaps the most controversial change in the company was the replacement of Dave Donatelli with Bill Veghte.   What made this fascinating was that Dave, from outside, looked to be much better suited for the job, having come from EMC, than Bill Veghte who came from Microsoft and was connected to Windows Vista.  

This shows you the danger of outside perceptions. Because Bill had little to do with the Vista disaster as he had no line authority and was in a Marketing role (marketing has very little authority at Microsoft).   Before Vista, Veghte actually had a strong career at Microsoft, with projects like Internet Explorer and Windows Server, both of which were extremely successful and required collaboration to fix. 

Dave was simply the wrong executive for the job in convergence that needed to be done and Bill’s skill set was closer.   So while we all focused on the hardware vs. software disconnect, it was actually a management style problem that Whitman was trying to correct. And she got a bonus. Because in convergence solutions, software plays a bigger role anyway, making Veghte more ideal in the role.  

HR’s Role

I can count on one hand how many CEOs have realized that HR plays one of the most important roles in a turn around  – and I’d still have nearly 4 fingers remaining.   

One of the unique aspects of HP is that they have the most capable and powerful HR manager in the segment.  At HP, HR has been very well staffed.   While it was Whitman’s predecessor that recognized and executed in this area, Whitman wisely left Tracey Keogh in place and she has worked tirelessly to undo the mistakes made by Whitman’s predecessors, particularly Mark Hurd.  If you can’t get the employees behind you, you’ll likely fail in a turnaround effort. 

While it is a long road back, Hurd did some things during his tenure that hurt morale.  Had Keogh not been able, or had someone less capable been put in her role, HP likely would have failed by now, and this would be a very different column.   Part of what makes a good turn-around CEO isn’t just making changes but not breaking something that is working.  

HP’s Big Gambles

There are three big gambles playing out at HP, ranging from public to little known.    The first is how they are working to replace Cisco as the premier networking hardware provider.   In a fascinating effort led by Bethany Meyer, one of HP’s fastest rising stars, the firm is moving on Cisco’s margins and has strategically partnered with VMware in Software Defined Networking, one of the largest and most lucrative networking market segments, taking advantage of Cisco’s increasing trend of competing with partners. 

Less known is HP’s effort to replicate what IBM did to make DOS and Windows household names by uplifting Microsoft but with Google and their Chrome OS.   Because HP is very strong in thin clients, and Blade PCs (and IBM has exited the client space) HP is uniquely suited to make this happen. And they quietly recruited Mike Nash, who was instrumental in making Windows NT/Server successful in the 1990’s at Microsoft, for the effort.   As a result they have the only Chrome OS version that is truly business ready, largely because it has HP’s backing and is driven by a Microsoft legend.  

Almost unknown is HP’s 3D printer effort.  3D printing is starting out at the low end, much like PCs initially did with Apple, and they are believed to be the next huge trend.   This is what makes printing very strategic to HP and why combining PCs and printing makes sense. Because 3D printers, as they evolve, will likely bundle well with high performance PCs and workstations.  No company in HP’s class is even close to having a solution here and HP would be able to move easily from consumer level products to industrial solutions.   This play could be HP’s iPod and so much more.  

Wrapping Up: Marketing

What I find interesting when comparing HP to IBM’s turnaround effort is that while most would have thought that given Meg Whitman’s political career, HP would be better at marketing Whitman’s vision. It would have created an image, like IBM did, that was well ahead of progress. 

Politicians are often known to be long on promises and short on getting them done.   Whitman is actually long at getting things done and short on promises.   This likely both explains why she didn’t win the election in California and why the US political system is in such a mess.   Maybe we need a few more folks that are better at execution than they are at marketing.   Still, HP isn’t really getting credit for what they have accomplished and perhaps the recent changes Whitman has made to corporate marketing with fix that. 

In the end, what I think is fascinating is that HP looks far better from the inside than the outside.   And, if memory serves, that is the way the founders kind of liked it.  Go figure.