Seven Major CEO Concerns CIOs Should Address
Understand the concerns of CEOs and the implications they may have on IT.
On HP's financial call, Meg Whitman today was making a major play to take HP back to its roots and to focus on fighting as a company and to stop running it like a more typical, and problematic, umbrella company where each division is managed like a separate entity. There has also been a recent history of firing from the hip, which appeared to first create and then prematurely kill off its tablet - almost unprofitably spun out its PC business - and it cost the company two of the last four CEOs because of how they were hired and the scandals that defined their termination.
One major gamble she is taking is that she is, under her watch, putting HP's long-term survival on her shortlist and breaking a historical tendency to cripple the firm in exchange for quarterly results.
Let's update our look at Meg Whitman's HP.
Umbrella companies tend to be uncompetitive. An umbrella company is a firm that has a group of nearly autonomous large divisions, each of which could be a separate company that operates almost independently under a corporate umbrella. You see this done poorly at Sony where the different divisions, much like a dysfunctional family, appear to be more focused on screwing each other up than on being team players, and you have most recently seen it done well by Sam Palmisano at IBM.
Where umbrella companies appear to fail is when corporate becomes too much of a burden and where there is no synergy between the divisions to overcome the corporate overhead, and, frankly, where there is too much movement between the divisions putting too many people in jobs they don't understand. It is also where there is too much competition for corporate funding, which focuses the division heads on each other as rivals instead of on their markets and competitors. Particularly bad is an excess focus on revenue or market share over profitability, which puts bragging rights ahead of return on investment.
Where they succeed is when they are managed like an intricate portfolio, where return on investment is rewarded and where cooperation between divisions is also rewarded (and being a problem is punished). And where decisions that also consider opportunity cost are made between divisions, with a tight focus on optimizing return on investment hedged with the primary requirement of assuring the company's survival.
In short, there are few people who have the skill set to manage an umbrella company well because it is vastly different than any other company. It requires skills that are balanced between CEO and top portfolio manager, with a taste of company founder, to create a firm that can both maximize profit and survive long term.
This takes us to Meg Whitman's quarterly report. Clearly, there were problems, the greatest of which was the uncertainty surrounding its PC division, but it was her stated strategy that appeared to be the most interesting.
Going forward, HP will be focusing its investments on earnings per share, cash flow and long-term survival. In addition, and this was showcased in the decision to retain the PC division, there will be a major effort to base decisions on research and facts rather than fire-from-the-hip decisions like those that surrounded Palm and those that have done so much damage to HP in the past.
Divisions will be both measured and funded based on their ability to provide a strong long-term return on investment, opportunity cost will be considered (this was implied), and decisions will be made based on what is in the best interest of the corporation as opposed to favoring one division over another. In short, Whitman was in sharp contrast to Mark Hurd, who managed for the short term and didn't appear to be able to spell synergy; or Carly Fiorina, who understood synergy but didn't understand how to get a strong return on investment; and Leo Apotheker, who initially had promise, but unfortunately appeared to fire from the hip and had execution issues.
Wrapping Up: Better HP
Whitman's performance continues to impress; the HP employees I've spoken with remain hopeful that she is as good as she appears to be and that the problems and drama that have plagued HP of late are over. The firm is still a bureaucratic nightmare, but that'll take some time to unravel and that problem became the bridge too far for Louis Gerstner when he ran IBM, so I don't have a lot of hope that one will get corrected on Whitman's watch, either.
On the other hand, the new HP is emerging as one that listens to customers (Whitman quoted customers throughout her talk and it was their feedback that helped with the PC division decisions), is showing a willingness to consider details before making a decision (a much-needed change), and is one that wants to build an HP that can last until next century. This last is something the founders, who have likely been sleeping uneasily of late, might themselves applaud.
While still early, Meg Whitman's HP is showing good progress down the path of once again becoming a firm known for its products rather than its drama. For employees, investors and customers, that has to be a good thing.