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.

HP CEO Lays Out New Strategy - I Hope He's Got Something Else Up His Sleeve

Hewlett-Packard's (Relatively) New CEO Has Some Ideas For The Company's Future -- Not Necessarily Great Ideas, But Ideas Nonetheless

In a 40-minute speech at an event in San Francisco yesterday, Hewlett-Packard CEO Leo Apotheker laid out his vision for the company's role in the new digital media universe.  This was Mr. Apotheker's first public address since taking over the HP reins from Mark Hurd last November.  It was his biggest opportunity to date to gain the confidence of the public and the investment community.  This is important for him as HP's performance has already slipped under his command.

Unfortunately, I don't think the plan Mr. Apotheker described is going to be a winning strategy for HP.  It seems the two major initiatives are:

• To build a comprehensive cloud-computing platform; and 
• To create a comprehensive application marketplace.  

Both of these are actually pretty good ideas -- but not for HP.

If HP is going to get into providing cloud storage and retrieval services, they are not going to be alone in that business.  In fact, it is likely to become a commodity business, with several players providing similar storage capacity and retrieval speed. Competition in commodity businesses, where the products or services of the various suppliers are essentially fungible, generally boils down to pricing.

Historically, HP has not done well where price is the primary differentiating factor.  HP has always been a high-end supplier of quality products (although in recent years, I'm less impressed by their computers).  The only way HP could dominate the cloud business is with really superior technology.

If "superior technology" in the cloud business means a better user interface, HP will likely struggle to stand out.  User interfaces aren't really their long suit either.  They don't generally supply the "must have" software for any market.  However, if they can use their superior technology to actually make cloud computing more seamless, secure and effective than any other company providing that service, and do it at a competitive price (not necessarily the lowest -- just competitive), they might do o.k.  But o.k. won't be good enough; they need to dominate the sector in order to call the strategy a "win," and I don't think they will be able to do that.

Leo Apotheker

The other strategic initiative of creating a comprehensive application marketplace is also a very good idea.  However, HP has no particular traction or expertise for that business plan.  That business will very much come down to the quality of the user experience, and as noted above, that's not necessarily a strong area for HP.  The HP technology won't really help, nor will branding it with the HP name.  I don't think consumers care who is selling them their apps.  I just don't see what HP will do to gain a competitive advantage in that line of business.

With that said, I hope both businesses go really well for HP.  I am very much a fan of the company, and I've always wanted to see it succeed -- even when Carly Fiorina was running it (although I was happy to see her go - she was simply  not a good fit).  I don't know that Leo Apotheker is of the same caliber as Mark Hurd, but I guess we'll find out.  I'm a little dubious after yesterday's speech.