HP's top challenge vs. rivals: Continuity

Continuity wouldn't be such a big deal for Hewlett-Packard if it didn't have to compete with IBM and Oracle daily.

Hewlett-Packard CEO Meg Whitman in her debut yesterday talked about better execution, harnessing a talented workforce, hitting metrics, strategy, and innovation, but the one thing that matters most for the company--continuity--wasn't mentioned.

Continuity frames HP's challenges well. Simply put, HP has little to no continuity. Strategies, product lines, research and development spending, and CEOs--seven of them since 1999--all change regularly at HP. As a result, HP never quite seems like it has a long-term plan. The HP Way isn't in the DNA anymore and that prevents the company from being a long-term strategic partner to customers.

HP started out as a maker of instruments for scientists and engineers and lost its way. It doubled down on the PC market a decade ago and now plans to spin off the unit. HP bought its way into businesses that alienated partners such as Cisco Systems. R&D spending in recent years fell to commodity hardware levels at about 3 percent of revenue.

Meg Whitman
Meg Whitman, CEO of HP cc Flickr Max Morse

And now HP is trying to reinvent itself into something akin to IBM with a focus on software and services. Whitman said: "HP really matters. HP matters to Silicon Valley, California, to the United States and the world, and now it's time to get to work."

For HP to matter it needs the one thing that has been missing for decades--continuity. It's hard to have continuity when the company creates plans based on what the CEO knows best. Mark Hurd was all about the hardware so HP went down that road and acquired 3Com, 3Par, Palm and others. Leo Apotheker knew software. Poof, there's $10 billion down the tubes to buy Autonomy. Following that recent history, maybe it's time for HP to focus on e-commerce. After all, Whitman knows e-commerce.

Perhaps this continuity thing wouldn't matter so much if HP didn't compete with two juggernauts that launch plans, stick to them, and know what they're about. Those juggernauts are IBM and Oracle. In fact, HP runs into the continuity wall daily. In storage, HP competes with EMC and CEO Joe Tucci. In networking, there's Cisco and CEO John Chambers. In PCs, Michael Dell is there.

IBM this week held a leadership powwow with big name CEOs such as J.P. Morgan's Jamie Dimon, Sony's Howard Stringer, and Boeing's James McNerney. Toss in the various heads of state talking up IBM and it was quite a conference to celebrate a 100-year anniversary.

Big Blue chief Sam Palmisano worked the room and the crowd as he pondered the next 100 years. Palmisano took over from Lou Gerstner in 2002. Palmisano's likely successor, Virginia Rometty, also had some time onstage. The baton wasn't officially passed, but rest assured it was backstage to be handed off at some future date.

Add it up and IBM has had two CEOs since 1999 to HP's seven. HP CEOs last about as long as an NFL running back. Both groups apparently run into brick walls for a living.

During Palmisano's opening remarks on Tuesday, he said:

It's so easy to stick with things that have made you a successful company or institution--a winning product, a profitable business model. It's even easier to stick with what's made you successful as a professional--what got you to where you are. Yet one of the core responsibilities of leadership is to understand when it's time to change. And it's equally important to understand what not to change...what must endure.

Now IBM has had its rough moments too. IBM missed the PC curve. IBM had to bail on OS2. IBM was a complete mess before Gerstner showed up. But IBM continued to invest in R&D during bad times, cooked up five-year plans that worked and rejiggered its portfolio to catch secular trends. IBM will spend about 6 percent of revenue on R&D every year.

Palmisano said it's critical to manage for the long term and to have "institutional patience." The catch is that long-term thinking needs political and financial capital. In other words, a company needs to satisfy customers, shareholders, employees, and the community to have the luxury of thinking long term. "A lasting enterprise must maintain all of them," said Palmisano.

That reality is why Whitman gave a nod to Wall Street. Whitman said she understood the investment community and noted HP will hit its numbers. In addition, Whitman will have to calm down an HP workforce that has been through way too much in the last two years. And naturally, HP will have to keep its customers happy.

As if IBM's steady-as-she-goes approach and culture weren't enough, Oracle also has a lot of continuity going for it.

Oracle's continuity boils down to CEO Larry Ellison. Ellison has been at the helm as long as Oracle has been around. Back in 2003, Ellison said software was a mature industry that needed to be consolidated. He later followed through. Whether you love Oracle, hate the company, or are simply scared of it, continuity reigns.

Ellison's personality drives the company. Oracle makes big bets and loves competition. Today, Oracle's bet is on integrated hardware and software systems. The jury is still out on the hardware plan, but rest assured Oracle won't pull the plug on a high-end system in a month.

IBM's culture thinks big. Oracle's culture revolves around punching rivals in the mouth. What's HP's personality?

On Oracle's earnings conference call Tuesday, Ellison broke out some historical perspective. Oracle's plan is simple when it comes to databases: take the latest technology and absorb it.

Ellison said:

I don't know how many people are on the call are my age, probably no one, but a long time ago, after relational databases came out, there was a next generation database that were called object databases. And everyone talked about, well, object databases are going to replace relational databases and what actually happened is that object database capabilities got integrated into the Oracle database.

So Oracle ceased to be just a relational database and became a relational and object database and then there were these things called text databases for text search and those were separate databases and Oracle then incorporated a text search and text capability into the Oracle database. And then there were these things called XML databases and separate XML databases and then Oracle integrated XML capability into it.

Now people are talking a lot about unstructured data and things like Autonomy. Oracle's strategy has always been to integrate additional types of data into the Oracle database.

To cut to the chase, Ellison said Oracle will exploit the big data trend too.

Oracle's exec behind the scenes--Safra Catz, president and CFO, also has that continuity thing going. She knows the company cold. Add former HP CEO Mark Hurd to the mix, and Oracle is formidable. Critics would argue that Oracle's main vision is charging customers more for maintenance every year, but it's one fine business model.

Add it up and HP's biggest rivals have continuity. Maybe Whitman begins the continuity trend for HP, but there were a few hints that executive turnover may be an issue going forward. HP Executive Chairman Ray Lane said yesterday that there were CEO candidates inside the company, but they "were not ready." "We think they are future candidates to be CEO here but they are not ready," said Lane.

If HP wants to get on the continuity bandwagon--assuming those passed over don't bolt--the next CEO handoff needs to be to one of those internal candidates running $40 billion businesses today.

This story originally posted on ZDNet's Between the Lines.

 

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