Hewlett-Packard continues its record of strategic blunders, stops selling Apple iPods

The big news this week has been that Hewlett-Packard has announced that it will no longer rebrand and sell the market leader Apple Computer‘s iPod. After all these years, and after a long history of strategic blunders, it’s shocking and depressing to see HP’s at it again, even after chief blunderer Carly Fiorina was booted and Mark Hurd came aboard the venerable corporation as its new CEO less than a year ago.
Over the last twenty-five years, at least, one of the greatest challenges Hewlett-Packard has faced is the not invented here syndrome. It’s logical, if you really think about it: two brilliant Stanford engineers, Bill Hewlett and Dave Packard, created HP because they wanted to engineer the very best products in the world. The corporate mantra was “build things so that the engineer one bench over would use them” and that was memorialized as the next bench philosophy. But if you start there, it’s not hard for employees to conclude that nothing non-HP is good enough.


When I joined the company back in 1984, they were just going through what I call the TCP/IP fiasco (TCP/IP is, of course, the standardized networking protocol that allowed computers from different vendors talk to each other directly, something that was not possible before then) where HP engineers recognized some limitations in the protocol stack and fixed it, thereby releasing HP computers that had a better TCP/IP implementation except they didn’t actually interoperate with any other vendor’s systems!
As you might expect, the market forced HP to fix its TCP/IP implementation, through such events as “TCP/IP bake-offs” where lots of engineers and computers from different vendors would work together in a central facility to ensure that everyone could talk to everyone else.
Then I moved to HP Labs in Palo Alto and was astonished to find the same sort of industry snobbishness and strategic error happening again. I was part of an artificial intelligence workstation project, where lots of us were building a really slick AI development computer, all programmed in LISP, the de facto language of the AI community. Except, being HP, we weren’t using Common LISP like everyone else, we were using “HP-LISP” which was – surprise – not 100% compatible. As I recall, we introduced the system into the market and received rather blunt feedback that forced us to retool our system using Common LISP after all.
Then there’s the ghastly strategic blunder of HP buying Compaq and trying to hold onto its unsuccessful PC business by melding it into another failing PC manufacturer. I’ve written about this before on my blog (HP’s Fiorina Quits, for example, or HP stumbles, saddles printer division with loser PC division), but again, it’s that same cluelessness, that same lack of long-term strategic vision that caused the HP Board of Directors to completely miss the reality that real industry visionaries like Michael Dell saw: PCs were inevitably going to become a pure commodity, and the only way to be profitable was to either stop making them entirely, to put them together in novel and interesting ways (think Apple), or to make the production system so unbelievably efficient that even foreign competitors would be unable to match prices and quality.
And now we come to the current events. As CNet reports, “We do remain committed to our digital-entertainment strategy,” HP spokesman Ross Camp said Friday. “We decided that reselling the iPod does not fit within that strategy.”
Bloggers have been reporting this event, including Rafat All, Mark Evans, John Murrell and Robert Scoble, but not one has offered a theory on why the “change in strategy” occurred and what it implies about HP’s strategy overall. At least journalists like Matthew Fordahl, Associated Press technology writer, did a better job of reporting the story, and Peter Burrows over at BusinessWeek has some thoughtful analysis too, even if I disagree with him..
But it’s just so obvious to me that new CEO Mark Hurd is following in the footsteps of everyone who has succumbed to what has become the siren song of the next-bench philosophy, the not invented here syndrome (we called it “NIH” at HP Labs for short, and yes, we were well aware of it in the trenches).
The reality of the computer industry today and into the future is that hardware is a commodity and that you can’t compete on price. If you think otherwise, you’re destined for failure if you aren’t already slowly failing right now.
Smart companies are innovating with design and recognizing that they cannot be all things to all customers, but that they need to create cross-platform, cross-vendor solutions, that they need to answer the fundamental problems of the customer. Gone are the days of “no-one ever got fired for buying IBM”. Get over it. It’s not about brands, logos, or circuit boards. It’s about solutions that work.
Apple gets it – that’s why they’ve bailed on Motorola and are moving to an Intel-based computer design. Think about it: moving into a more popular platform will offer them more sources for parts, more options for manufacturing (think offshore laptop development, for example) and more competitive pricing options to increase their market penetration. IBM gets it – that’s why they sold most of their PC business to Lenovo and held on to just enough of the new company that they can see the upside if / when it’s really successful.
Hewlett-Packard, meanwhile, has made an art out of strategic blunders, out of operating from a base of braggadocio that lets them truly believe that they have the best engineers in the world and can always produce industry-leading products. If only they could…
And so the next 18 months are inevitable. HP’s already been disassembling and analyzing the iPod from an engineers perspective and already has a competitive MP3 player in the works. The day that their non-compete embargo is lifted (approx. Aug 2006) they’ll introduce something technically advanced but with lame design and poor interoperability with non-standard PCs. Then they’ll push it aggressively for six months and within a year look askance at each other and agree, begrudgingly, that the consumer doesn’t shop for features any more, they shop for style, design and sex appeal. All features that HP has lacked for years.
Meanwhile, other companies will also tilt against the iPod windmill, with varying success (there are some splendid alternatives on the market today, I must say. But me? I have two iPods.) and will eventually topple Apple as the premier MP3 vendor. That’s okay, no-one owns a market segment forever.
It’s just too darn bad that HP is making the same strategic blunder that it’s made so many times in the past. Some companies just never learn…

