HPs Corporate Challenge: To Remain Agile and Responsive in an Ever-Changing Environment

Hewlett-Packard (HP) is the original started in a garage technology company, founded by Bill Hewlett and Dave Packard in 1939. Over the years, HP has grown into a market leader, with $114 billion in annual revenue, 300,000 employees worldwide, and tens of millions of customers on six continents. Its rivals, multinationals such as Apple, Dell, Acer, and Lenovo, never stop looking for the next big tech breakthrough. No wonder HP, approaching its 75th birthday, uses its organizational structure for competitive advantage in the 21st-century race for higher sales and profits.

The company has seven divisions, organized according to product or function: Services, Enterprise Storage and Servers, HP Software, the Personal Systems Group, the Imaging and Printing Group, HP Financial Services, and Corporate Investments. Within each division are business units organized by product. For example, the services division contains four main units (infrastructure technology outsourcing, applications services, business process outsourcing, and technology services). Each unit hires managers and employees with the particular skills, experience, and training appropriate for the services it offers.

Some HP business units are organized by customer and by product within a division. The Personal Systems Group, for example, includes one unit that focuses on commercial PC s and one that focuses on consumer PC s. Establishing these as separate business units allows HP to address differences in products and customers needs while sharing expertise within the division. For efficiency, some functions straddle divisions and serve multiple units. The company recently consolidated its data-center operations and now has six megacenters instead of 85 smaller centers for data management.

Through its organizational structure, HP seeks to achieve two key objectives. First, knowing that technological change can occur at any time and move in unexpected directions, the company is determined to remain agile and adaptable. Its structure leaves day-to-day planning, decisions, and implementation in the hands of each units managers, allowing them to satisfy customers, initiate projects, and respond to environmental shifts without delay. Major decisions that affect the overall organization, such as whether to acquire another company, are made at higher levels.

Second, the company uses its structure to support growth. Eyeing a larger share of the $1.7 trillion global market for information technology, HP has been steadily adding to its portfolio of goods and services. Some of this expansion has occurred through acquisition. During the past few years, HP has bought EDS, 3Com, and Palm, among other businesses, and merged their operations into the appropriate corporate divisions. Palm, a pioneer of handheld computing devices and maker of smartphones, was integrated into HP s Personal Systems Group to enhance that divisions technical capabilities in preparation for future growth.

Innovation has been woven into the fabric of HP s corporate culture since the early days. The company is famous for investing billions of dollars annually to research new technology and develop new products. Although senior managers dont want to stifle innovation by imposing too many limits, they have very clear expectations for research projects. The key change we made was to take our brilliant scientists and sharpen their focus around a much smaller pool of big bets, explains the head of HP Labs. Researchers know that every single [project] must have the potential to [generate] $1 billion-plus in revenue for HP . As a result, instead of pursuing as many as 150 projects at any given time, researchers now concentrate their efforts on the most promising two dozen projects.

Top managers are also involved in coordinating the overall efforts of employees that serve their very largest customers. For example, HP has a $3 billion contract to handle information technology operations for Procter & Gamble on an outsourcing basis. The head of the HP division visits with Procter & Gambles senior managers six times a year to jointly evaluate performance. HPs CEO also joins the conversation at least twice a year. When you have the CEO of a company sitting across the table saying, Were going to deliver this, you know theyre going to deliver, says a senior Procter & Gamble executive.12

Questions

• How is corporate culture likely to affect HPs ability to integrate acquired companies into its organizational structure?
• Analyze HPs use of departmentalization. Why are its choices appropriate for a technology company?
• Analyze HPs approach to delegation and decentralization. Are its choices appropriate for a technology company? Why or why not?