Co-Founders Dave Packard and Bill Hewlett started Hewlett-Packard (HP) in 1939 inside a small one car garage behind Packard’s house. The two finished their studies as electrical engineers at Stanford University in 1934 and became close friends. They decided to start their own business “and make a run for it”, formalizing their partnership January 1, 1939. (The HP Way). They decide the company’s name with a coin toss that one car garage became the office of Hewlett-Packard. At the time it was started HP had $538 in working capital and little more than a couple hundred dollars worth of assets. It was in that garage that HP’s legacy was born, when Bill and Dave created the first HP product – the Audio Oscillator HP200A. Following the invention of their first product, the pair moved into a small building down the street from their famed garage and hired their first employees. “Walt Disney Studios placed an order for eight HP 200B audio oscillators for the movie Fantasia—HP’s first big sale.” (High Tech: Winning Success In Silicon Valley).
Another milestone was reached in 1940 when HP sent out its first ever Christmas bonus in the amount of $5. This Christmas bonus set the tone for all bonuses to come, as it quickly turned into a production bonus and soon helped to shape the company wide profit sharing plan that HP adapts. In 1942 HP builds its first ever company owned building, and in order to protect themselves build it so that it can be easily converted to a convenience store should the electronics industry fail. One of the most important milestones for the company was reached in 1947, as HP became a true Corporation. HP also caught attention for their Management by Walking Around and Open Door Policy programs. In 1957 HP had its initial public offering of stock and wrote their first set of corporate objectives, which set the tone for their management style as a company. In 1958 HP made its first “sizeable acquisition when they purchased F.L. Moseley Company”, which further expanded their product line. (Maddox).
The late 50’s and 60’s were an extremely important time for HP as a company as it was during this time that they became a global company by building a manufacturing plant in Germany. It was also during this time that they created their Division Separation structure where they separated profit and loss accountability between divisions. This division was thought to help keep employees nimble while fostering motivation and creativity. During the 60’s HP further developed itself by entering into the medical field with the purchase of Sanborn Company. They also had their stock listed on the New York and Pacific Stock exchanges and were listed in Fortune 500’s top companies at 460. It was also during the 60’s that HP created its first computer, which was used in house to control company tests. HP also creates their first scientific calculator around this time, which also gained critical success. Further helping promote HP products Dave Packard was appointed U.S.
Deputy Secretary of Defense in 1969. In 1977 John Young became president of HP replacing Bill Hewlett. In the early 80’s HP took much more interest in the personal computing industry as it was during this time that they create the first mass marketed personal computer. They also enter into creating printers for use with their personal computers, the printers HP manufactured during this time set the standard for the direction in which printers would evolve. In 1987 Bill Hewlett retired as vice chairman of the board of directors, his son Walter Hewlett and David W Packard (son of Dave Packard) step up to take his place. In 1992 Lew Platt became HP president and CEO who was the first president and CEO of HP to not be a member of the Hewlett or Packard family.
In 1993 Dave Packard relinquishes his chair of the board of director’s position to Lew Platt. Possibly one of the most damaging events hits HP in 1996 when Dave Packard one of the original founders dies. In 1999 Carly Fiorina becomes President and CEO of HP. In 2002 HP merged with Compaq Computer. This merger created an “$87 billion entity” which operates in more than 160 countries and has almost 150,000 employees. (Dykman, Davis, & Lamb). “Quite a change from a company which 70 years ago started in a 1 car garage shack with 2 college kids who had $500 to work with!” (Hewlett Packard Company) Today, HP provides consumers a wide range of products and services from digital photography to digital entertainment and from computing to home printing. This comprehensive portfolio helps the company match the right products, services, and solutions to their customers’ specific needs.
Hewlett-Packard’s Vision Statement
We strive to improve the environmental performance of our customers, our supply chain, and our own operations. We give people the tools and solutions to build a better today while preparing to address the challenges of tomorrow.
To lead in the marketplace by developing and delivering useful and innovative products, services and solutions.
Committed to global responsibility by being economic, intellectual and a social asset, demonstrate commitment to our employees by promoting creative work that reflects our values, and earn customer respect and loyalty by consistently providing the highest quality and value while achieving finance growth.
HP’s values embody the qualities, beliefs, and principles that will ensure organizational success. “It is necessary that people work together in unison toward common objectives and avoid working at cross purposes at all levels if the ultimate in efficiency and achievement is to be obtained.”-Dave Packard Trust and respect for individuals
We work together to create a culture of inclusion built on trust, respect and dignity for all.
Achievement and contribution
We strive for excellence in all we do; each person’s contribution is critical to our success.
Results through teamwork
We effectively collaborate, always looking for more efficient ways to serve our customers.
