In 1938, two engineers named Bill Hewlett and Dave Packard with $538 between them, set-up shop in the now-famous garage at 329 Addison Avenue. Over the next 50 years, “
The HP Way” would provide a blueprint for thousands of silicon-valley
entrepreneurs. Their approach boiled down to basic ideas: by giving workers respect and
autonomy, they would build innovative products that would contribute to society and generate big
profits.
Back then, HP was a company run by engineers for engineers; their first big break came when they landed an order for a device called an audio oscillator to Disney to fine-tune the sound for Fantasia. The marketers and sales-force were irrelavent since it was purely high-tech products that drove HPs growth.
At the dawn of the electronic age in the 1950’s and 1960’s, HP offered several new kinds of instruments to help Electronic Engineers do their work. During that period, HP’s idea was to invest heavily in R&D to produce products that made a technical contribution – products that rivals could not match and customers would pay a high price to get. The company would also contribute to the communities in which it did business. Both Hewlett and Packard believed that their money was meant to be given away. Both men put more than 95% of their wealth into charity - they gave more than $300 million to Stanford University.
The HP-35 handheld scientific calculator was the company’s first consumer hit. In the early-seventies, thinking small was cutting-edge. The market-research firm they hired told them that they wouldn’t sell enough to make a profit but Hewlett believed that people would want something they could carry around. He also decided to keep the price low – instead of thousands the calculator only cost $395.
Aside form the HP-35, Hewlett and Packard didn’t want to mess with computers since it was such an unfamiliar business – instead of selling to subscribing engineers out of a catalogue it required an expensive, sophisticated sales-force to convince firms to commit to HP over competitors like IBM. That was the reason HP had passed when a low-level engineer named Steve Wozniak showed them a prototype of his user-friendly computer in 1975. (when he failed to garner interest from his immediate boss, Wozniak and his partner, Steve Jobs, used the idea to create Apple Computer.)*
Nonetheless, HP’s most successful business ever was linked to computers – printers. HP quickly cornered the printer market in 1984 with the release of the first LaserJet. By the late 80s ink-jet printers began to take off and HP made huge profits selling printers and high-margin ink-cartriges.
“You know the only thing worse than a shitty business? A big shitty business”* is what HP veterans claim Packard said after looking over a prototype of HP’s newer PCs. In fact they almost axed the division if not for the printer-division’s Bill Hackborn’s pleading. Slowly, the company began to strategize and re-focus on PCs. By 1995 the company was reaping benefits from the PC boom as companies and citizens alike began loading up on equipment.
In 1996, Packard died - more than one employee sent a good-bye note to his e-mail account. At his last general meeting, he read a poem called “The Deacon’s Masterpiece” by Oliver Wendell Holmes about a carriage, designed to never wear-out, that suddenly fell apart in a heap:
“You see, of course, if you’re not a dunce,
How it went to pieces all at once,
All at once, and nothing first,
Just as bubbles do when they burst”
In 1997, the company began to miss its financial targets and scrambled for change. By 1999, they spun-off their traditional instruments business and called it Agilent. They also hired CEO Carly Fiorina. HP always subscribed to progressive hiring practices so it was not a stretch to have a female leader. Fiorina changed the traditional structure of the company, putting an emphasis on sales and marketing. She also undertook the controversial merger with Compaq Computer.
Bill Hewlett’s son, Walter, was rabidly against the merger since it expanded the unsuccessful computer business instead of focussing on printer business that was keeping the entire company afloat. Hewlett wasn’t the only one against the merger, analysts and industry experts agreed: “The visual I see is a slow-motion collision of two garbage trucks,”* said Sun Microsystem CEO Scott McNealy. Mild-mannered Hewlett eventually set-up a proxy-fight with HP, claiming that Fiorina unfairly influenced some shareholders in the board’s decision -- Hewlett lost.
The HP way was admirable and benefited and improved all who came in touch with it – customers, employees, investors and society at large. It is the opposite of the ruthless way we see many businesses moving forward today. Hopefully in the future, HP will go back to its roots of engineering and innovation and generosity.
Backfire, Peter Burrows, 2003