As I get older, I’m becoming a greater believer in power of the differences of opinion. When we’re stuck doing things a certain way, we tend to stay doing them the same way. In a business parlance, you can think about this as being the evolution of a corporate culture. Of course, that can be a good thing, and a bad thing. I suppose it depends on the business you’re in and the direction you’re heading.
Recently, Hewlett Packard (HP) made the surprise announcement that they were intending to spin off their Personal Systems Group, dump their brand new tablet and smartphone hardware, and ultimately will start sacking the WebOS developers {as reported by AllThingsD} they’d just acquired about a year previously from Palm. The acquisition of Autonomy at the cost of $10 billion USD was all part of Leo’s plan to turn HP into an enterprise software solutions company - like the one he left prior to coming to HP: SAP.
The market, to put it bluntly, didn’t like the new direction of the company and HPs stock lost 20% of its value in the first 24 hours after the announcement in August. Since then, it has lost 45%of its value from before the announcement.
In response, the HP board decided to take action. Two days ago, HP sacked Leo Apotheker, and replaced him with Meg Whitman as CEO.
It seems like a television soap box drama almost or at the very least a lesson to be heeded by budding executives out there. But what is the lesson? What went wrong?
Leo Apotheker had been involved with SAP or its subsidiaries from 1995 to 2010: about 15 years. The ultimate set of products that SAP create are all about enterprise management: databases, time sheets, goods tracking, cost tracking, and all the glue that goes into making a modern corporation work. As a product I have had some personal experience with, it’s really not that great and frankly looking a bit long in the tooth: but I digress. What happens when you work in an environment for a significant period of time, as I have seen in past employees I’ve hired in my line of work, is that they bring the corporate culture of their old company to your company when you hire them. Again, this can be good and bad.
When HP brought Leo on board the first thing he wanted to do was to shake things up and make some more money for HP. The best way of doing that was to take HPs existing, albeit small, enterprise business segments and start to push them in a similar direction to SAP - after all that’s what he did before with some reasonable success. To be honest - that’s fair enough when you look at it in isolation. It falls apart when it comes to perception: the greater community have known HP for many years as fine makers (usually) of everything from calculators to printers and more recently to personal computers and smartphones. The shareholders hear that the Leo is going to sell-off the very group that has the highest market visibility and market will react very negatively. HP could have had their cake and ate it as well - provided they had enough money to keep the PSG running in the meantime - by acquiring Autonomy in the background and beginning their push into that market more vigourously. It may have been there wasn’t enough money to pay for both options: in which case I would have said build up to it instead of acquiring. If the PSG was losing a lot of money, then far better to try and fix it than to axe it entirely.
To me I see it simply as Leo not anticipating the market backlash being to sudden and so intense. There are always other options and it seems to me that Leo simply went with a strategy that he was used to, rather than trying to rethink what HP was and how he could play HP to its own strengths. If all HP could do to succeed (according to Leo) was to buy another companies technology and products for a huge sum of money, then the final product isn’t HPs strength by definition. Was it such a good idea then or would Leo have been happier just going to work at Autonomy instead?
So where’s the lesson? It always comes back to core business and HPs core business is what made it successful. HP built a reputable brand and branching out takes patience and determination - not shock acquisitions and announcements of new directions for established companies. Fundamentally though, many peoples thinking is flawed. Just because a certain way of doing things worked before in another situation, doesn’t mean it will work well in the current situation. Understanding the subtleties that make each situation unique comes with experience - but only with a wide and varied experience. A lot of experience inside one silo just tends to make it worse. The more you work within one set of rules the more you believe the way you work is the only and best way. If we only do what we know without thinking about it first, all we do is send things to hell just that little bit quicker.
What happened to HP is a tragedy to me. Perhaps an unnecessary one too. But then, if you hire someone that’s lived inside another companies silo for 15 years and give them the reins, why didn’t you think this would happen? Maybe they’d been the directors of HP for too long? Maybe they thought HP needed a shake up? Wanted or not, they got one.