12 comments on “Hewlett-Packard continues its record of strategic blunders, stops selling Apple iPods

  1. The simple fact is that the entire tech sector is awash in overcapacity. If we woke up tomorrow morning and HP’s products had vanished, how many us would even notice? Any pop in demand can easily be accommodated up by Dell, IBM, et al. Faced with such market, what is HP to do?
    Maybe the company simply needs to be liquidated. But how many executives and managers at HP would go along with such an option even if it was “best” for shareholders.
    For the health of the tech sector, a couple of the PC hardware companies need to go, along with quite a number of half-baked software companies.
    I’m sure that the executives and product managers at HP would love to continue to redesign and rearrange the deck chairs on their sinking ship, and unfortunately there’s nobody at the wheel intent on stopping that kind of misbehavior.
    — Jack Krupansky

  2. Dell assembles computers…manufacture is probably an overstatement. They rely on the Taiwanese (like everyone else in the world) to actually manufacture everything in the PC. IIRC, Dell desktop computers come shipped to the US already half assembled by the Taiwanese OEMs. Their local “manufacturing” is simply pluging in the customizable components (e.g. memory, CPU, HD, video card), which are mostly “Made in Taiwan” to begin with. Dell’s uber-efficient manufacturing is in my opinion quite overrated. I’m sure any legit vertically integrated Taiwanese company who actually builds all the parts (e.g. Acer, Quanta, HonHai) can easily do better than them.
    Their direct to customer distribution on the hand does make them more competitive vs HP and others– they don’t have to leave a profit margin for retailers and distributors.
    On the choice of Hurd, I think HP’s biggest mistake is going with outsiders (e.g. Fiorina) to lead the firm when there are plenty of very competent insiders that know the business and know precisely where the business has gone wrong . However, I sincerely hope Hurd proves me wrong because I don’t want another great technology company be flush down the toilet by the crap “leaders” that business schools put out today.
    John Yau

  3. I just wanted to tell you that I very much enjoy your column/blog and read it as often as I can. That’s all! Now back to my glass of wine and Manhook (by Ken Ratcliffe). <– great corporate thriller novel.

  4. Don’t buy anything from Hewlett Packard if you value your sanity. I bought a laptop from them a year ago, which overheated and fried 10 months after I bought it. Realize too, that I only used it two or three times a month(not very often). After speaking with every person in India, I still got nowhere. They tell you your warranty expired long before it really does. You cannot get help to save your life in order to resolve this through HP, and they try to sell you the extended warranty, even though your problem occurred long before the expiration of the one year warranty you get when you purchase the product. I had to call AMAZON.com, which is the BEST, to get them to call HP and put their balls to the grindstone and finally get some results. Do yourself a favor, don’t buy HP products anymore, unless you enjoy jumping through 15 hoops over 2-3 hours just to get a simple resolution. HP used to be a good company. Now they are an inept joke!!!!!!!!

  5. Every single product I have ever used or owned by HP has had problems, I will never use their products again, just to add, I ALWAYS take care of my PCs and equipment. Here’s the list;
    Most of our office PCs hard drives crashed (about 10), all HP.
    A brand new printer/scanner for home packed up after two months, the replacement also went faulty even though we hardly used them.
    This PC I am using is HP, I have to keep re-booting explorer, even after trying several ways of fixing it.
    My daughter’s HP pavilion laptop stopped working, after 4 weeks in repair we used it for three weeks and now the start-up config software has crashed, did they include a recovery disc?, no, and the PC is only 7 months old, back to the dealers.
    SHOULD THEY NOT RENAME THIS COMPANY HEWLETT PACKUP!!!

