I vividly remember the goosebumps I felt while working late at the office one night almost 10 years ago, when I first read a memo from my then-CEO Carly Fiorina about HP's big, hairy, audiacious goal to acquire Compaq. As we know, HP went on to complete the deal, laying the strategic foundations for subsequent CEO Mark Hurd to execute and drive HP to its market-leading position today.
So you can imagine my surpise and sadness to read, two days ago, of HP's plan to shed its mobile devices and PC businesses.
Now this isn't some rinky-dink wannabe trying to stand toe-to-toe with the PC giants out there. We're talking about a company that sold US$41 billion worth of PCs in 2010, and achieved an 18% market share in the 2nd quarter of this year (which, incidentally, made it the market leader by far -- Dell came in at #2 with a 13% share).
Why would an undisputed market leader surrender its dominance while seemingly at the top of its game?
Industry analysts trot out a justification cribsheet that seems, at first glance, to make sense: Razor-thin margins in a largely commoditized market; abysmal sales of its TouchPad tablet launched in July; a predisposition by current CEO Leo Apotheker to bare his software fangs and move HP to a higher-margin business and (to use that odious euphemism) "unlock shareholder value".
And yet -- I wonder if those who hail this move have fully considered two things:
The first, is what I'd call negative ROM (return on morale). HP's Personal Systems Group (PSG), who up until this week were internally regarded as rock stars for turning around a struggling division by "making the computer personal again", have had the wind knocked out of their sails. Why, the company has discontinued its much-touted TouchPad, introduced only last month; and pulled it off the shelves in Australia just four days after their national launch. You don't change tack so abruptly externally without torching the ground internally. A whole bunch of demoralised employees are going to quit and leave -- or even worse, quit and stay.
The second observation, is that HP is jettisioning its most critically vital brand touchpoint. For the past decade, HP has arguably been the only technology company with the breadth of products and services to engage consumers, SMEs and the enterprise segments. But the bulk of its brand-building potential has always resided in the consumer space. This business is transactional in nature (win a prospect over quickly, and repeat millions of time over; as opposed to clinching a BPO contract with one corporation after an 18-month pursuit). But perhaps even more importantly, SME and enterprise decision-makers are also consumers after hours; and they interact with their consumer products far more frequently (how many times have you used your smartphone today?) than with their corporate purchases (how many times have you pulled out your outsourcing contract lately to admire the fine print?) By ditching its PC business, HP is relinquishing the countless opportunities it would have, each and every day, to delight its customers and exceed their expectations through the most personal of devices in its armoury. (Next to the mobile phone, a PC has the best chance to be at arm's length, more so than a printer or blade server.)
Banks demonstrate their grasp of this fundamental tenet when they put real effort behind their credit card business. They know that in a world of 360-degree branding, it pays to know which 36 degrees count the most.
Will HP turn around its supertanker, and find traction with this new strategic tack? To be clear, computing will carry on. It's just that increasingly, it won't be on a computer.
The hallways of history are filled with portraits of companies which have turned their brands and businesses around (think Apple, Xerox, Target, Gillette, Tesco, Burberry, Samsung, Nissan and Ford, to name a few) and littered with the remains of several that haven't (Digital, Wang, Ericsson, Polaroid, Sunbeam, Saturn, Borders and Blockbuster come to mind). Time will tell if HP's big bet on business strategy is founded on a compelling brand strategy. I have to admit, I can't seem to find any.