We are the technology company that invents the useful and the significant.
We are open, honest and direct in our dealings.
In order for the company to remain one of the world’s leading producers of the latest technological advances, HP must face the following issues head-on: 1. Their ability to remain a top tier leader in the technology industry through innovative products 2. Strive in meeting the continued needs of various shareholders by increasing HP shares 3. Maintain customer loyalty by producing quality yet reasonable prices and exemplarily customer service
4. Finding ways to reduce our global footprint worldwide through advances in green solutions Management Question: What does CEO, Meg Whitman, need to do to retain and recommit HP to the PC business and reintroduce products her predecessor discarded?
* Legislators and regulators
* Nongovernmental organizations (NGOs)
Stakeholder Expectations and Expectation
(See Exhibit 1.1)
Stakeholders Key Issues
With the unwavering success of new entrants into the market HPs stakeholder’s main issue is their ability to be innovative and competitive in the market. Competitors such as Apple has gained a significant competitive advantage in the technology industry forcing HP to evaluate how they do business. SWOTS
* Hewlett-Packard (HP) is a global provider of personal systems, imaging and printing products, and technology solutions. * It is the largest player in the inkjet and laser printer market. * HP is also one of the market leaders in the global PC market. * HP has a very strong distribution Hewlett-Packard’s primary strength is its business position. The enterprise has a large amount of cash in hand about $10 billion. * Hewlett-Packard is a global enterprise and especially after its merger with Compaq, the company became world’s biggest computer hardware and peripherals consort in the world and has ranked 20th in the Fortune 500 list.
* Hewlett Packard is operating in more than 170 countries including both developed as well as under-developed. * Being a global dealer of computer hardware, it gives HP many advantages like dominating printers market, both laser and inkjet. The company attracts and focuses on consumers from even newly found markets all around the world, multinational corporations, non-governmental organizations etc. * The company competes both at local and international level. * It has increased its competitiveness through policies and strategies that supports free-market economies. * HP is a leading supplier in the growing IT markets.
* HP uses the Windows platform in all its I-PAQ phones. Incidentally, I-PAQ phones have been much criticized for not being very Windows friendly in a lot of user forums. * The inability to react quickly to changing market conditions and demands is a weakness of HP. * The company was in a long term debt for many years which kept it from investing in different growth opportunities. * The touch pads of the notebooks of Hewlett Packard like the dv series, dm3, and Envy lines needs improvement. These touch pads are either finicky, unreliable, or are difficult to use because of friction.
* The mouse buttons on various HP supplied machines are said to be clumsy to use, too. * Poor shelling life of HP products plagued some mainstream systems and net books. * The past acquisition of Peregrine made the HP’s portfolio even more diverse and complete but HP Open View’s lack of mainframe management capabilities created several problems. * Another weakness was that it did not yet hit a CMDB product that includes discovery and mapping. This cause many customers to switch the brand.
* Expansion in alternative client computing architectures and other emerging mobile computing devices gives a good opportunity for HP. * The mobile phone market is forecasted to grow tremendously. * The recent acquisition of EDS puts HP at a strong position in the computer market and makes it portfolio more impressive. * Hewlett-Packard was able to generate large number of revenues and profits from its different deals and raised more than six billion which it can use to pay off its debts as well as invest in different research and development activities. * If the products by the company are supplied at reasonable prices, there will be more chances of growth as the demand would increase. * The company has formed Customer Solutions Group that helps in selling the complete IT solutions, products and services by HP.
* Hyper-competitive environment – Companies such as Dell, Toshiba, Lenova Group and Acer are formidable competitors for HP. * It competes in terms of price, brand, quality, technology, distribution and range of products, among other factors. * Other mobile operating systems such as Symbian, iPhone, and Linux are on the rise and they too pose a threat to HP. * Operating in global market means many competitors and therefore, the company has to be at the forefront of changing technologies as well as addressing the changing customer demands and needs. * The global economic recession is also a threat for the company’s sales and profits. The prices have also fallen as the stock markets are at historic low positions. * Many other competitors including Dell are entering the printer business whereas IBM has become a market leader.
3. Organizational Design Analysis
Division of Labor in the Ambidextrous Orgainzation:
Organic characteristics such as decentralization and employee freedom are excellent for initiating ideas, but these same conditions often make it hard to implement a change because employees are less likely to comply. Employees can ignore the innovation because of decentralization and generally loose structure. HP has such problem and it is necessary to overlay the ambidextrous approach, which speaks to incorporate structure and management process that are appropriate to both creation and the implementation of innovation.