  6. In August I purchased a Compaq sr5152nx. It is one of three I use (euphemistically). It’s intended use: word processing and some photo editing. Right out of the box it! ran slower than molasses; wouldn’t load the programs I needed to install; crashed when I did try to load some of them; crashed again and again. Gives frequent “failure to run” program error messages.
    I am a dutiful customer. I notified the “Vaunted” Blue Ribbon, Highly Rated, Customer Service! YEA! Let’s see; the first two hour phone call resulted in a failed system restore procedure. I was graciously allowed to send the thing into the “repair” facility. Oh boy, they got right at it. It must be the DVD drive, they concluded. A new one goes in. Once home again, not only does it continue to operate in the same fashion but it has discovered addtional problems that It can abuse me with. Two phone calls and several hours later talking to people who cannot hardly answer my questions and additional system restore attempts (it seems that’s the only thing the phone people from Bombay or Calcutta know how to do or tell me what to do) and the machine is operating perfectly normal, for it: just as before. One more try. Perhaps some poor soul will give me an authorization code to send the machine back so that it can truly be fixed this time. “Oh, no, sir, please do this one thing: a system restore.” After I hung up on the kind gentleman, he was nice, I thought long and hard. Since HP won’t fix the machine maybe I can. I braved one more phone call so that I might order system restore discs. That took long enough. I had to repeat all of the same information that I had repeated repeatedly every time I spoke to one of the “tech.” people. And yes, I was given a case number, for all that is worth.
    The machine works a couple of percentage points better but it is still mostly useless to me. I do not know what to do. Perhaps I can use it for a planter!

  7. We recently had a problem with our older model hp psc 2410 photosmart printer, and so we contacted the “technical support” people. They were absolutely no help at all and suggested we upgrade at a reduced price to the hp photosmart C6380.
    We were told that the new printer would do exactly what the old printer did (it doesn’t), we were getting a special price (we were not), we could definitely use our existing ink cartridges (we couldn’t), and nothing was said about sending hp our old printer.
    Now trying to communicate with people in India or somewhere else who barely speak Engling has become impossible. Twice we were told that someone would call us at a certain time and day, and twice we didn’t receive the phone call. We’ve spent literally hours trying to get assistance without success.
    Needless to say we will never buy another HP product!
    Carol

  8. Yes,I do agree with the fact that day to day, HP Product is becoming complicated and problemetic,but still I have a HP Product and I am satisfied with the fact that its print quality is very good.

  9. After a multiple of years of ASSuming trust for their product and accumulating many of their “Great Products” In my basement which are non-functional and accumulating dust as a result of same, which help from these people was requested on multiple occassions and given supposed fixes which never worked, and my optimism, And stupididy remained, giving them the upper hand as they were supposed to know what they were doing, My mistake. I know I’m within their product base as a disgruntled purchaser of long standing. I think I’m now able to purchase the least effective printer on the planet (No- name ) and get better results. Possibly one of theirs, Go figure…./
    I want a Printer that works, Heaven forbid that scenario, especially where HEWLETT-PACKARD is concerned. After an affiliation of more than 25 yrs. it is now apparent they care nothing about loyalty and have abandoned ethics for profit.
    L.D.MacKay

  10. State of NJ – CASS Project
    This project, is headed for the garbage heap!
    HP placed all of its “un-assigned” employees on this project, problem is that they are all incomptent and are running the project into the ground. State of NJ is not fully aware of whats going on, but will soon. HP is trying to cooerce all of its consulting partners to turn their consultants into HP employees! Not going to work this is a train wreck in the making. More to come!

  11. We purchased a HP Officejet 6500 E709n All in one series..printer, scanner, fax, phone, copier with wireless capabilities for Christmas 2009. It worked great until the black ink ran out. Costco ink cartridges don’t come in singles,,you buy 2 of everything. The whole stupid thing is a DOOR STOP if it doesn’t accept the new printheads. There is nothing wrong with the new cartridges, it just wont accept NONe of the eight HP printheads. Now, I ask you; after going on-line for help, (which was not even close), trying to e-mail for tech support (which was not up and running), all these new printheads and a barely used “All-in-One” printer…wheres the justice! We thought we were buying a good name product. Our family is sure disappointed! It still looks great, but who cares about a PAPER WEIGHT that can’t earn its keep. What company stands by their products anymore. HP website will sure show you their new products and stamp the words “buy/ink” on every printhead as if we aren’t going to notice the failing performance. We got jipped.

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