Saturday, August 20, 2011

Hewlett-Packard - A Lesson In Why A Strategy Must Respect The Brand

First of all, it's nice to be back online.  I took several weeks off of blogging and tweeting to recharge my battery and simply observe for a while.  Time well spent.  I'll probably start getting back into things a little slowly.  Here's my first thought:

Hewlett-Packard's stock price suffered an historical drop this week.  I suppose they could point to general economic uncertainty, but no one is even trying to make that argument.  This is all about HP's strategy -- make that HP's lack of strategy.

This is not an "I told you so" moment, but back on March 15, I already had some serious concerns.  It was clear to me that Leo Apotheker did not have a good feel for the company.  Again, as I said back then, this is not an attack on Mr. Apotheker.  I'm sure he is a brilliant guy and talented businessman.  You don't get to that level without doing a lot of things right.

However, this is a lesson in why it is critical to understand your brand when you plan your strategy.  Every company is different, and that means that a good strategy for one firm might be a terrible strategy for another seemingly similar firm.  Mr. Apotheker is spending all of his time surveying the market for opportunities, and not enough time understanding HP and how it fits into that market.

I'm not going to pretend to have all of the answers for HP (or any answers, for that matter).  But I do know that the HP brand has decades of history as a symbol of innovation, quality and prestige.  It used to mean something when you spent extra money to purchase an HP calculator.  It added up numbers the same as the cheap brand, but it showed that you cared about quality.

I don't think that history is lost (although the brand has certainly been damaged -- first by some of Carly Fiorina's decisions, and now by Leo Apotheker's).  But a history of quality and prestige has no value in commodity offerings.  To capitalize on a history of quality, you need to do something special -- not jump into the same business models as your competitors.

Let me take a couple of painful positions which actually seem obvious to me.  HP should never have fired Mark Hurd.  I don't know what they were thinking.  He was clearly a talented leader who understood the company.  He made some mistakes, but they could have rehabilitated his reputation without looking like they were condoning his behavior.  Unfortunately, I don't think they can remedy that mistake now.  Hurd has a great new job and he probably doesn't want HP back in its current condition.

The other obvious point is that Leo Apotheker is the wrong guy to run this company.  I'm sure there is another good job for him out there, but he is a really bad fit for HP.  I'm sure this is not news to the HP Board, but the sooner they find a replacement, the better.  And who should that be?  Some talented executive who is focused on innovation and really understands the HP brand.  Or maybe they should just sell it to Google.