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HP Takes the Accountability Path Toward a Clear(er) Vision
An important thought is being under-emphasized lost amid the general media and pundit “I told you so” follow-on to HP CEO Meg Whitman’s announcement Wednesday that the company would, after all, retain its PC business – i.e., the Personal Systems Group, or PSG.
HP is keeping one of its core businesses, yes, and plans to invest in it in order to become a meaningful player in tablets as well as find more ways to profit from the upcoming Microsoft Windows 8 operating system.
But what’s most important to Saugatuck is that company management made that decision based on an examination and consideration of real business value, and then explained it in those terms - a concept that had been absent from various business vision and strategy pronouncements for almost a year.
HP leaders sat down and considered the current and future costs and benefits of retaining and selling of the Personal Systems Group; they built a business case and reviewed it; and they made their decision based on what should be done for the good of the company. And then they explained the decision to investors, analysts, partners and customers in clear and simple terms. In a conference call late Wednesday (US time), HP, CFO Cathie Lesjak explained that their business case indicated that the cost of spinning off PSG would cost $1.5 billion and reduce HP’s operating profit by $1 billion annually. Lesjak further explained HP’s significant supply-chain economies of scale, and how these improve company margins to an extent that competitors cannot equal.
Following Lesjak, CEO Whitman simplified the explanation and decision even further, saying, “At the end of the day, the cost and the risk of a separation are simply greater than any value we could create otherwise."
Saugatuck’s net take: Whitman, with other senior HP leadership, is working to make certain that HP’s constituent investors, customers, partners – the entire ecosystem – are not only aware of what the company is doing, but why, and is basing the why on clearly-articulated business rationales. It’s a great step forward for a company that may not have lost its way, but certainly wasn’t seen as knowing where it was going.