The ambidextrous approach looks at HP’s design elements that are important for exploring new ideas versus the design elements that are most suitable for exploiting HP’s current capabilities. Exploration means encouraging creativity and developing new ideas, whereas exploitation means implementing those ideas to produce routine products. HP can be designed to behave in an organic way for exploring new ideas and in a mechanistic way to exploit and use the ideas. Research under HP could use an ambidextrous approach by designing for both exploration and exploitation perform better and are significantly more successful in launching innovative new products or services.
Through research, using this model as an overlay, HP’s creative department should use the organic structure to expand its capabilities such as reducing their global worldwide footprint through advances in green solutions. The economy of China has been growing at a robust rate since last few years. China’s recently released five-year plan signifies a new phase of growth through the expansion of domestic consumption, driving a low-carbon economy, fostering innovation and achieving balanced social and economic growth (Datamonitor PLC, 2012). The growth of HP’s mobile tablet PC market, entry into the smartphone market expects to grow strongly in the coming years. The growth is expected to be driven by the demand from the US and Asia Pacific regions.
In 2010, the market was led by the North American region with approximately 35% market share. By 2014, Asia Pacific region including China expects to lead the tablet PC market (Datamonitor, 2011). In February 2011, HP launched the HP TouchPad, a 9.7-inch tablet PC that runs on webOS 3.0. The company plans to make available this product in the coming months. The company’s increased focus on the tablet PC segment will enable it to benefit from the growing market (Datamonitor, 2011). HP entered the smartphone market with the acquisition of Palm, a provider of smartphones powered by the Palm WebOS mobile operating system, in July 2010.
The launch of new smartphones with an updated version of WebOS will enable the company to effectively compete with each other players in the market, including Apple and Google (Datamonitor, 2011). In addition, provide the healthcare markets with products beyond the capabilities of their competitors. HP has been focusing on providing healthcare solutions in recent times. In January 2010, the company and McKesson collaborated to work on electric health record (EHR) adoption at independent physician practices. HP’s solutions targeting healthcare sector will enable it to increase its revenues in the company years (Datamonitor, 2011).
The creative department could use an organic structure to explore and develop new ideas to face intense competition from Apple, RIM, and Nokia. Under an organic structure, HP will be able to react quickly to those competitors having a positive effect on revenues and profitability of the company in the long run.
Looking at the mechanistic structure HP could exploit capabilities and apply routine implementation of innovations. An example of this looks at HP leading market position in the global printers market. HP ships more than one millions printer per week. Strong market position in various market segments provides economies of scale for the company, including increasing their customer base (Datamonitor, 2011). The Four Types of Change Provide a Strategic Competitive Wedge: Managers can focus on four types of change within organizations to achieve strategic advantage. These four types of change are technology, products and services, strategy and structure, and culture. These factors provide an overall context within which the four types of change serve as a competitive wedge to achieve an advantage in the international environment. HP has an unique configuration of products and services, strategy and structure, culture, and technologies that can be focused for maximum impact upon the its chosen markets.
Technology changes are changes in an organization’s production process, including its knowledge and skill base, that enable distinctive competence. These changes are designed to make production more efficient or to produce greater volume. Changes in technology involve the techniques for making products or services. They include work methods, equipment, and workflow. In the case of HP, the competitive-intelligence (CI) chief of HP has focused his intention to offer free shipping for printer cartridges, its development of “print status monitor software which will prompt customers to purchase replacement cartridges,” and numerous technical specifications. Only but a few minor errors, the CI team had nailed everything: prices, specs, software details (Varchaver & Burke, 2007).
Products and services changes pertain to the product or service outputs of HP. New products and services are normally designed to increase the market share or to develop new markets, customers, or clients. If correctly applied, HP can bring together existing technologies in a new way to serve a new market. HP has a broad product portfolio. HP’s services segment offers consulting, outsourcing and technology services across infrastructure, applications and business process domains. Its services encompass the data center and the workplace (desktop); network and communications; and security, compliance; business continuity; warranty support; technology consulting and systems integration solutions (Datamonitor, 2012).
Strategy and structure changes pertain to the administrative domain in an organization. The administrative domain involves the supervision and management of management, policies, rewards systems, labor relations, coordination devices, management information and control systems, and accounting and budgeting systems. Strategy, structure, and systems changes are usually top-down–that is, mandated by top management–whereas product and technology changes often come from the bottom up. To make the strategy successful, they identified a new set of key performance metrics to track how effectively the company was meeting goals of competitive costs, high quality, and great service. This change also proved to be successful in the long run.
A culture change refers to changes in the values, attitudes, expectations, beliefs, abilities, and behavior of employees. Culture change pertains to changes in how employees think; these are changes in mindset rather than technology, structure, or products. Culture change can be particularly difficult because people don’t think their attitudes and beliefs easily.
