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…