Why HP Labs' Return to Research Focus Means Stronger Tech Market

Rob Enderle

HP is attempting a return to its past as a smaller company driven by innovation rather than a large company protecting turf. I, along with a pack of tech journalists, was on hand at HP's labs late last week to get a look at the firm's renewed emphasis on R&D.


This is incredibly hard for a large company because turf issues, both internal and external, typically predominate. The focus on quarterly performance makes long-term, strategic efforts like labs difficult to fund. Yet, without these long-term efforts, the large company increasingly gets bogged down by an inability to lead the market, and smaller firms take the margins -- and eventually the revenues -- away from it as they grow into the market opportunities they create.


This lack of strategic focus can also result in Hail Mary moves, which may not pan out.


Let's chat about why this is incredibly important and what it means for HP and you.


Tactical vs. Strategic


One of the huge mistakes large companies make -- and it is largely the result of executive compensation packages overly focused on quarterly results -- is their tendency to peak and then decline. From the outside, it is almost like companies mirror people and become infirm with age, increasingly lacking agility and eventually looking back at their misspent youth as their employees begin to wonder who will be left to turn out the lights.


When a company is young, all eyes are on the long term. The very concept surrounding the small firm destined to be large was the ability to guess right on that future and assure the firm grew to benefit from it. That's called "strategic thinking," and it forms the one of the key differences between the fast-growing small company like Google and most large companies in HP's class.


Once a company reaches a certain size, executives become risk averse and goals become shorter-term and more focused on keeping what the company has instead of trying to anticipate the next big wave. This is why Netscape and Google didn't grow inside a company like Microsoft or HP -- they grow up outside. I often wonder how many result from research funding the big companies make to the universities that spawned the initially successful startups.


Lab and university research isn't good on a tactical timetable because it takes too long to germinate, and the research organizations are too far removed from current customers. They do have better tools to anticipate future needs though, and they are vastly more capable of creating something that will meet future needs that the current market may not yet see (Google and Netscape both came out of universities). So efforts to focus labs into limited product enhancement units haven't worked out particularly well, as they are generally a mismatch of skills and process.


Why HP Can Think Strategically


The reason HP can focus on making changes to its labs is its current market performance, allowing executive staff to reduce focus on the tactical issues of the company, which are being well run, and shift focus to strategic issues that had languished while the tactical problems were addressed. The reality is that if you are worried about the quarter, you are unlikely to put effort into fixing something that won't have an effect for years.


Impact of Putting the 'R' Back on HP and the World


HP is a bellwether company; what it does, other firms will likely emulate. As HP moves to think more strategically, it should force other firms to do the same. This could substantially help the technology market long term as, I believe, it is stagnating due to too much tactical focus over too long a period of time, resulting in products that are increasingly uninteresting to buyers.


You can get a sense of what HP is developing here, but things that stood out at the event were Brain, CloudView, Pluribus, HP Book Prep and FaceBubble. It also had an impressive demonstration of how massive numbers of sensors could monitor the world to anticipate and correct problems, and better monitor your server farms to dramatically lower support and power costs. This last had impressive real-world and real-time benefits, and HP is the one large firm that has demonstrated that being green can have bottom-line benefits by practicing what it preaches.


Brain was likely the most interesting because it used a modified form of Delphi that I've run into before; it uses betting to create highly accurate predictions from knowledgeable people. It is amazing how much accuracy improves when you add the money aspect. Applied to HP's own decision process, it has apparently already demonstrated a solid economic benefit in more accurate parts ordering.


One other thing that is somewhat unique to HP's plan is the new active search for technology outside the firm. This will allow it to discover companies like Stantum, which owns an earlier patent on multi-touch technology then Apple's and could result in an iPaq phone that could be better than the iPhone.


Wrapping Up: A Brighter Tech Future


Too long have technology companies focused exclusively on quarterly performance. This has resulted in increasingly boring products that the market has often rejected. The overall trend back to well-designed offerings and an increasing focus on imagining the future, if it spreads outside of HP, should return much of the luster to the technology. If you get a chance, check out the link above on the HP lab stuff; some of it you can use today and all of it heralds the promise of long-term market improvement.

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