Über die Autorinnen und Autoren

Charles (Chuck) House is Chancellor of Cogswell College. House is deeply involved with questions of technology's effect on society, particularly distance learning and collaboration using multi-mediated Web networking. Previously, he served as Executive Director for Media X, and Senior Research Scholar in the Human Sciences and Technologies Advanced Research Institute at Stanford University, and he led the Research Collaboratory and served as director of Societal Impact of Technology for Intel Corporation. House has also held executive management positions at Dialogic, Spectron Microsystems, Veritas, Informix, and Hewlett-Packard. Raymond L. Price is the Professor and Severns Chair for Human Behavior in Engineering at the University of Illinois at Urbana-Champaign . He has had a long career in industry working in Management and Organization Development and Human Resources. Most recently he was Vice President of Human Resources at Allergan, Inc. Prior to that he was the Director of Employee Training and Development for Boeing Commercial Airplane Group. He also held various management positions with Hewlett-Packard, including Manager of Engineering Education.

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THE HP PHENOMENON

INNOVATION AND BUSINESS TRANSFORMATIONBy Charles H. House Raymond L. Price

STANFORD BUSINESS BOOKS

Copyright © 2009 Board of Trustees of the Leland Stanford Junior University
All right reserved.
ISBN: 978-0-8047-5286-2

Contents

Figures...............................................................ixForeword by Gifford Pinchot...........................................xiiiIntroduction: Shards in the Glass Ceiling.............................11 Creating the HP Way.................................................92 Lord Kelvin's Imperative............................................373 Scaling the HP Way..................................................604 Division Renewal and the Corporate Laboratories.....................865 Planned Transformation..............................................1156 Unexpected Transformation...........................................1537 Second Watershed....................................................1858 The Secret Sauce....................................................2169 Disruptive Forces...................................................25710 Marks on Paper.....................................................29311 We Need to Be Number One...........................................31912 Looking Forward....................................................35513 Strategic Turmoil..................................................38614 Amicable Separation................................................41615 Indigestion........................................................43616 Who Decides Who Decides?...........................................467Epilogue: Where now?..................................................509Appendices............................................................517Acknowledgments.......................................................539Notes.................................................................547HP/Agilent Names Index................................................607HP/Agilent Specific Topics Index......................................616General Index.........................................................624

Chapter One

Creating the HP Way

It was so hard to really comprehend the greatness of HP because one of the great features was that they wouldn't talk about their virtues. They weren't going to sell you on their virtues. You had to see for yourself. DON HAMMOND

The Forbes issue reached local mailboxes on March 1, 2007, with a stunning cover story: "HP: Tech's new King." how satisfying the coronation was for Hewlett-Packard employees and leadership alike. Weeks before, a BusinessWeek story led with the words "Hewlett-Packard has taken a big step toward laying official claim to the title of world's biggest tech company.... 'This has been a defining year for HP,' a buoyant Chief Executive Mark Hurd told reporters during a conference call. And no, he wasn't referring to the pretexting scandal that dominated headlines earlier this fall." The story was hardly new-HP had passed IBM in equipment revenues four years earlier, in 2002, before the Compaq merger. But this modest company never made the claim, even with flamboyant Carly Fiorina at its helm. One has to wonder-why did people fail to notice this company for so long?

The HP saga began with a clever but simple idea: to insert a small lightbulb into one side of a circuit as the resistance element, rather than a standard resistor. Whether Bill Hewlett understood the probable effect ahead of time is unimportant-he instantly recognized the result when he turned it on. He had constructed an automatically controlled amplitude limiter for a resistance-capacitance signal generator. His innovation was adequate for a fifteen-page engineer's thesis from Stanford University in 1939; it was also good enough for U.S. patent number 2,268,872. And it led to the model 200A Oscillator, a brand-new product from a brand-new company named Hewlett-Packard after Hewlett won the coin toss for the right to put his name first. The first big order-$517.50 for nine units-was garnered from Walt Disney Studios in 1939, intended for use in creating and balancing stereo soundtrack music for the cartoon "Fantasia." The movie was a pioneering effort, with six individual soundtracks, two mixing tracks, and a metronome track to capture Leopold Stokowski's orchestra in very high-fidelity sound. One oscillator per track was required; HP's new machine, offered at $54.50 versus the General Radio machines at $400 each, was an exciting find for Disney's chief engineer Johnny (Bud) Hawkins. But as it turned out, the HP 200A didn't have quite the frequency range desired. So Hewlett changed the capacitor and charged $3.00 more per unit, and Disney actually bought the company's second product, the 200B. Over time, at least twenty-four variations of the lamp-stabilized oscillator would be offered for sale.

From that auspicious beginning, the company quietly set about doing business in a most unorthodox manner. Contribution, more than profit or growth, was the watchword. Years later, Packard told a biographer, "I never really thought about how much money we might make. The question was, 'What contribution can we make?'" The company began in the single-car garage behind the house that Dave and his bride, Lucile, rented at 367 Addison Avenue in Palo Alto, California, now graced with a granite monument plaque denoting it as the origin of fabled Silicon Valley.

Legendary even in their lifetimes, each founder of the Hewlett-Packard Company-William Hewlett and David Packard-had a giant intellect with uncommon integrity and character. Their business approach from the earliest days became known as the HP Way. Each could have stood alone, and did, on occasion, but the most remarkable fact was that they stood together for a lifetime, building a resolute partnership founded on core values of honesty in dealings, faith in people, and excellence in performance.

David Packard was an imposing figure. He stood six-foot-five-inches tall, with a hawkish nose and deep-set eyes that seemed to not miss a thing. Once, while touring Russia in the glasnost aftermath of the Reagan years, he mused to companions about the tire marks on the tarmac, "Look how close together they are; their pilots must get far better training than ours," an observation missed by everyone else.

Another time, Packard took the floor at the end of an HP general managers meeting and announced that the Berlin Wall would be falling soon. He exhorted the group to ponder the significance for each of their divisional product lines. At coffee break, chief operating officer Dean Morton could scarcely contain his dismay: "The damn Berlin Wall? We've got problems with Spectrum, we've got problems in computing, we've got problems with managing this place-he wants us to worry about the market in East Berlin?" The wall fell less than ten months later. One attendee at the meeting opined to an external group that Packard had predicted this when the entire U.S. State Department missed it-the dismissive reply was that his role as Deputy Secretary of defense must have given him special insight that was lacking at State. When Packard was asked, the stunningly simple answer was that "I was in our Vienna office, and I was reading the telephone log book. I noticed that the number of calls in 1988 from the East Bloc had gone up by nearly a factor of ten from the year before, and I figured something must be changing for so many phone calls to be coming our way."...