I’m at HP’s print analyst event and given that many of us thought print was largely dead back in the 1990s, this event is pretty amazing. Perhaps the biggest thing is that a company being featured here, ePac, is currently growing at an astounding rate. I’m not talking 20, 30, 50, or even 100 percent; it is apparently growing at around 300 percent. Its business is short-run packaging and this company was designed around HP’s large-format Indigo printers. This is fascinating because most firms are created around an idea from a founder. In this case, ePac was created once the founders understood HP’s technology and effectively built the company to optimize the opportunity created by a digital technology that best targeted an under-served segment of the market.
Currently, HP is reporting revenue growth of 12 percent, profit growth of 6 percent, unit growth of 13 percent, and supplies growth of 7 percent. This is in sharp contrast to the performance the firm saw in 2015, which had it dropping revenue, profit, and unit performance around 10 percent year over year.
It got there through innovation, focus and impressive execution. Let’s take each in turn.
One of the most innovative and successful programs HP has implemented is Instant Ink. While this may seem obvious in hindsight, this program allows the printer to effectively order its own replacement ink. This prevents the printer from running dry and assures that HP ink is used with HP printers. Printing in the home segment is a razor/blade model. You don’t make money off the printers, but off the supplies, and by implementing this program, HP not only solved a customer problem but another one, counterfeit ink, that plagued HP.
Another program that I think is incredibly innovative is the HP concept of One Life. This too, in hindsight, seems obvious (most great ideas often do). The idea is that there is only one of us, that we aren’t different people at work and at home, but the same person. However, the industry has historically segmented us into home users and corporate users. Apple seemed to get this right once Steve Jobs returned by eliminating its corporate products and focusing on building great products regardless of where people used them. HP translated this into a policy and has adopted and extended this Apple concept to make all of its products more attractive.
3D printing is one of the most innovative areas where HP is making an impact. Moving aggressively from industrial-grade plastics, which could not only be used for prototyping but for production, to colors, and most recently to metal, HP has emerged as the leader in industrial-grade 3D printing. It has worked aggressively to put these industrial-grade printers into assembly lines and even though this technology is still in its infancy, it has demonstrated production-level implementations in a variety of industries.
One other area that stands out is personalization. HP understood first that delivering a product that was unique to each buyer but at scale would be compelling. We can see this concept in everything from Coke labels with customer names to candy wrappers customized with pictures and names.
Diversity in products and lines can help a company survive a downturn or market change but it can also result in significant distractions and a level of management skill breadth that is impossible to sustain. If you aren’t diverse enough when a market changes, you can become obsolete. But become too diverse and the resulting complexity will make execution nearly impossible. In addition, diversity should be tied to closely related segments, for instance, printing on different materials, not massively different industries, like automobiles. This is because the skills will transfer to adjacent industries far better where vastly different industries require vastly different skills that exceed the reasonable breadth of any executive. HP’s return to becoming just a print and PC company reduced the operational complexity of the firm so that it could again focus its efforts effectively because the executive scope could be reasonably contained inside an achievable skill set.
Having compelling innovation and sharp focus isn’t enough. We just saw the company that made the Baxter Robot fail not because of innovation or focus — the robot was incredibly innovative and the total focus for the firm — but because of a failure to execute. As I write this, supposedly Google employees are staging a walkout because they don’t support the decisions of management, specifically regarding the treatment of women employees.
One of the amazing things about HP is that the more typical undercurrent of executives behaving badly doesn’t seem to exist there. The employees seem to be more like family than co-workers and the kind of back stabbing that often seems common in a tech firm, and that isn’t as well concealed as many companies seem to think it is, doesn’t appear to be a common practice. Much of the presentation at this event is being done by women, which is distinctly different from the largely male-oriented tech industry, and while most firms seem to have constant executive changes, HP’s executive staff has remained largely stable of late. People seem to want to stay.
I think this has a great deal to do with why HP is executing well. I look at a company like GE and can point to practices like Forced Ranking, which pitted employee against employee, made taking risks suicidal, and destroyed that firm’s ability to innovate and execute, and compare it to HP, where the operational differences, and results, are stark. In fact, one way to fix GE would be to use HP as a template, which is ironic, given that GE was once used as a template for the tech industry and nearly destroyed it.
Wrapping Up: Lessons Learned
I’m fascinated by the once dominant companies that failed, and the companies that we thought would fail that came back. Netscape should have become Yahoo and/or Google and failed. Blockbuster should have become Netflix, but it didn’t even want to invest in the company. Sears should have become Amazon. Yahoo should have become Facebook. Companies need to evolve to address the changing needs of their market. HP’s success is tied to its ability to evolve. HP didn’t need to become someone else; it needed to anticipate the market and its needs, and then pivot to meet them.
HP’s success is tied to an executive staff that works as a team and has priorities that are in line with its customers, employees and investors. This seems obvious, but you only need to look out at failed and failing companies to see that this isn’t as usual as it should be.
In the end, I think HP’s founders, who were similarly focused, would be incredibly proud of their company and, perhaps, that is the final test of how we should measure success.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+