Founders: Bill Hewlett and David Packard.
Distinction: Leader in technology, and the business world that
Primary Products: Computers, printing and imaging products,
Annual sales: $42.370 billion.
Number of employees: 84,400.
Major competitors: Compaq, IBM, Xerox.
Chairman, President and CEO: Carleton S. "Carly" Fiorina.
Headquarters: Palo Alto, Calif.
Year founded: 1939.
Web site: www.hp.com.
As the 21st century approached, the Hewlett-Packard Company faced
a significant dilemma. Justifiably acknowledged as Silicon Valley's original
startup, it literally began in a garage and unequivocally grew into one of
the world's top computer companies. Ever since its audio oscillator was
picked up by Walt Disney Studios in 1939 for use in the original Fantasia,
HP had consistently produced state-of-the-art electronic gear that was the
envy of its industry. From that first product through calculators, computer,
printers and imaging peripherals, Hewlett-Packard was always one to
In addition, the company was always a great place to work. Its
founders pioneered the concept of Management By Walking Around, which
encouraged leaders to stay in close touch with their employees. It
eschewed time clocks and offered flexible work schedules. It was one of
the first large American firms to decentralize its operation and empower its
workers. It provided a superior salary-and-benefits package. It even
institutionalized these and other components of its vaunted corporate
culture through adoption of The HP Way, an official document that stresses
trust and openness. About the only criticism ever leveled at HP, in fact,
concerned the historical lack of women in the ranks of its upper
As the company prepared to usher in the new country, however, all
this was no longer adequate. Its once-experimental corporate structure
was providing an ill fit for the networked age. Quaint habits–like an odd
87-hour pay period that was implemented decades ago for a type of
worker HP no longer employs-were causing unnecessary headaches.
Innovations in software and other key areas often went unnoticed by the
public (as well as by many members of the all-important investment
community). Competitors were surging. Internet activity was lagging.
And so, in mid-1999, Hewlett-Packard broke the mold once more by
naming Carleton S. "Carly" Fiorina as its president and CEO. The first
women ever to lead one of the companies that comprise the Dow Jones
Industrial average–and the first outsider ever to lead HP–the 45-year-old
veteran of AT&T spinoff, Lucent, this company," she explained. Fiorina's
subsequent actions certainly stunned some tradition-bound observes.
Others–including many employees, customers, and investors–were more
A half-century before garage-based technology startups on the West
Coast became a cliché, a pair of 26-year-old electrical engineers was
working on electronic products in their own one-car shed in northern
California. Bill Hewlett and David Packard has just $538 (along with a
string of disappointments) to their names when they came up with the
technically advanced HP 200A resistance capacity audio oscillator. The HP
200A was an instrument used to test sound equipment, and The Walt
Disney Company snagged them both a patent as well as a contract. The
studio's ensuing order for eight HP 200As, and their part in the
development of its groundbreaking film Fantasia, started the Hewlett-
Packard Company on a regular path of innovative electronics excellence.
Right from the beginning, though, Hewlett and Packard also
recognized the importance of their relationship with employees. They
focused their creative energies there as well. The two built facilities with
an open floor plan–including executive office without doors–and
established an official "Open Door Policy" to help establish mutual trust at
all levels. They additionally implemented their now-famous "Management
by Walking Around" philosophy to actively engage supervision and workers
in even more deliberate and meaningful ways.
During the 1950s, significance breakthroughs continued on both the
product and personnel fronts. Successful releases, such as the HP 524A
high-speed frequency counter, a device used by radio stations to comply
with certain federal regulation, rolled out of their increasingly busy plant.
Profits were reinvested in new research and development, freeing the
partners from venture capitalists and resultant debt. The practice also
allowed them to acquire a plotter company that would eventually form the
basis for their printer business. And it gave them the footing to go public.
At the same time, HP's progressive philosophies helped it attract top
young scientists and engineers. In 1957, the company formalized its
unique objectives and management style in "The HP Way." The following
year, it split into separate divisions with individual profit-and-loss
accountability, and moved them out of headquarters in Palo Alto. Each
became a self-sustaining unit responsible for developing, manufacturing,
and marketing its own products–and would be awarded future R&D
funding in direct proportion to performance. In 1959, HP took these ideas
global and opened a manufacturing facility in Germany and a European
headquarters in Switzerland. It also made stock-opinion plans a part of its
employee benefits package, and become the first company to institute a
cash profit-sharing program.