The four types of change are interdependent– a change in one often means a change in another. The structural change was an outgrowth of the technology change. HP is an independent system, and changing one part often has implications for other parts of HP. Porter’s Competitive Strategies- Michael E. Porter studied a number of business organizations and proposed mangers can make the orgainzation more profitable and less vulnerable by adopting either a differentiation strategy or a low-cost strategy.
Appling a low-cost leadership strategy means managers choose to compete through lower costs, whereas with a differentiation strategy the orgainzation compete through the ability to offer unique or distinctive products and services that command a premium price. Each strategy can vary in scope from broad to narrow. That is, an organization can choose to compete in many market and customer segments or to focus on a specific market or buying group.
Appling this model to HP revels the organizations focuses on low-cost leadership strategy with a broad scope where HP provides goods and services to customers at cheaper prices. HP uses the low-cost strategy with their printer / copier product line where tight controls to produce products more efficiently than its competitors.
Low-cost leadership strategy using a broad scope is concerned primarily with stability rather than taking risks or seeking new opportunities for innovation and growth. For HP, this means it can achieve higher profits than competitors because of it can efficiency and lower operation costs. Also, this strategy puts HP in a better position to prevent loss of market share. 4. Identification and Evaluation of Alternatives
1. Encourage technology change by using skunkworks
Pros: Focuses on breakthrough ideas for HP
Give highly talented employees time and freedom to keep HP on the cutting edge
This group could be highly autonomous and secretive while creating
Cons: May create a subculture under HP’s vision
Risk of skunkworks wasting resources and come away with nothing to show
Ideas may be behind competitor’s organization’s skunkworks teams
2. Empower employees through the bottom-up approach
Pros: Employees are motivated to figure out the best ways to get their jobs done
Supports the right culture that drive high performance
Employees at all levels feel part of the vision / change or the organization
Cons: Employees ideas could go nowhere
Ideas could get lost between the layers of management
Employees may become focused on “looking for shortcuts” in the process 3.
Discover a distinct pattern of tailoring innovations to customer needs by using the Horizontal Coordination Model
Pros: Increases the amount of new product development
Improves the different possible developed products
Gives HP the edge in meeting customer needs and circumventing manufacturing / marketing ideas
Cons: If not properly applied, the connections is lost between employees and customers
If not properly applies, the coordination between departments are not shared
Must be driven by top managers to function well
5. Recommended Alternatives- Based on the models and discussed alternatives, I recommend HP will be best able to adapt to the changing external environment by proceeding with the Horizontal Coordination. This means HP’s technical, marketing, and production employees share ideas and information. All departments would have a say if / when a product gets introduced in the market. Specialization means every department are highly competent at their own tasks. Boundary spanning means each department under HP vision will be linked with involvement on new products and has an excellent linkage with relevant sectors in the external environment. Under boundary spanning, employees are aware of recent scientific developments and personnel are closely linked to customer needs. Horizontal coordination stresses the importance of sharing ideas between technical, marketing, and production.
I would not recommend using skunkworks or the bottom-up approach. Skunkworks has a great possibility of developing a subculture that may not support HP’s overall vision. Using the bottom-up approach may go dry after employees discover their ideas are going unnoticed or getting lost while traveling through the layers of management.
6. Implementation and Conclusion
Elements for Successful Change- Regardless of the type or scope of change, there are identifiable stages of innovation, which generally occur as a sequence of events, through innovation stages may overlap. For a change to be successful implemented, HP’s mangers must make sure each element occurs in the organization. If one of the elements is missing, the change process will fail. 1. Ideas. Change is an outward expression of ideas. Ideas can come from within or from outside the organization, 2. Need. Ideas are generally not seriously considered unless there is a perceived need for change. A perceived need for change occurs when managers see a gap between actual performance and desired performance in the organization. 3. Decision to adopt.
The decision to adopt occurs when managers or other decision makers choose to go ahead with a proposed idea at HP. 4. Implementation. Implementation occurs when HP’s members actually use a new idea, technique, or behavior. Materials and equipment may have to be acquired, and workers may have to be trained to use the new idea. This is the most difficult part for HP. Until people use the new idea, no change has actually taken place. 5. Resources. Change does not happen on its own; it requires time and resources, for both creating and implementing a new idea. Employees at HP must provide energy to see both the need and the idea to meet that need.
In conclusion, strong market position in various markets segments provides economies of scale for the company, besides increasing its chance of winning customers. However, intense competition will adversely affect the revenues and profitability of the company in ling term (Datamonitor, 2011).
1. Daft, R. (2010). Organization Theory & Design. (11th ed.). Mason, OH: South-Western, Cengage Learning. 2. Datamonitor. (2011). Hewlett-Packard Company
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