True story.  The last article I read before leaving for Yosemite was from the New York Times entitled “HP – Palm Deal Looks Better with Time”.  The August 16th article compared HP’s $1.2 billion purchase of Palm versus Google’s $12.5 billion acquisition of Motorola Mobility.  The article reaped praise on former HP CEO Mark Hurd’s decision to grab an important software treasure trove at an affordable price.  The article stressed that while HP’s TouchPad tablet had a lukewarm reception, the company’s Palm acquisition would prove to be a winner in the long run.

I agreed and left for Half Dome.

After five glorious days without a single bar of cell phone reception, I returned home August 21st and checked my Twitter (@gapintelligence).


The Big Surprise

During HP’s quarterly earnings call the previous Thursday, CEO Leo Apotheker announced that the company was discontinuing all hardware products that used its WebOS platform, namely the TouchPad.  The decision to halt the TouchPad came just weeks after its launch, which was perhaps the biggest product event in the company’s long and storied history.

Though Leo is the needle that euthanized the TouchPad and will receive the credit or blame for erasing Mark Hurd’s Palm purchase, it is generally the same Board of Directors who approved the $1.2 billion purchase to begin with.  With its latest decision, HP’s Board has removed any doubt that it is the most erratic group that has ever steered a corporation in our time and has tossed away billion dollar purchases with the ease of a teenager using Dad’s credit card.

During the same earnings call and after the announcement of an $11.7 billion purchase of enterprise software developer Autonomy, Leo also mentioned that HP’s Board was considering alternatives for the company’s Personal Systems Group (PSG), its $40 billion computer hardware division.  The PSG operation could potentially be spun off from HP or sold outright to interested buyers with roughly $12 billion burning a hole in their pockets.


The Hedgehog

HP’s decisions to dump the TouchPad, purchase Autonomy, and reconsider its role as the world’s number one computer maker (PSG) is part of what it calls a “strategic transformation”.  Ultimately, HP’s vision is that long-term profit and value is in the shape of being an enterprise services powerhouse that emulates an IBM or Oracle and that the metamorphosis starts by removing its highly commoditized computer manufacturing business (PSG).

HP’s “strategic transformation” took me back to Jim Collins’ wonderful book entitled “Good to Great”.  The book’s philosophy suggests that the highest performing companies are those that focus on a single principle, which is described as a “Hedgehog”.  Once defined, any aspect of business, any initiative, any decision, or any endeavor that does not comply with the company’s “Hedgehog” is ignored and cast aside.  Leo’s ultimate vision is to re-write HP’s “Hedgehog” and turn the company from a technology manufacturer into an enterprise services goliath.

Sounds great, but are enterprise services HP’s “Hedgehog”?

Collins details in “Good to Great” the necessary steps a company must take before it identifies its Hedgehog.  First the company must determine if the right personnel are on staff (the bus) and if they are in the right positions.  With a highly tuned staff, the company can then determine its Hedgehog based on three criteria:

1) What can you be the best in the world at?
2) What drives your economic engine?
3) What are you deeply passionate about?

Of the three, Leo’s “strategic transformation” is best supported by criteria #2.  There is no doubt that enterprise services are more profitable than hardware manufacturing and HP’s quarterly results have only proven that since Carli Fiorina’s tenure as CEO.

Arguments can be made that no matter how many enterprise software and services companies HP gobbles up, the company will never be better than IBM or Oracle in the industry.  The biggest obstacle hurting HP’s chances to be the very best in enterprise services lies within criteria #3 – passion.

Though HP has bought its way into enterprise services, the heart of the company is the employees who have been there through the years within the PSG and IPG (Imaging & Printing Group) divisions.  These people are engineers at heart, smart people who have long embraced the innovative “small garage” entrepreneur spirit born by Bill Hewlett and Dave Packard.

IBM’s Hedgehog was established 100 years ago and is anchored to “packaging technology for use by businesses.”  IBM’s long standing Hedgehog has seamlessly guided it through “strategic transformations” from punch card tabulators, magnetic tape, mainframes, personal computers, and now services and consulting.

HP’s Hedgehog:

It will take more than Autonomy for Leo to get this right.

The Ecosystem

When he spent $1.2 billion on Palm, Mark Hurd’s vision (and HP’s BoD) went well beyond the company’s cell phones.  Palm’s very well received WebOS operating system was the gem of Mark Hurd’s purchase and would be the glue that connected an ecosystem of devices that would ultimately create its own profits.  Hurd’s vision was the same as Apple’s and its iOS operating system that opens its iPhones, iPods, and iPads to a world of developers who can produce small, easy to purchase applications that generate both demand and profits for Apples devices.  With WebOS installed on tablets, phones, computers, notebooks, and even printers, Hurd’s vision was to create an ecosystem of interconnected devices that were supported by a massive developer community.  Developers would build amazing software applications for Hurd’s devices, which generate more demand and sales.  The more Hurd devices sold creates a larger audience and motivates developers to build even more applications.  The business model feeds itself.

Apple Ecosystem

A device and software ecosystem is no different than the natural ecosystem that I observed in Yosemite.  An ecosystem is very delicate and requires both an extraordinary amount of time to develop and perfect synchronicity between the players involved.  HP’s proposed ecosystem consisted of three autonomous units – its own PSG and IPG divisions as well as an independent (and recently purchased) Palm / WebOS development house.

Apple Computers took years to develop its iOS ecosystem and all of its players were confined to One Infinite Loop.  HP gave its ecosystem six weeks using three giant independently moving parts.

It’s rumored that the processors used in HP’s printers could not run WebOS software.

Seems like they don’t have much of a chance.


The Mailman

The greatest innovator the world has seen since Alexander Graham Bell announced his resignation as CEO of Apple last week (my very best wishes, Steve).  Arguably, the second greatest innovator of the last decade quietly sits in a cubicle in Rancho Bernardo, California.  Vyomesh Joshi (VJ) has held the reigns of HP’s Imaging & Printing Group since 2001.  Praised as a superstar during Carli Fiorina’s reign as CEO, VJ saw less of the spotlight during Mark Hurd’s cost cutting tenure over HP.

Regardless of fanfare or lack thereof, VJ has delivered.  Just like the mailman, VJ delivers 7% hardware unit growth each and every quarter (*big asterisk).

Mature market?  7%.
Increased competition?  7%.
Global economic meltdown?  7%.
No one is printing!?!?  7%.

VJ delivers not only because he has stayed true to HP’s Hedgehog, but he has been an innovator, testing new ideas and driving innovation in the printing and imaging space.  Even more importantly, much like Mr. Jobs, VJ has been an evangelist for IPG and inspires tens of thousands to follow him through a whirlwind of change, both in and out of HP.


The Fork in the Trail

As almost everyone with a keyboard has pointed out, Leo and HP’s maniacal Board have hit a fork in the trail, a point where the company will either go the same course or embark on its new “strategic transformation”.

I hope that Leo merely spins-off the Personal Systems Group and combines the hardware computing business with the company’s Imaging and Printing Group.  I hope that Leo believes that the combined PSG/IPG unit should inherit the HP name and its long established “Invent” Hedgehog.

Leo can give his collection of billion dollar enterprise services companies a new name, one that embraces his previous role as CEO of SAP.

I like a combination of the two: “SHAP”.

But in the end, I hope that Leo gives the mailman the keys to HP Invent.  VJ is an innovator, is true to HP’s hedgehog, and is the one who can inspire such a huge organization to become a single ecosystem.

VJ will deliver that 7%.

*Big asterisk: IPG just had its worst quarter in recent memory.  VJ may be Superman, but not even Superman can stop a tsunami.

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