The 1960s was a decade of flex time and calculators. The former
first appeared in HP's German plant in 1967, and time clocks completely
disappeared throughout the company within half-dozen years. The latter
hit the market in 1968 in the form of the HP 9100, proudly proclaimed by
the company to this day as the world's first programmable scientific
desktop calculator. (Four years later, HP would introduce its first handheld
version the HP 35. Slide rules suddenly became superfluous, and the
technology revolution went portable.)
The company also entered the world of business computing in 1972
with the HP 3000 minicomputer. By this time, it had 16,000 employees
and sales of more than $365 million. Only top college's graduates were
recruited for the expanding workforce. They were retained by the
challenging professional atmosphere, and the progressive people programs
that now included a strict promote-from-within policy and an unofficial ban
Desktop mainframe computers were unveiled with the now-familiar
Hewlett-Packard logo in the early 1980s, and the company entered the
printing business in 1984. Its reasonably priced inkjet and laser printers
took the market by storm and quickly became ubiquitous. Concurrently,
the company formed four "sector" organizations to manage its proliferating
groups while establishing the first high-tech joint venture in China. When it
celebrated its 50th anniversary in 1989, the garage where Hewlett and
Packard developed that first audio oscillator was designated a California
State Historical Landmark.
By the mid-1990s, HP's diversified units had introduced
breakthrough products–ranging from a palm-sized PC weighting 11 ounces
to a device that processed ultrasound waves for noninvasive real-time
cardiac analysis. It teamed up with Intel to develop common 64-bit
microprocessor architecture and moved vigorously into the growing homeoffice
market. It also formalized policies on telecommuting which
encouraged employees to work at home or remote offices around the
globe. Half of all sales were now coming from outside the United States–
10 percent of the world's high-tech retail space featured its products. And
by the end of the decade, the original garage startup had grown into a
major multinational with 104 divisions, 19,000 products, and more than
$47 billion in sales.
Yet growth, which once regularly hit 20 percent a year, was virtually
nonexistent, HP stock was flagging, despite a bull market that had been
particularly kind to tech companies. No new business lines were emerging,
but strong competitors certainly were. And the Internet appeared an
afterthought while key executive routinely fielded offers from outside. In
response, the company long known for its unorthodox ways responded
with some very radical changes.
The transformation actually began under former CEO Lew Platt, who
took the helm as HP's fourth leader in 1992. Platt, considered a capable
manager but not an innovator, realized things needed to change and
began the corporate makeover just a few years later. Much like IBM, he
decided to reinvent HP as an Internet solutions company providing
hardware, software, and support for corporate customers. He also decided
(6) of (11)
that the company's decentralized nature was stifling its attempts to move
on "Internet time," and he realigned it into two cohesive operation: Agilent
Technologies, a new $8 billion company selling test-and-measurement
equipment and medical electronics, and a $40 billion company selling
computers, printers, software and services that bore the long-standing
Hewlett-Packard name. Platt further announced that he would be stepping
down early at the end of 1999, and that the new HP would be led by a new
Carly Fiorina, who managed the original branding campaign that
helped Lucent gain respect in the industry and get noticed by Wall Street,
was one of 100 candidates for the slot. When chosen after an array of
tests (which reportedly included a three-hour interview and a 900-
questionpsychological survey), Florina immediately leapt into the fray with
her characteristic high-energy zeal. Within days, she was meeting with
supporters as well as detractors inside the company and out. She quickly
tallied $1 billion in savings by consolidating diverse operations, and
considered layoffs that observes estimated could ultimately pare the
payroll by 25 percent. She reoriented the company's disparate advertising
and marketing approaches, lent her own voice to commercial in a radical
departure from HP's long-time publicity shy ways, altered product designs,
and announced entirely new lines, such as digital cameras, a printer that
allows bookstores to rapidly produce entire books on demand, and
software that provides intriguing possibilities of electronic commerce. She
also dropped the venerable "Hewlett-Packard" logo ff many of them in
favor of an ore trendy "HP".
For a company so immersed in tradition that it keeps official
corporate artifacts tended by a full-time archivist, this whirlwind of
activity–all accomplished or announced within months of Fiorina's hiring–
was quite jarring, to say the least. But it's nothing less than the promise
voiced in one of her first national TV spots: "The original startup will act
like one again. Watch."