Carly Fiorina on the post-merger 'HP Way'
Published: 23 Jul 2003 08:37 BST
Dell's been growing faster than HP for some amount of time. Does HP need to have that No. 1 spot?
I do not think an appropriate strategic objective is to get bragging rights to No. 1 on a quarter-by-quarter basis. What I do think is important is that we have enough scope and scale on the PC business to sustain competitive margins and lead in market segments where we choose to lead. The PC business is a scope and scale business; it's why you see the market consolidating between the guys who are going to pull ahead, a bunch of guys stuck in the middle and a bunch of other guys who are barely making an impact in the business. Those guys stuck in the middle are going to have a harder and harder time because they're not making money.
Dell doesn't innovate that much, but they're still growing phenomenally. In this quarter, their shipments grew 26 percent and yours grew 13 percent. You had a great quarter, but it was also the first one (post-merger) where you didn't shrink.
That's because we eliminated redundant product lines.
Yes, but Dell's still growing overseas, and they're growing faster than you in industry standard servers and desktops. Is it just because corporate customers see Michael Dell and go, "God, I'm dazzled. Sign me up?" Is it because their field sales team is especially good? Why should they be growing this rapidly when everyone knows it's basically commodity parts and a commodity product? What can you do to counter that?
I think the best answer to that question is to ask another question: Why is Dell trying to get into printing and networking and services and storage and a bunch of other things? I think they are doing that because their stock depends upon sustaining that level of growth. The businesses they are in today won't sustain that level of growth. That's why. Now they have to find new growth markets, which means going outside their core business.
By the way, while they're trying to get outside their core businesses they got a big competitor called HP banging them every day in their core business, day in and day out. And those new businesses they're trying to get into take a bunch of things they they've never done before. It takes a system sell, R&D, the ability to manage multiple businesses at the same time -- things you don't learn in a day or two...(Dell's) a great company, but what they're trying to do now is not going to be as easy as what they've done for the last five years. And what they've done for the last five years is tune to perfection a single way of doing business around a relatively narrow product line.
But why does that narrow a product line sell?
Because they do a good job at it.
What is HP doing to build mind share? Part of your challenge (vis-a-vis Dell) is that you have a complex array of products.
There is no question that when we completed the merger, the biggest issue we had was ignorance about who we were and what we do. And a lot of the ad campaign that we started running the first 12 months was around introducing the marketplace to what this company was... There's no question we had -- and continue to have -- an education challenge. But candidly, our product line is no more complex than IBM's. It's different. It's no more complex than what Dell claims they're trying to do. It's slightly different. If you think about what Dell says they want to do -- networking, printing, storage, services, PCs, servers -- actually, it's an even broader product line than ours is. Whether they are actually going to do all that stuff is something different but they've announced plans to get into all those businesses.
As Dell expands into other areas from storage to printers, they will have the benefit of their direct distribution model to help their profit margins. What are you doing to bolster your direct efforts as well as other areas of your business?
It's interesting. If you look at what Dell is doing, in addition to continuing to use their direct distribution, they are looking for channel partners. They made a foray into the retail market. You may remember there was a big announcement about them going into Sears. You may remember there was a less-noisy announcement about them exiting from Sears. The reality is they are trying to extend their channels of distribution and go to other channels than direct. We happen to be coming at it from a different angle. We have every indirect channel of distribution there is. We own 10 percent of the world's retail shelf space.
Most people don't know how to marry IT to their businesses. It requires a huge amount of information. How do they do it? Where do they start? That's a big problem for people to solve.
It certainly is. And I don't want to convey that the consulting companies that we partner with don't add real value. However, it is also true that we actually don't believe that this is so complicated that most people can't get it done... I think IBM's marketing message is, "Mr. and Mrs. Customer, you don't get it. You're not smart enough to get this, so please hand it over to us cause we'll make it all better." I think most customers are quite smart. I think in many ways technologists have purposely tried to make technology very complicated. I think technologists purposively have marketed technology using technology terms, not business terms. Any businessperson can understand technology.
The role of a very fine CIO is not to be a geek about the technology... the role of a great CIO is to link the business requirement to the technology response. By the way, it doesn't have to be the CIO; maybe it's the person in process operations who is our main link. But you have to have someone who we interact with on a day-to-day basis who understands where is it that (the company) is trying to go on a business basis.
Do you think SCO has any rights to claims against HP or IBM?
I don't know whether they have any rights to claims to IBM. I am only speaking for HP.
You do distribute Linux to your customers?
Yes.
And it sounds like SCO is saying that any commercial distribution of Linux would be subject to litigation potential.
SCO's actions to date have been based on their readings of Unix patents, as you know. And we think our position is different than IBM's.
You came to HP about four years ago. Where are you in refashioning the corporate culture and the HP Way? When people look back 10 or 15 years from now, what legacy do you think you will have left?
If you look at our statement of corporate values today and you looked at them (when David Packard and William Hewlett were in charge), you would find that they are exactly the same -- but with the addition of speed and agility. If you look at the corporate objectives, they are precisely the same.
There's been a lot of misunderstanding what the HP Way was. Let me give you a simple example. When I came to HP, there was a performance management system in place. This system had been in place for 15 years and hadn't been used. Therefore, everybody was clustered in the middle... less than 1 percent was rated as "needs improvement."
I have two board members who knew and worked closely with Bill and Dave and told me that they were focused on excellence. What I said was, "We have this performance management system in place. Let's use it." There's been a lot of discussion that the HP Way meant nobody ever got fired. That's not true. Dave Packard did fire and his nickname was The Evil One. HP is a company where balance counts. But when the company becomes slow and inward focused and self-satisfied -- this is not the HP Way.
Do you have any plans what you might do next?
I never think about the next job. Never did. Never will.
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