Reference no: EM132294968
Hewlett-Packard is one of Silicon Valley’s oldest success stories after William Hewlett and David Packard began building test equipment in a Palo Alto, California, garage in 1938. Over the years, Hewlett-Packard became fabled for its passion for innovation and customer support as well as giving back to the community. It developed a reputation for building high-quality printers, computers, and other hardware used by businesses and consumers. In later years, it expanded into software and business solutions. Hewlett and Packard tried to maintain the “HP Way,” infusing their entrepreneurial spirit and empowering employees even as the company grew to tens of thousands of employees. By the early twenty-first century, however, technology innovations and customer desires were changing faster than the company could respond. The company made a number of disastrous acquisitions which depressed its stock price and distracted executives from the changing world and intense competition. Stakeholders, especially employees and customers, were increasingly perplexed about just what HP stood for. When Meg Whitman assumed the reins in 2011, she became the third chief executive in just three years.
To revitalize the company and put it back on a healthy course, Whitman had to assess the plans that her predecessors had put in place, decide which to salvage, develop new plans, and restructure the firm so that it could be more nimble in today’s fast-paced and increasingly mobile world. She then launched a five-year turnaround plan that required laying off tens of thousands of long-time employees and regular pivots to keep up with technological innovation, competition, and changing customer needs and wants. For example, in the first years of the turnaround plan, HP placed major bets on then-popular tablet computers, but backed off when consumer interest in tablets waned. Moreover, while Whitman initially insisted that HP retain its vaunted hardware business no matter what, changing times changed her mind.
After a year of complex planning, Hewlett-Packard split into two separate companies in November of 2015. HP Inc. kept the hardware business, organizing by HP-branded printers and computers. The firm’s business solution products, including servers, data storage, cloud computing, and software, went to Hewlett Packard Enterprise. Whitman believed that splitting the company into two in this way would enable the new companies’ respective CEOs to focus more narrowly on what needed to be done to survive. It would also allow them to be more responsive to the environment than they would as a single entity. In her own way, Whitman sought to restore the “HP Way” that had been lost through the many acquisitions and strategy changes of previous executives.
Implementing the turnaround plan and splitting the company into two was challenging and costly. Ultimately, HP laid off 55,000 employees. Throughout the process, Whitman says, “We were very straight with people…. We communicated, communicated, and communicated some more. We also laid out the milestones of the turnaround journey, so people knew they didn’t have to wait five years for something to happen.” Moreover, Whitman had to modify plans and change course several times in response to changing conditions and opportunities. Just nine months after the split, she folded Hewlett Packard Labs, HP’s venerable research & development division, into Hewlett Packard Enterprise to ensure that its research projects resulted in sellable products. She also made moves to simplify the firm’s complex structure, such as consolidating the sales teams into a single global sales unit. She reshuffled the marketing departments and consolidated them with staff from e-commerce and customer relations into a single marketing unit.
Five years after Meg Whitman took over Hewlett-Packard, things are mostly looking up for the two resulting companies. Shares of Hewlett Packard Enterprise, run by Whitman, are up 62 percent since the split. HP Inc. is holding its own in the face of intense competition. While Whitman’s critics accuse her of changing course too often, her admirers praise her for pragmatically and calmly steering the troubled company through a very challenging situation. Hewlett Packard Enterprise is even applying the lessons it learned from the split to offer consulting services to business customers undergoing their own organizational issues and massive technology upgrades. Despite all the changes over the last 79 years, both companies today strive to adhere to the “HP Way” and continue to be guided by their founders’ core values, including trust & respect, achievement & contribution, results through teamwork, meaningful innovation, and uncompromising integrity.
1. What departmentalization bases are likely being used at HP Inc. and Hewlett Packard Enterprise? Explain your answer.
2. Describe the “HP Way” and explain how it can be used to guide future strategic directions for Hewlett Packard Enterprise.
3. Evaluate the advantages and disadvantages of dividing Hewlett-Packard into HP Inc. and Hewlett Packard Enterprise.