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HP, the GE way
July 31, 2005
Hewlett-Packard's new CEO, Mark Hurd, has been doing what he was hired to do: dismantle the bureaucracy that his ill-fated predecessor, Carly Fiorina, wrapped herself in. The week before last, he announced plans to fire nearly 15,000 employees, saving the company a couple of billion dollars a year. He also said he'd close down the firm's central marketing and sales organization, shifting marketing responsibility back into the three customer-focused business units - one serving big companies, one serving middle-sized businesses, and one serving consumers. With less fanfare, he also shut down some R&D projects. Last week, he pulled the plug on Fiorina's decision to sell rebranded iPods (the strategy behind that much-hyped move never seemed to materialize).
Reducing HP's complexities and costs is a good first step. But at some point, Hurd is going to have to address the me-too-ism that has come to plague his company - and stake out a claim on some fresh and exciting territory. That will mean abandoning some comfortable old sources of revenue, but I don't think it has to mean, as some are arguing, tearing the company into pieces. In fact, the breadth of HP's products and services could be a real strength if it could be put to the service of a coherent strategy. Here, I think Jeffrey Immelt's recent restructuring of uber-conglomerate General Electric could hold some lessons.
GE had been been showing signs of dry rot at the end of the reign of Immelt's predecessor, Jack Welch, and Immelt has been aggressively remodeling the-house-that-Jack-built. In late June, he announced a sweeping reorganization, collapsing the company's eleven business units into six. One of the new units is called GE Infrastructure, and it brings together GE's capabilities in transportation, energy, water treatment, and security as well as related financial services. It's designed to be a one-stop shop for developing countries eager to build modern physical infrastructures - and ready to make the big investments such buildouts require. "This organization will accelerate our progress in developing markets like China, India and the Middle East," Immelt explained. "Leveraging common technology and services will also result in substantial gains in productivity."
A similar - and equally exciting - opportunity is open to help build information infrastructures in developing regions. The desire for modern IT systems in these fast-growing areas is great, and local governments and companies now have piles of cash to invest in them. As with GE on the physical side, HP has the breadth of products and skills necessary to lead the way in this effort. And the experience it earns, particularly in applying emerging utility-computing technologies to build efficient, reliable IT infrastructures, could be valuable in helping organizations in the developed world modernize their own IT organizations in the years ahead. Seizing the opportunity would require further organizational and business changes, as well as some serious risk-taking, but if HP doesn't grab it, someone else will.
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